While it's certainly possible to build a house for less than a bad deal on a fixer upper, and possibly for less than a routine deal in a fixer upper, you should definitely be able to buy a fixer upper for less than the cost of building, unless Richmond has undergone some sort of above national average real estate price growth in the last decade I'm unaware of. Assuming by "build" you mean "pay to have built", and are not looking for the construction to be your employment or to build after working a day job and on weekends, I would put together a building budget for what you are proposing, and then look for an existing house in that price range, even though it may be bigger than what you need. Don't forget you have to carry the construction cost while you're building a house you're not living in, in addition to the cost of your current residence, which is a hassle, and makes delays expensive. When buying a livable fixer upper, that doesn't apply. Whether or not you would take a loss on the build depends on the future of house prices, which is unpredictable, but the relevant question is which route is going to give you more total lifetime happiness over the ownership period (value of the quality of life you enjoy while owning + the money you have left over after sale). Buying a 2000 sf house that conforms to the neighborhood at 20% off is probably safer financially, but by all means, run the numbers. Please post your analysis. I'm interested to see what you come up with.