The Expert Podcast

…So is it better to buy a home or to have a home built for you? Sometimes it's building a house and constructing the house is a better deal than actually buying a resale or even buying a new home. And the reason why is because. A home that's already constructed. The way that the construction costs are amortized.

You have to build in a certain margin which if you build your own home, you may be able to avoid that In fact, some of the costs that go into a home that's already done even a resale are things that may be. Are paying for expenses that really you don't need to absorb. Give you an example. If you buy a home that's built on speculation. That builder has to factor in.

to they're building cost. They're carrying costs They're overhead. And a certain amount of speculative risk. So if that house is built in three months and they have to carry it for another three or four months and have the risk of, not selling it. They have to factor that in along with the profit margin.

If they're doing a custom home for you, they can actually. Do like Tetris where they fit in their workflow into their existing.

schedule their existing pipeline. So there may not be as much slack in the system. In addition. You can actually construct a home to only have the things in it and the features that you want and need many spec homes add on extra things. To appeal to a wider range which may not be applicable to you.

And in many parts of the country according to this article that came out this week, building a home, even you even if you hear the word custom home it sounds very expensive. Custom just means it's specific to you. It's not built as a wide ranging cookie cutter home. And sometimes that can eliminate extra things that don't make the house any less desirable. It just makes it fit your needs and not have any extra things that you don't need How many times have you been to.

a car dealership for example, to buy a car? And you have to pay extra for things on the car that you really didn't want Maybe somebody wants them They may not be worthless items, but maybe you don't want a sunroof and the car has a sunroof Maybe you don't want rust proofing and has rust proofing. So house is the same way If you buy a house that's a spec house or a neighborhood that's already being developed. Now you have to buy things that the builder thinks that everybody wants which maybe you don't. And if you build a house.

on your own you can also parcel out the construction to have a timeline that fits both you and the builder. Right. So for more information on consulting on construction you can check out our website and you can arrange for consultation but. The bigger takeaway. Is when you're building a home.

You can actually. Take the property acquisition, the permitting, the site plans, the excavation. And fit it into exact. what you want In fact some of the things you may be able to do yourself, for example, Excavation. There are many potential homeowners that want to do their own excavation You can rent a.

a mini excavator or payloader, do some of the site work do some of the grading, granted your contractor is going to have to do some finish work on that, but you can take away a lot of the heavy lifting In fact, some contractors prefer. Not to do certain types of work. And if you can provide that for them maybe it's even site cleanup. Sometimes contractors don't like to, to move a lot of the debris off site And if maybe you go two or three times a week and put.

the debris and a dumpster that might help the builder. Maybe it's doing things like silt fence. Sometimes those are things that don't seem like that costs a lot but there's a lot of labor costs involved with doing those And you can work with your builder or your contractor. To find the things that they would like to eliminate from it And whether you do it yourself or you hire somebody else to do it, sometimes eliminating those things from the builder's workflow. It's not in their sweet spot like what they like to work on and you can price it a whole lot cheaper.

So how much is this going to cost Well most parts of the country. A rule of thumb for building is about $150 per square foot And this article bears that out If you build a 2000 square foot house, it's going to cost you about 300 grand. Now that's not the land cost or some of the site work That's the cost of construction. And some places are a little less you know at west it's $130 a foot in the Midwest It's about a hundred bucks a foot.

and some places are a little higher. If you can build a house for a hundred dollars a square foot. Because you're doing some of the oversight and property and project management yourself. That could get that price down to 200 grand where a spec home I…

might be in the 300,000 dollar range that saves you a hundred thousand dollars Even if you worked. A few hours a week, eight hours a week on this project for a year That's like a hundred thousand dollars a year job. Right And you can customize a lot of the things yourself So do you fund this Well you can get a construction loan. Typically if you have a property that you already own or you pay cash for the property, you can do construction loan for large percentage of the, improvements. And the way a construction loan works is the lender will give you the amount you need to build a home and they parcel it out in draw payments So when you build a foundation they pay you for that When they start the framing they.

They draw you for that. And it's usually for a short period of time usually a couple years to build the house. Once the house is done and you get your CEO and your house has done. At that point it converts to a regular mortgage. Right In the meantime you might pay interest only or there might even be a moratorium on payments until your house is done.

And then it converts to a standard.

Fixed rate mortgage or a 30 year mortgage. So what are the downsides Well the downsides are, it's going to take you longer than you think because all of the steps in the process that you have to do framing, and then you do. Ruffin. mechanicals electrical and plumbing. And then you have to do sheet rock and then you do finish work All these different steps have to be, scheduled right.

And they have to. You have inspections in between each one So when the plumber does the rough-in work they get inspected then you do your sheet rock. And that gets inspected then to the plumbers does their finished work. And there's another inspection. You have to arrange all of those different inspections Now if you hire a general contractor, they'll handle all that for you.

And of course they're going to have a margin of markup for doing that, but it's probably going to be cheaper than just to have them deliver you a turn key. Home already done with landscaping. In fact that's another place you can save Some money is if you have the landscaping left off or some of the finished work left off just the bare minimum you need to get your CO. You can do some of that yourself. And save some money.

Elbow grease is a good way to save money In fact, it's, it saves you more than just the cost of doing it because anytime you have to have a contractor get involved, they're going to add their management markup on top of that. it's not just paying the landscaper $20 an hour or whatever to do it. They also have to manage the process which means there's two or three people on top of that. That have to oversee it. And that might add hundreds of dollars an hour to the.

management costs. Anything you can eliminate from the contractor. the other thing you have to worry about is material Some of these materials are on backorder, even things like paint and finishings and roofing and adhesive sometimes they're on back order So if you're flexible on what kind of final finishes and trim work you can, you can use that might save you some time and money. Also time is a valuable commodity. If the contractor can get this done in a short period of time, they also have to charge less because their resources are not being tied up for a longer period of time and they can move on to other projects So.

Preparing the…project management for building your own house can save you a lot of money and it could be tens of thousands If not hundreds of thousands of dollars. If we do it correctly, it will be a little bit of. mental tasks you have to take a responsibility for, but if you do it the right way it can save you money And more importantly, get you in a house sooner than waiting for the builder to finish. If they have to handle the whole thing themselves.