Building New Home With Cash, NO DEBT - Advice Appreciated

[Deerherd]

What Eddie said is great advice provided your state/county/town will allow that. Never happen in the late great State of New York but I'm sure there are places in this country where people can still do what they want.

I suspect the real problem for the OP is securing a mortgage for the house he really wants. Interest rates may be low but qualifying is a whole different ball game. Securing a construction loan for a do it your-selfer is out of the question, especially if you have no general contracting or builder experience. And if you want to finance any amount of land other than a few acres, your lending choices go down dramatically.

I would see what you would qualify for in a mortgage and build a house that was designed with further expansion in mind. Building an addition(s) is much more do it yourself friendly and a lot less stressful on a marriage and your living conditions. I have two ex wives who will attest to that....."

 

[s219]

1. Most things will take longer than I thought they would
2. Free or cheap help is worth what you pay for it
3. Take the easy way out and do it her way, because that's how it's going to end up anyway

I like those points a lot. I will add -- consider how you value quality time with your family, and weigh that against the time it will take to finish the project. If you can combine the two, then awesome -- everybody spends time together and the project gets done. If not, beware! I have read quite a few posts on TBN where big projects get in the way of family life and can even cause marital problems.

My experience -- we had a baby girl just as we finished up our house last spring. I have a million post-construction projects, including barn, pier, fencing, landscaping, etc. All easy stuff I know how to do (grew up the son of a builder, so I've seen/done most everything). Well the first project made me realize things take a lot longer when there is a baby in the household, whether because of parenting requirments, the need to keep quiet during nap time, or just stuff that is out of my control. Progress gets impeded, and sometimes just going to get materials would burn up my free time in a given day. Second was that I'd miss out on hours of time with the baby whenever I was out cranking away on the project. I have now taken to hiring out work that I can trust someone to do as good or better than me, and am a lot more strategic with my own time. Everyone is happier. I have always tried to do everything myself, but am slowly learning to balance things out.

We got a construction loan for our home, and had it built in 10 months (combination of me and a builder). From there transitioned to a low interest mortgage. Still saved every penny we could during those 10 months and net a decent profit when selling our old home, so we were able to put down 50% on the mortgage. What's left spread over the next 30 years is very affordable, and we have the option to increase payments if we want to get out sooner or save some interest costs. In fact, once I am comfortable with my situation after having a child for a couple years, I hope to double mortgage payments every month.

With interest rates so low, I don't really see the need to be afraid of home debt at this point, provided you make good decisions and live within your means.

 

[slowzuki]

We built a shop and partitioned off a living space as temporary but has become permanent. Built ourselves almost without debt. If I was to do it again I would have taken the first 5k and bought a cheap mini-home to live in while house was built. Living in a place under construction with a wife and child is frustrating for them and slows everything down.

 

[newbury]

OP -

It seems you have the right mix of resources and PLENTY of advice.

I have to agree with

Were I doing it, I'd buy the place on a mortgage and concentrate on retiring the note ASAP. Interest rates are still cheap, and after the house is built you could concentrate your resources on getting rid of the mortgage. As others have stated, sometimes there can be problems with occupancy. Debt can be a useful tool if used properly.

Remember interest is still tax deductible. So $10,000 on loan from the bank at 5% may effectively be $10,000 on loan at 3% after taxes. And that will free up $10,000 for other use, such as truck repairs or "fast cash" to buy supplies when they are on an absolute bargain.

I think your "garage" idea is on the small side. Like others I agree with concept of a garage with an apartment in the second floor, or across the back of a larger garage. I've got a 1 bedroom apartment across the back of my 40'x60' workshop. But since you already have 1 tractor and probably a car and a truck a 25' x 32' garage is TOO small.

Another option I've seen is to put up a good sized pole barn first. Then get an RV (even can have a leaky roof) and live in that under the pole barn while you build the house. Then you would have plenty of room for "under cover" storage of building materials which is VERY important. I've seen many a stack of plywood ruined because it got wet when the plastic cover ripped.

If you can get your whole "family" behind you building this project it will greatly speed things up. There are a LOT of things that require 4 hands and two strong backs in building a house. Whatever you build first you should maximize your effort to get and coordinate their help. And keep some log of the hours they contribute so you can reward them down the line.

My Grandfather and Father built their own houses. I started out sorting nails when I was about 5. When we built the last, a duplex, I started out about 12 yrs old and we moved in when I was about 15. Virtually the only labor was my Grandfather full time, me whenever, and my Dad after work. That convinced me to buy old and rehab. When we bought our retirement home in Mississippi a strong contender was building on any of several "acreages" we owned. However the total price of the house with 5,500 sq foot of warehouse AND apartment AND 3.5 acres of land only came to about $45/sq foot of living area in the house, far less than new construction. Since then we've repainted, put in new stairs, totally redone three rooms.

Get to know the building inspectors and officials you need to deal with. Last year I and two others totally rebuilt a kitchen and bathroom. The inspectors were fairly easy to deal with and made suggestions on how to solve a couple of problems we ran into.

 

[walker450]

Wow!! I have read every single reply. Thanks everyone! I don't hardly know where to start. Perhaps I did not give enough information to begin with.

I need two years to save money for dry-in. This will actually be more than enough, but I am going into it with enough money to hire any part of it completed in case I don't want to or I'm unable to. I understand dry-in is a time and weather sensitive issue. :thumbsup:

We won't be living "in" the construction zone. The garage will be built as a free-standing structure first. I don't know how else to explain this one...

We've already been pre-approved for both the construction loan and long-term financing.

All code issues and occupancy issues have been worked out with the city. It is in city limits. I used to be on the volunteer fire department with the inspector, so I think he trusts that I will do what I say more than some.

Yes there will be waste with temporary walls, etc. This cost would be a small one to pay for all of the benefits it brings living on our own land while we build. It only takes a few months of rent to pay for all of the material that cannot be re-used.

I didn't mention my father-in-law lives 3/4 of a mile away. He built his own house and is a big inspiration.

My wife and family will be fine. My wife and I have a great relationship and we truly work as a team, unlike most marriages these days (sadly).

We can only live in a trailer for one-year due to city rules. One year is too constricting of a time schedule for me. If we build our "800 square foot house" we can live in it indefinitely. We would then "add on" 2100 sq ft (not counting upstairs) and "convert" the 800 sq ft portion to a garage.

I already have a 12x16 storage shed on location to house my tools. I would like to build the temp house, move in, then build the barn we want. This would give me a large area to store building materials out of the weather until they are ready to be used. Once the house is complete, the next project is to build an actual insulated shop, about 30'x40' in size. I don't want to build this first because I am not sure where I want it.

I have already done the dirt work for the house. Thread here: http://www.tractorbynet.com/forums/projects/291704-clearing-recently-purchased-land-1.html

My grandfather built their house debt-free. They simply added on when they had money. He is another inspiration. I hope he comes out and swings a hammer! He is 82 years old and just bought a new chainsaw and cleared some trees behind his house. Tough old man!

Thanks for all of the encouragement. Things like this used to be more common. I am not attempting something that has never been done before. This is the American Spirit that is missing in a lot of places these days.

 

[dave1949]

EDIT
Walker450 You must have posted just as I began composing this masterpiece of advice. It reads like I didn't read your last post- because I didn't. :laughing:


I think it is admirable to want to build debt free and you should be able to do that given your family & neighbor support system and your own personal knowledge. I would count on the support system for knowledge and guidance more than the labor. If you can get some helping hands on a few things that are hard to do alone, that's really all you need. I am assuming you are reasonably young, highly motivated but patient, have a wife that is 100% on-board, and you are physically fit. :laughing:

There are some things I wouldn't do myself, like slabs and foundations. I wouldn't think of doing drywall or other overhead sheet work alone without a panel hoist. Set up a chop/mitre saw with long extensions that makes accurate cuts easy. Having the right tools for working alone can make most jobs a lot easier.

If building permit restrictions won't let you do what you want, I'm sure there are house designs that lend themselves to building in stages that aren't wasteful. I would avoid do overs as much as possible. For not much more square footage than your garage, you could build the "core" of a larger house that is a complete stand-alone but small home. Your family would be happier with that than the garage. Get that much under your belt, take a breather and then put an addition on. The key is to begin with a house design and roof layout that lends itself to that approach. It may not be your dream design, but it is the one that will get you where you want to be most efficiently.

For example, a 1-1/2 or 2-story core space that will later have 1-story extensions allows you to build the roof correctly and permanently. A core space house could eventually have a bedroom/master suite addition on one end, and a family room & garage on the other. The supply and waste plumbing, heating & cooling, and electrical needs to be planned for the eventual full size of course.

Tyvek house wrap will last a year where the extensions tie into the core. You don't necessarily need to put exterior siding on then take it off. Even if you must put siding on, then painted T-111 is not expensive in the overall scheme of things and is easy to cover or remove later.

It's a long job no doubt. You should approach it as such, be willing to take some time away from it but set yourself firm goals--or become one of Eddie's customers. Plenty of research time needs to be included in the work plan. You will get sick of going to the lumber yard, etc. It can also be a source of immense self satisfaction. Many don't get the chance these days to do things for ourselves and by ourselves.

The idea of first building a shed or something similar is good. It sure helps to have a place to store tools and materials secure and out of the weather. It will always be useful to have a shed for tractor parking if nothing else. You know it won't go to waste.

 

[walker450]

Thanks Dave! Well said. I'm 29 years old and in decent shape. I have some great friends that will help when they can. They usually complain that I work them too hard, whiners!

I'm looking forward to this and I'm very excited. My wife is excited too. She gets to help design and decorate two brand new houses lol.

The kitchen area will be built right where I want my future work bench and cabinets so they will be double-duty. I'll leave the sink, it can be nice to have water available in the garage. I'll put the hot-water tank and pressure tank in a closet that will remain there for the duration, even when the house is complete. The dryer plug will become a welder plug. It will all work out guys, have some faith.

Not having to work on the bank's schedule is another bonus that someone mentioned. I have set down with a few bankers and decided that's something I don't want to deal with. Believe me, I have had plenty of debt and have a great relationship with the two banks I use, but I don't want to mess with a construction loan. I prefer to make "draws" from my own savings.

My wife and I have been talking about this and planning this new house for several years now. This isn't an idea I dreamed up this week. I just posted it this week on the internet.

 

[kevinwak]

I have a Cousin that built the garage before the house. They never did build the house after. Lived in the garage for 5 years and now are trying to sell it as a house. In building my own home I learned few things. First any time estimate I have on how long it will take to do something needs to be tripled. If I think it will take a day to do something it usually ended up taking three. Second, it was easy to work on the house and I got a ton accomplished when we lived 30 miles away. Once we moved in the progress ground down to a crawl. When I lived away from sight I would pack a lunch and a thermos of coffee. I would get there by 7 am and work through until 9 or 10 at night, with only quick lunch breaks. The third thing I learned, but it is probably very specific to my job is that I lost money doing things myself. When we were done and I looked back and compared the hours I spent on the house to the amount of money I would have made working equivalent hours at work I would have been way further ahead going to work and hiring a builder to build the whole house. That only is because my job had tons of overtime available that year at double time, but not everybody has that opportunity. Now when I look at things on the house I take the price of getting somebody to do it and then calculate how many hours of OT I would have to work to pay for it. Then I decide if I can do the said house job myself in that many hours. If it is anywhere equal I will choose working on the house over OT, but there are some tasks that just aren't worth it.

Oh, and I would never again use asphalt shingles. One corner of the house catches lots of wind and they are always blowing off. I wish we had done metal roofing, and I am looking at changing in the next few years.

 

[rtimgray]

Kevin makes a great point about basically "What is your time worth and can you make more money somewhere else?" In my, I'm not eligible for overtime pay, even if I work it, so the more I work, the less I make per hour, so I work the minimum amount of hours possible. Certainly, if you can make $40 per hour working and pay $20 for someone to work on your house, then by all means hire that portion of the work done.

I have also fallen victim to the "quit working after I move in" syndrome. It's easy to get used to things that aren't done. However, at least in my case, the only person it bothers is me and my wife, so it's really not a problem unless we think it is. Again, that's one of the good/bad parts about doing the work without deadlines.

 

[buckeyefarmer]

If you can do it, go for it. Sounds like you know what your doing, and have resources to help. I designed and built my own house. I did get a construction loan, and the bank timeline did make me work fast. I built in 9 months. I also like building things, so it was fun for me, but still stressful. I also had a 1 yr old at the time.

I wanted to start with a garage as a temp house, but my wife didn't like the idea, nor the idea of a trailor on the lot. I ended up renting a house near my lot while building. I had planned on leaving most of the upstairs unfinished, but ended up finishing it all during construction, since I sub'd out the drywall work it didn't cost a whole lot more to just finish it. I added my garage later, but I set up the house for it, including an upstairs hall that ended at the end of the house so it could be extended over the garage. The garage finishing has been pay as I go, so no additional debt. I also added geothermal systems myself, all paid for and done myself. Well, I did buy a new Kubota with backhoe to put in the geo system, that I did take a loan on at 0% interest.

Building myself was the only way I could afford the house I have. If I had to pay someone to do it all, I would not have done it. My goal going in was to build a larger house than what I had, on a much larger lot, for the same price that I was selling my house, in order to keep my mortgage the same. I did not want a higher mortgage, regardless of if I could afford it or not. I went from an 1800 sf split level on .7 acre, to a 2400 sf (before garage and not counting basement) on 5 acres. My mortgage will be paid off soon. I pay myself by doing my own work when possible. I also rolled a lot of tools into my construction cost.