Why Build Your Own Home.
Ok, so why would anyone want to build their own home? Well, I had never given it a thought until my wife and I decided we wanted to retire in the Texas Hill Country. We spoke with a few custom builders and discovered that we could not afford a custom home. We had a budget of around $220,000 and the least expensive custom home builder gave us an estimate of $350.000. Obviously a professional builder knows what he’s doing and I don’t. That’s the thought that went through my head until I heard of a couple of firefighter buddies who were building their own homes.
They told me that there’s nothing to it as long as I had a good professional building inspector on my side. I would hire my own sub-contractors and the inspector would check to make sure they did a good job before I paid them. I have to say that was the best piece of advice I received.
While there is nothing wrong with hiring a professional home builder, you only pay him or her to hire subs and inspect the work. Keep in mind that his inspector works for him and not for me. By building myself I had total control of the project and each individual or company hired was eager to keep me happy. They wanted to do a good job for me because I held the checkbook.
I also had more choices in what went into my house. I could buy the inexpensive faucets, flooring, tile, etc. as offered by a builder to keep his costs down or I could buy upgrades that enhanced the beauty of my home. Since I controlled the budget I had that option. I knew what I could afford.
And that’s the gist of the story. Building your own home gives you control over the budget, options for upgrades not available from builders or available at a higher cost, and the satisfaction of knowing the job was done right. Every person or company is hired by you and wants to make you happy. Should you find a problem area, and you don’t want to confront the contractor, your inspector is right there to talk to the contractor and get the job done to your satisfaction. My inspector checked every phase of the operation for a mere $1,200. A cheap price to pay for the piece of mind you get.
In these economic times it just makes sense to depend on yourself to get the job done as opposed to paying someone to make some phone calls, oversee the project, and get the benefit of your hard earned money. And remember, you meet with your builder at the site to go over decisions right? Well, leave the builder at the office and check on your own site. You won’t spend any more time at your own building site by doing it your self.
Would I do it again? Heck yes!! I saved over $100,000 for my family, my equity sky rocked, I have upgrades like granite counter tops and wood flooring that increased the value of my home, it was built in a shorter time than other builders in the area, and I had a blast doing it. Actually, I’d like to build another home but my wife does not want to move again. It was a great experience to be sure.
Calculate Your Current Utility Cost At Any Time. Download Free Utility Spreadsheet.
I just hate surprises, don’t you. I like to keep track of my monthly expenses and have a good idea of what I have to pay at the end of the month. My utility companies do not offer bill averaging which is why I came up with this utility spreadsheet.
It’s pretty simple to work and very accurate. All you have to do is input your end reading and end date for each utility and it will tell you what you owe at that very moment and project what your total bill will be at the end of the month.
My utility company charges me a surcharge which requires additional information in some formulas. If your utility company does this then use the spreadsheet named “MOHB Utility Freebie with Surcharge.xlt”. If they don’t then use the spreadsheet named “MOHB Utility Freebie W-O Surcharge.xlt”. Both are in the zip file that you will download. If you need the formulas, email me with your surcharge amount and I will send you the formula and where to place it.
Always remember that you CAN NOT mess up the downloaded file. It is a template. When you open it and revise it to your own needs, just “save as” and name it whatever you want. It will create your personalized spreadsheet and leave the template alone. If you mess up your personal one you can always return to the template and start over.
Hope this helps; if you have any questions just drop me an e-mail. Good luck.
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Caution - Did Your Sub Pay Your Bill?
Well it’s been awhile since I wrote and for that I apologize. But a bit of news from my father-in-law, Bobby, made me think that some of you might get hurt if I don’t provide some much needed information. Let me explain.
I recommended a concrete sub-contractor to my father-in-law. He needed a driveway pored. When the job was done, the sub was paid for a job well done. A couple of weeks later Bobby received a registered letter explaining that if he did not pay his bill for the concrete poured, the concrete company was going to put a lien on his home. Bobby immediately called the sub who told Bobby that the bill had been paid that day. Bobby called the concrete company and verified that it indeed was paid.
I’m not sure about your State but in Texas this is how the law works: A sub will purchase what he needs for your project and puts the charges on his bill; the bill has your address on it as the site for delivery. If the sub does not pay his bill YOU are responsible for the charges!!! Thankfully there is a remedy for this not so well planned out law.
You as the client of the sub MUST NOT PAY the sub until he or she has proven to you that all his bills for purchases made on your behalf have been paid. I would insist on seeing the receipt from the company where the purchases were made. Take the slab for instance. Before you pay the sub make certain that he has paid for concrete, rebar, sand, etc. Once you are satisfied with the job and that all bills have been paid you can pay the sub.
I did not know about this situation when I was building my home. I was very lucky that no one took advantage partly because I very selective of my subs and talked to others that had used the same subs. If you live in Texas be extremely selective of your subs.
While we’re in this area let me say this: NEVER PAY A CONTRACTOR IN ADVANCE! IF YOU DO, HE HAS NO REASON TO COME BACK TO FINISH THE JOB.
If you have any similar stories about laws in your State let me know. I will be glad to post them on the web site.
Want To Save Even More Money Building Your Own Home?
If you’re going to build your own home and really want to save some money, consider doing some of the work yourself. There are several good reasons to do some work yourself, aside from saving money. The first and most important reason is you control the quality of the work. It’s important to remember “if you want the job done right, do it yourself.” The big assumption here of course is you know how to do it.
When I look at a sub-contractor doing his job I generally get the feeling that if he can do it then I can do it. Specialty tools and experience are on his side but when you stop and think about it, it’s not rocket science. I saved $6,000 on labor alone when I laid my own wood flooring. I just went to the internet and looked at “how-to” sites. I made certain the floor was level, laid some glue down and put wood on top of that, like I said it’s not rocket science.
The finished floor was every bit as beautiful as if a pro had done it and maybe better because I took the time to do it right. Of course I was on a fireman’s schedule and had the time to do some things on my own. Your situation may not allow time, but if it does, you’ll really appreciate your new home if you do some work yourself.
FREE Home Construction Interior Budgeting Spreadsheet
When budgeting for building your own home you should have a master budget for overall expenses, and a nice clean way to help you build a budget for your interior needs. This spreadsheet will allow you to plan each detail for each room down to the light switches. Although the fields are not populated for you, the math formulas are ready for you to insert each room’s needs accordingly. Enjoy!
If you are planning on building a home in the Greater San Antonio Area - Contact Me Before You Build.
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FREE Home Building Tax Benefits Spreadsheet
Build your own home and gain some great tax benefits in the process. Read the related article here.
If you are planning on building a home in the Greater San Antonio Area - Contact Me Before You Build.
Don’t forget, having the Master Plan Budgeting Worksheet is essential. Learn More Here.
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Loan to Value and Your Home Equity
Loan to Value (LTV)
When you decide to build your own home and need to borrow funds to accomplish the task, you will need to obtain an interim loan. This loan will provide funds to pay sub-contractors and buy materials. When you are done building, the interim loan is changed to a permanent loan.
To put it simply: Let’s say you want to build a home and estimate that it will cost you $250,000 to build it. You go to the bank to get money to build the home. The bank will send an appraiser to appraise the land, the houses in the neighborhood, and your plans. The appraiser will then file a report to the bank advising that when your house is finished being built, it should appraise at a certain amount. Let’s say he appraises your house at $300,000. The bank will now loan you 90% of the appraised value to build the house. This is called LTV or 90% Loan to Value which would be $270,000. In this case the bank would set aside in a special account your $270,000. You take money out of this account as you need it to pay for materials and sub-contractors. (more…)
What is Your Credit Score?
About Credit Scores
When you apply for credit - whether for a credit card, a car loan, or a mortgage - lenders want to know what risk they’d take by loaning money to you. Credit bureau scores are often called “FICO scores” because most credit bureau scores used in the U.S. are produced from software developed by Fair Isaac and Company. FICO scores are provided to lenders by the major credit reporting agencies.
You have three FICO scores, one for each of the three credit bureaus: Experian, TransUnion, and Equifax. Your three FICO scores affect both how much and what loan terms (interest rate, etc.) lenders will offer you at any given time. Taking steps to improve your FICO scores can help you qualify for better rates from lenders.
FICO scores provide the best guide to future risk based solely on credit report data. The higher the credit score, the lower the risk. While many lenders use FICO scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable for a given credit product. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders use to determine your actual interest rates.
The law requires the major nationwide consumer reporting companies — Experian, TransUnion, and Equifax — to give you a free copy of your credit report each year if you ask for it. Get your FREE Annual Credit Report or call 1-877-322-8228, a service created by these three companies, to obtain your free credit report each year.
Tax Benefits of Building Your Own Home
Tax Tip - Sales Tax Deduction
If you file a Form 1040, and itemize deductions on Schedule A, you have the option of claiming either state and local income taxes or state and local sales taxes. (You can’t claim both.) If you saved your receipts throughout the year, you can add up the total amount of sales taxes you actually paid and claim that amount. This information and more can be found here. Think of all you’ll have to buy and pay sales tax on for your new home!
Save every receipt from Home Depot, Lowes, building suppliers, etc. If your sub-contractor buys your wood for framing, make sure you get the receipt so you can deduct the tax. I was amazed at the amount of sales tax I paid while building my home and quite happy to add over $10,000 to my other deductions for the year. Just another reason to build your own home and another way for your family to keep more of their hard earned money.
If you are familiar with MS Excel, I provide a free template and instructional video that you may want to download and use to keep track of your sales taxes. At the end of the year it will come in handy. Happy building!!
Build Your Own Home & Increase Your Equity
Another Reason to Build Your Own Home
Another reason to build your own home is accelerated equity buildup. It stands to reason that if you pay less for the same house and it appraises for the same amount of money, your equity will be higher. Put in simple terms. You buy a home from a builder and he charges you $150,000 while it appraises at $175,000. When you walk in the front door, you have $25,000 in equity assuming you put nothing down on the property. Now build that same house on your own for $125,000. It still appraises the same so you have $50,000 in equity and you saved your family $25,000 in the process or you were able to put an extra $25,000 in upgrades you really wanted.
