Being your own Contractor - Posted by cary-ut

Real Estate Investing
1

Posted by Jonathan Rexford on May 30, 2000 at 15:11:08:

First of all, you can save some $$$ on being your own contractor! Not advisable though if you do not have the experience. There are a couple of companies that do offer owner/builder financing…Contact your local Mortgage Broker…If they do not know any please email me with your state and I will put you in touch with a few. I do consulate with owners that do want to build there own home but the 10% that is suggested is peanuts in the aggreavation that I save them. General contractors do not make 20-25% or more on Jobs we are lucky if we 12-15% gross profit on Custom jobs. We should make 20-25% on jobs. Well enough rambling (WET TOWEL RIGHT MARK NC). IF you need help please email me and I will be glad to put you in touch with lenders that will do Owner/Builder loans.

PS If you want to rent a good Movie about rehab/Building its called MONEY PIT…LOL

HAPPY BUILDING,
Jonathan Rexford
Licensed General Contractor
Licensed Mortgage Brokerage Business
Rexford Incorporated
P. O. Box 650099
Vero Beach, Florida 32965
Office (561) 569-4087
Fax (561) 569-0279
Cell (561) 532-0029
Pager (561)458-5658

2

Being your own Contractor - Posted by cary-ut

Posted by cary-ut on May 30, 2000 at 13:28:03:

My wife and I are looking at the possibility of being our own general contractor for our next home.

First off… I have never built a home before.

We met with a company called COBS Homes (cobshomes.com). They offer 100% financing and “consulting” with the hitch being that one must purchase “all” building materials from Home Depot.

I like the general idea of this concept, but am afraid of getting “stuck” with Home Depot and thier pricing. Not that it is generally bad, but what if I could find things much cheaper/better else where??

They also mention that “most” people only save about 12-15% when taking thier route vs. using a general contractor. When I quizzed him on this, mentioning that “all” the books I’ve read show a savings rate of 20-25% (on average). The reason that I speculate that he is showing 12-15% is because of higher priced materials. He sorta waffled.

Of course he mentioned that if I “shop” the sub market very aggressively, I “might” be able to shave 2-3%, and if I choose to swing the hammer, another 2-3% savings. But, my original thoughts were, if I shop the subs and I help swing the hammer, I’d better get more than 4-6% savings.

So, I don’t really want to go that route, but… I also checked with some lenders.

They were not interested in giving me a construction loan unless I had a liscense, or could get in a manager’s contract with a general contractor. So, I met w/ some generals, and for anywhere from $10K to 10% they would give me a manager’s contract. But, obviously, that’s a fee that I would rather NOT have.

So, I’m kinda stuck.

I don’t want to be stuck w/ Home Depot, and I don’t want to give some guy 10% just to have his name on a piece of paper.

I’m not afraid of the construction process at all. Although, I’ve never built a house, I’m not afraid of the project. There is plenty of literature out there to guide me, and inspectors to ensure the codes are met.

Any thoughts???

3

Re: Being your own Contractor - Posted by Rob

Posted by Rob on May 30, 2000 at 20:34:46:

Yes you can save $ by being your own contractor.

You do this by:

  1. making sure that you control the cost process by setting up your project fixed-fee do this by negotiating incentives for fixed fees from the general contractor and the framing subcontractor (and any other contractor you use, get more than one bid…)
  2. make sure you know profit up front, do this by doing a construction budget and getting a plan appraisal FIRST. This way you know your equity potential. Start with a Realtors CMA for preliminary evaluation. Once the land is under contract and you have your plans, use an appraisers plan appraisal.
  3. making sure your deal is contracted correctly and financed correctly, do this by making your offer on land with subject to clauses and use a one close construction to perm loan process that allows you to controll your money.
  4. do everything possible to reduce the risks associated with construction, do this by getting help with the portion of construction that is most risky, that is everything up to the completion of the dry-in stage.

We market the Builder Assisted program to our owner-builder clients. The average savings (documented) is about 20%.

I personally build 2-4 homes per year for investments using the Builder Assisted concepts. I earn an extra $20,000-$40,000 per year doing this. Since you can only build one home per year by law, I have an arrangement with my general contractor. We work together using a cost plus concept.

In my area, new starter homes retail for $91/SF. Investors with good databases of prospective clients should have no problem selling your spec homes that you build. You will have about 4 mos to do so. Consider any of the normal techniques including creating the note and selling for cash…(Bill Bonchicks Cash Cow technique works great here since you will have a nice cost basis to value ratio.

Note that my web site only features ONE of the company’s I rep for, the others have not been posted to the web. (I am working on that now, the other company is much better…)

I would be happy to snail-mail mail you a CD Rom of all of my plans ect and complete information about the Builder Assisted concept. Check out the web site first. Remember that there are a few hundred plans so just get comfortable with the concept.

Best regards,
Rob

PS 10% is what a general contractor gets for his fee. If you are going to pay that, you might as well turn-key.

PPS It is my experience that is much more simple to negotiate a deal on a piece of land than an existing house. There is much less emotion and ego involved. The basis for a good deal starts with a good price on the land. It should be less than 18% of the total value of the project in order to work.

site: http://www.charlottencproperty.com/Trelligrams/Panelized/