How about building a house?

jcaut

There are some smart folks on this board, and I'd like to hear your opinions. In light of the current economic situation and all, how stupid would it be to build a house right now? So many factors, I know, but here's my situation. Sorry it's a little long-winded:

My wife and I live in a small rural area in Arkansas. The economic situation here wasn't booming before and therefore it really hasn't changed much. In fact, since fuel prices have eased a little, I think spending and tax revenues are actually up a bit here. My job is secure, or at least I feel as certain as one can be that it is. It pays less than 40K and my wife works part time. Her job is secure too, and she could get full time if she wanted, but we have two kids and child care expenses would probably eat up most of the extra money she'd make. We live within our means, meaning no credit card debt etc.. We're far from rolling in the dough, but we manage to save a little money every month.

Until 2003, my employer provided housing at my jobsite. It was almost like a rental situation, however, since they limited my salary to account for the house. In 2003, my wife and I purchased an old house- sort of a fix'er up'er- and we've been living there since then. Well, since '04- I worked on it for over a year rewiring, re-plumbing, HVAC, etc.. The house is over 70 years old and still needs a lot of work, and truthfully we don't like it very much. Obviously we don't have a huge amount of equity in it, but I think we can sell it for a little more than we have in it (I actually have someone interested in buying it right now, without even having actually put it up for sale).

To give you some idea of home values here: Our house is about 2100 sq.ft. two-story, 3 car detached garage, on a corner lot that's about 0.3 acres- basically half the city block. Good neighborhood. We bought it for 87K and paid 12K down and got a 4.75% rate.

We have property on which we can build. We wouldn't have trouble getting a loan. We'd probably have to go a little smaller than what we're living in, but I don't think that would be a problem. It'd be nice to have new. And insulation. My wife is eager to get started-and I'm the one going, "Eh.... Let's slow down here and really think about this..." What do you think?

BrettT1

If you can find a used property in a desirable location you can make a lot of money should you ever want to move. Think about it...

Gadabout

I can pass on a little bit of knowledge that I have accumulated when I was considering building my own.

- Not sure if you can be the general contractor of your own house. That would depend on the Arkansas building codes. If you can be your own general contratctor, I would still recommend getting a construction manager or general contractor. Someone who is licensed.
-- Depending on how much of the work you are willing to do yourself, you still need to hire sub contractors for some things. A general contractor earns his money buy getting quality work for a decent price. He is also the middle man and gets to deal with a lot of headaches. For instance, a friend of mine had his brick laying crew just up and leave cause they got a higher paying gig.
-- He will also help a great deal in getting the trades into the house at the right time and coordinating everything so the build goes as smooth as possible. (Sticking to the schedule is important as construction loans bear a higher interest rate than just home loans. You'll convert to a mortage when construction is complete)

The other thing is that you and/or your will need to be available. It seems like plans are always changing and they will always be asking you to make decisions on those changes.

Do as much planning as you can before you start construction. Have all the decisons made. Type of flooring, plumbing fixtures, cabinets, counter tops, windows type etc....
A good plan to start with will help alleviate the issues that are bound to occur. (Also, try and not make to many changes once construction starts. This only adds to the cost and the time of the build.)

Since you can sell your home quickly, that bodes well as you. It means you can tell people your going to do this. Not I'm going to do it when my house sells. Also, with the housing slow down there are alot of construction workers that are pretty slow right now. You might be able to get some real quality trades at a very good price to work on the house. Loan rate should be pretty reasonable right now too.

I guess to some it up, I think now is a great time to build a home. Nothing like having something that you designed yourself.

Do you still get the $8k tax credit for building a home vs. buying one?

Hope that helps,
Scott

PS I have driven thru Paris, AR. Pretty country around there.

dfranks

Economically, with interest rates at never before low, with a lot of trades slowing down or out of work, the shortage of qualified labor is not an issue. If you can sell the house you are in and have some floating cash so that you can deal a little harder (to sub some labor yourself) I think now is a perfect time to build!
Building in a economic boom is silly and stupid!. The smart people make the the big purchases now!.

treitz3

Damnit, this was supposed to be a PM. Sorry, nothing to see here folks........

renowilliams

I agree with lots of planning.Especially if your going to be building in the country. One thing I would look at closely would be the water table. I have a friend who spent $20,000 getting a well drilled as he built on a hill. Also got to think about septic. It seems the guys in that field can be a little disrepuable, at least where I live. Overall I don't think your idea is a bad one, as we have to live somewhere.


Good Luck

nadams

now is the perfect time to buy or build, AS LONG AS you can afford it in the first place. Labor and materials are cheap, since there's little demand for either right now. Sadly, not a good time to sell your place to get the cash to build new...

Hobbyguy

It would be nice to have a rich relative say go ahead if you run into problems I'll help you out. I don't have that and most people don't either. We have 4 kids and our 3 bedroom house was too small. It is on 8 acres so we had room to add on. I agonized for a year before we pulled the trigger and added on; so far we have been very happy with the gamble. In good economic times or bad economic times a large purchase is always a gamble unless you are wealthy. Make sure that your income stream is secure...or a least as secure as possible; if you extend yourself too much you will be miserable.
Many people mistakenly look at their house as an investment that they can sell later for a profit as they downsize. Don't think of it as investment potential, think of it as a place for happy times with your family.
You might also want to check to see if the mortgage interest will still be tax deductable in your tax bracket after 2011.

tcrossma

You mentioned that it might have to be smaller than you would ideally like. What is the size of the lot and what's the square footage? The one thing you don't want is to go into something like this with a large compromise right at the beginning that will eat away at you over the years. And with two kids anything smaller than what you're in now might start to feel really small.

Mike Reeter

Having built two homes in the past,and owning three others...my advice would be to buy a current home that is the size you will need for growth...that is in good shape structurely,and make cosmedic changes to your taste.

When you build from scratch,everything down to the last lightbulb has to be purchased new...fighting all the subs,the weather,the mud,until you go to the expense of an all new lawn and landscaping.

My next home will be one that is already established in a good neighborhood,all it will need will be a little paint,paper,maybe some new flooring...It's much easier and less expensive to update and redo to your tastes than to build new...

steveinaz

If you don't have to sell a home to get in the new one, it's absolutely a good time to buy. Interest rates are way down, and it's a buyer's market.