Author Topic: Am I nuts? Or is this smart?  (Read 1290 times)

joenorm

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Am I nuts? Or is this smart?
« on: December 03, 2018, 07:50:17 PM »
OK so I have already gone over my situation here and have had some great feedback, including nice encouragement.

A recap. I have bought property next door to me with a refinance of my home, along with taking out another 70K to start a build on the property.

Right now for my home, the new property, and the extra money, I am paying $1725 a month on 270K mortgage.

I am getting closer and closer to making this real. Plans are in the works, I have a friend who will help me(for pay) with the build. Nothing excites me more than this kind of stuff so it feels pretty good, besides the second guessing and the bit of stress that come along with it.

If the market doesn't fully crash in the next few years I will have the potential to sell my current home after I build the other and be mortgage free, with maybe a little in the bank but hard to say with the way house builds go. The new house in todays market would be valued at around 450-500K once built.

I will quit my day job to work on the build completely, acting as the main builder and the general contractor.

This seems like a sound plan, even considering the work and stress involved. But I have been waking up at night a little nervous about it.

Have others out there done anything like this? Am I crazy to take this on? I know I am ultimately the only one who can answer this question but hearing input has proven helpful.

Anyway, don't mean to beat a dead horse as I have already asked about this. Any further advice/comments/questions very much appreciated

 

waltworks

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Re: Am I nuts? Or is this smart?
« Reply #1 on: December 03, 2018, 11:04:39 PM »
I don't think I would quit my day job to become a GC, unless you've always wanted to be a GC. Have you always wanted to be a GC? If so, why not get paid to build something that *someone else* is taking all the risks on first to see how it goes?

My personal feeling (that I have acted upon by selling all my rentals) is that the housing cycle has peaked and we're due for some significant declines or at best price stagnation. I've been wrong before, and your market might not track the national market, of course.

-W

joenorm

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Re: Am I nuts? Or is this smart?
« Reply #2 on: December 04, 2018, 07:35:58 AM »
I have actually done it before a number of years ago. It's not what I want to do all the time, but it was pretty fun for a year.

This would be a little different as its a place for us to move into when it is finished.

Worst case scenario: Selling my house at a lower number than it may sell for today. I think I could still pay for the build and pay off my current mortgage.

It is hard not to think in catastrophic terms sometimes, like that the housing market might just vanish completely or something. Seems unlikely but my mind does go there.

I also wonder what the best alternative would be. I have this great piece of raw land now (it is a nice piece, water view in vacation/tourist town) with a chunk of cash. I could put it back on the market, or............

The idea of building is really exciting to me, especially as it is a place we'd live in. But of course it is nerve racking for the reasons illustrated here.

Thanks



waltworks

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Re: Am I nuts? Or is this smart?
« Reply #3 on: December 04, 2018, 11:33:11 AM »
Sell house now, buy RV or trailer and park it on vacant lot, live in it while you build the house?

If you like GCing, go for it. I'd try to sell the existing house now rather than wait, though.

-W

Jon Bon

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Re: Am I nuts? Or is this smart?
« Reply #4 on: December 04, 2018, 12:22:33 PM »
Sell house now, buy RV or trailer and park it on vacant lot, live in it while you build the house?

If you like GCing, go for it. I'd try to sell the existing house now rather than wait, though.

-W


I agree mostly with walt here, selling the house NOW is probably MUCH better then selling 12-18 months later. So price aggressively. Is this the start of a broader trend? Single family homes have been crazy for about 5 years. Is the top in!!??

However money is not everything. Living in a trailer while you work like a dog building a house does not sound like fun to me. So make sure you include that in your decision.


joenorm

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Re: Am I nuts? Or is this smart?
« Reply #5 on: December 04, 2018, 07:36:09 PM »
What is the biggest factor in the SELL NOW camp?

Is it that the bubble has peaked and will be popping anytime now or is the interest paid every month I stay put?

Yes, I have considered moving into a trailer(with my SO) on the other property but as Jon Bon said, it doesn't sound too fun. Winter time is a tough time for that sort of thing.

Its less the logistics I am concerned about and more just making sure this isn't a wildly stupid move financially. While building a house is wicked stressful and life consuming, it is also exciting and fun a lot of the time. And I think at the end of it I'll be in a better position than i'm in now.........right?

I don't have a high paying day job like a lot of people on this forum, so my time spent on a project like this may be more valuable than just going to work.

Anyway, just trying to figure out if it sounds like a bad move.

waltworks

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Re: Am I nuts? Or is this smart?
« Reply #6 on: December 04, 2018, 08:12:30 PM »
If you're good at being a GC (and by that, I mean, super efficient with awesome subs you have worked with many times and know what kind of donuts the secretary at the permit office likes) then you will probably do just fine.

If you just enjoy puttering around building stuff but you haven't tried to do it seriously for money, then who knows.

What's the lot worth? What's the lot worth with a house on it? How much will you spend in time and money to build it?

-W

joenorm

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Re: Am I nuts? Or is this smart?
« Reply #7 on: December 04, 2018, 11:05:37 PM »
Lot is worth 115K, Lot with house ~500K

Cost to build, hopefully $175,000, not factoring in any of my time.

joenorm

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Re: Am I nuts? Or is this smart?
« Reply #8 on: December 05, 2018, 06:44:40 AM »
forgot to factor in the mortgage.

$1725 x 12 months to build= $20,700

waltworks

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Re: Am I nuts? Or is this smart?
« Reply #9 on: December 05, 2018, 07:49:57 AM »
I'd go get a couple of GCs to bid it out (assuming you have plans already). Pay them something for their time.That will give you a second opinion on the construction costs.

Then hire a realtor to do a CMA for you on the hypothetical house. That'll give you a second opinion on end value.

If that all is close to your numbers, go for it.

-W

trollwithamustache

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Re: Am I nuts? Or is this smart?
« Reply #10 on: December 05, 2018, 08:37:16 AM »
GC'ing is a real job done well by professionals, so it might not be as easy as some webinar says. Not to say you can't do it, but understand you are starting a new career.

Also, do you have your state license lined up?

I'll second the sell the house and get in an RV idea. That gives you dollars/time wiggle room while you figure out tougher problems.

BicycleB

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Re: Am I nuts? Or is this smart?
« Reply #11 on: December 05, 2018, 09:03:28 AM »
What is the biggest factor in the SELL NOW camp?

Is it that the bubble has peaked and will be popping anytime now or is the interest paid every month I stay put?

Yes, I have considered moving into a trailer(with my SO) on the other property but as Jon Bon said, it doesn't sound too fun. Winter time is a tough time for that sort of thing.

Its less the logistics I am concerned about and more just making sure this isn't a wildly stupid move financially.

Joining the Sell House Now camp, because of your own words: just making this isn't a wildly stupid move financially.

Don't base your plans on guesses about how the market will go. Selling the house eliminates your risk of ending up with two properties that have lower values than you estimate. Keeping house 1 while building house 2 is what I personally would think of as a wildly stupid gamble. Selling house 1 cuts that gamble down to a wiser level. (Just one person's opinion. Heartened by Waltworks, though - smart guy.)

To put it another way, if I had low income and one pot of gold, I wouldn't bet the whole pot just to do one new project. I'd limit the bet, then do the project.
« Last Edit: December 05, 2018, 09:05:46 AM by BicycleB »

joenorm

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Re: Am I nuts? Or is this smart?
« Reply #12 on: December 05, 2018, 09:31:43 AM »
Thanks for the feedback.

As far as GC'ing goes, I can assure you I didn't take anything from a "webinar." I GC'ed a house when I was 24 years old, and have built and been in the trades since younger than that. GC'ing is not my current gig, but is certainly not foreign to me.

Points taken about the risk of owning two properties and spreading pretty thin, it makes me a bit nervous also. I think what reassures me is knowing the local market pretty well and betting that worst case scenario I end up with a paid for house, even if I cannot sell my current for top dollar.

That is assuming there is not a major market meltdown. The only downswing I have really lived through so far was 2008, so my mind always thinks catastrophically when I think about market ups and downs.

Trouble with selling now are the straight up logistics of doing it, getting on the market, finding trailer, making it livable, keeping SO happy throughout, finding a place for all our crap. All in the coldest, darkest, wettest season. Of course it is all doable, just hard to swallow as I sit in a cozy home by the wood stove and type.

But this is exactly the feedback I was hoping for. Sometimes you can really get tunnel vision toward a project or toward a goal and lose sight of things.

Being able to ask questions to an unbiased audience is really helpful.




elaine amj

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Re: Am I nuts? Or is this smart?
« Reply #13 on: December 05, 2018, 09:38:55 AM »
How about selling your current and renting another house for 12 months? You don't have to live in a tiny trailer but will still mitigate your risk. Holding both houses sounds like a putting too many eggs in one basket. Do u have enough cashflow/other assets to balance out that risk?

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theoverlook

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Re: Am I nuts? Or is this smart?
« Reply #14 on: December 06, 2018, 08:07:06 AM »
Another big problem I see with the trailer idea is local permitting / zoning. You may not be allowed to live in an RV on the property, at all. Or, you may need to get a permit that specifies sewer/electrical hookups and how long you can do it for. My family has some experience with this, and neighbors will call in a complaint if an RV shows up on an empty lot and someone starts living in it, so don't expect to skirt local regulations about it.

You say you don't have a high paying job, but I wonder if it wouldn't be more cost efficient to hire someone to do this house build while continuing to work? Or maybe do your GC gig part time while continuing to work? You don't have to hands-on everything about the house, and if you do you need to include that in your calculations if you're planning on quitting your job. It's an easy thing to add up since you know how much you make and how much income you'd forego by quitting your job. Supervising subcontractors is time consuming, but it's not a full time job. Or are you planning on doing all the work yourself?

Plenty of people have built houses will still working a full time job.

Tuskalusa

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Re: Am I nuts? Or is this smart?
« Reply #15 on: December 06, 2018, 08:35:51 AM »
Agree with selling the house now if you are planning to quit your job. My guess is that you’re waking up at night because you’re taking a significant financial risk by giving up income fir the build period.

You dint need to live in a trailer. You could find an affordable rental. Of is there a way to hold on to you job and hold a more limited role. Even if you’re not the GC, there are tons of decisions to be made and projects to be done on evenings and weekends.

joenorm

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Re: Am I nuts? Or is this smart?
« Reply #16 on: December 06, 2018, 07:07:45 PM »
One of the biggest factors that makes this feasible (or I thought so at least) was my involvement (sweat equity). A friend(a lead builder) and I will form the foundation, oversee the pour, then proceed to get the building "dried in." I will pay my friend a good wage to do this with me. Should take about three months.

If I am out working, my hourly rate won't differ much from what I am paying a skilled carpenter(wages are pretty high here for the trades). I am a very productive carpenter, so I thought my time would actually be more valuable on the build.

At this point I will do the plumbing and electrical myself. I will sub out insulation and drywall because those are the two things i don't like much, and pros are much, much faster and better.

I actually WANT to be 100% part of the build, I like doing it.

I just need to figure out if that is feasible. I thought it was but after this discussion I am having second thoughts. I am aware how expensive building can get.

Regarding putting a trailer on the land, I don't think it would pose a problem here.

Regarding waking up at night because I smell the risk, this is true.





Bicycle_B

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Re: Am I nuts? Or is this smart?
« Reply #17 on: December 08, 2018, 01:41:26 PM »
Really curious now... let us know step by step what happens...

theoverlook

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Re: Am I nuts? Or is this smart?
« Reply #18 on: December 11, 2018, 08:20:45 AM »

Regarding putting a trailer on the land, I don't think it would pose a problem here.


Don't do it based on "think." Do it based on "know." Contact zoning or permitting and ask. They can make you remove the trailer so it would be a bad situation to find that you have 48 hours to find a new place to live.

Is your day job physically demanding? If not, assuming you don't have kids, you could balance the two. Work day job, work house job, sleep. I've done that before and it wasn't bad, but it was before I had kids. My wife missed me but it was a short term thing.

OurFirstFire

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Re: Am I nuts? Or is this smart?
« Reply #19 on: December 11, 2018, 09:31:59 AM »
I don't think you sound crazy.  Do something you love while becoming mortgage free?  You sound like you have the right combination of knowledge and confidence to me.  Go for it.  Being in the trades, this could also enhance your career.  Take the opportunity to try new things and develop new expertise.

It seems your main worry is decline in market values, so I'd agree with others that say selling your current house now is a good idea to mitigate risk.  If the living in a trailer thing doesn't work out just rent a place until the new house is far enough along to move in.  Saving the $1725/month in mortgage gives you money to work with on that front.

Good luck!

joenorm

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Re: Am I nuts? Or is this smart?
« Reply #20 on: December 12, 2018, 08:58:10 AM »
Thanks for the encouragement.

At this point it is just coming down to logistics, houses don't sell overnight (usually)

I think trying to make it work while keeping at least a part time job is probably a good idea and something I will consider.

It is funny how differently people view Real Estate. A lot of people you talk to seem to think that no matter what you own you should always just hold onto it forever. They hold the idea that Real Estate will just continue to appreciate indefinitely, and don't even consider the value that will be locked away in it. I have found that to be almost 100% of the people I talk to in my area.

I never thought I would want to sell my current home, but it is not a "forever" home, and at this point I can see it as a tool toward a less stressful life(no mortgage=less stress).

After really diving into this site, and the ideas here, its amazing to see how wildly peoples opinions of things differ. I liken it it almost to diet, everyone has a different idea of what works and what doesn't. And of course there are different ways to do things for different people, but sometimes people are just plain old misinformed. Actually a lot of the time.