Author Topic: What are my chances of not losing money on (partial DIY) new construction?  (Read 540 times)

terran

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I know that the conventional wisdom is you'll lose money on new construction, and even worse on custom builds, but what about if you do some of it yourself?

Either way I will build a house someday as it's something I really want to do, but if I'm still guaranteed to lose money even with partial DIY, then I should probably stop dreaming (in the short term) and wait until we're FIRE and can decide if/where we want to settle down. On the other hand, if I have a pretty good chance of making a bit of money (or at least not losing money) not counting the time I spend on it, then maybe I would do a practice run now in the location we're likely to be for at for least the next 5-8 years and sell it when/if we move on.

I worked in construction in my younger days, so I'm a pretty competent all around carpenter. I live in a different part of the country now, so I may be missing some region specific knowledge and none of the connections (subs, etc) will transfer.

I would definitely do the interior finish work as that's the part I like best and probably the exterior finish work too.

I might or might not do:
> framing (I would need to hire someone to help with at least some of it as it's not a one person job),
> Insulation (would depend on what kind and possibly whether I do the framing)
> drywall (pretty good at it, but slow, and don't much like it, so it would depend how much it would save me)
> install windows (again, I'd need to hire someone to help and would probably depend on whether I hired out the framing)
> some parts of sitework/landscaping.

I would definitely hire out the foundation, electrical, plumbing, HVAC, roofing, large scale site work.

I think I'd like to have an architect help design it, but I could see designing it myself and having a draftsperson draw the plans.

So does anyone have any wisdom or experience to impart? Have you built or bought and eventually sold new construction? How did it turn out financially?

AlanStache

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #1 on: September 26, 2017, 02:59:56 PM »
There have been a few people here that did a large percent of a home build themselves so hopefully one of them will chime in.  You dont say if you are employed now or would be taking time off work to build the home.
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terran

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #2 on: September 26, 2017, 03:22:59 PM »
There have been a few people here that did a large percent of a home build themselves so hopefully one of them will chime in.  You dont say if you are employed now or would be taking time off work to build the home.

Good point. I freelance and my wife is the primary bread winner. I could fit it in without a large change in income with any slow down in the work being compensated by the increased freelance income that would cause it.

Bikeguy

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #3 on: September 26, 2017, 07:02:25 PM »
General contractor gets 20%.  If you can run the job site, you have just gained 20% equity in a house, if you built something someone else wants.

After completion, live in it for 2 years.

All profit is free.

Do that 5 times and the house will be paid for from you running the job site, as 20% x 5 = 100%.

The key is to build what others will buy.
If you're FI, why are you still selling days of your life?  You only have so many, and if you have enough money, you're trading them for something you don't need.

terran

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #4 on: September 26, 2017, 09:04:01 PM »
General contractor gets 20%.  If you can run the job site, you have just gained 20% equity in a house, if you built something someone else wants.

After completion, live in it for 2 years.

All profit is free.

Do that 5 times and the house will be paid for from you running the job site, as 20% x 5 = 100%.

The key is to build what others will buy.

Thanks! Have you done this? So the 20% is for site management? So conceivably one could save even more by also doing some of the work instead of hiring certain subs?

Jon Bon

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #5 on: September 27, 2017, 05:40:19 AM »
There are many moving parts here.

1. Custom Homes: I think this is an intangible benefit. Yes you might theoretically 'lose' a few bucks on this, but only if you sell. Valuing the custom features that you will get you lots of enjoyment out of is hard to quantify. I am currently building a custom garage, there are a few features that might raise the cost by 10-15% but I think it will make the garage 100% more useful and enjoyable for us. I am not sure how to do the maths there, but that is kind of my point!

2. DIY : Is going to be a HUGE savings some things more than others. I have heard 50% of the cost of a house is labor*, So that is math you can do! Drywall I would not do, those guys are SO FAST its really money well spent IMO.  Framing/insulation/windows could probably save you a nice chunk of change.

Now get out there are find your piece of land you are going to build on!

*source: https://www.fixr.com/costs/build-single-family-house

terran

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #6 on: September 27, 2017, 08:08:16 AM »
There are many moving parts here.

1. Custom Homes: I think this is an intangible benefit. Yes you might theoretically 'lose' a few bucks on this, but only if you sell. Valuing the custom features that you will get you lots of enjoyment out of is hard to quantify. I am currently building a custom garage, there are a few features that might raise the cost by 10-15% but I think it will make the garage 100% more useful and enjoyable for us. I am not sure how to do the maths there, but that is kind of my point!

2. DIY : Is going to be a HUGE savings some things more than others. I have heard 50% of the cost of a house is labor*, So that is math you can do! Drywall I would not do, those guys are SO FAST its really money well spent IMO.  Framing/insulation/windows could probably save you a nice chunk of change.

Now get out there are find your piece of land you are going to build on!

*source: https://www.fixr.com/costs/build-single-family-house

Thanks!

I totally agree that there are intangibles involved. For me, one of those is actually getting to build it, but also getting to live in it of course. This is why I'll absolutely do this someday. What I'm struggling with is whether now could be the time, or whether I should really wait. My wife just started her new job, and she's probably got one more move up the ladder in her before we're FIRE which will likely involve another move, and it's unlikely we would stay in this location once FIRE'd (although you never know). I guess I'm struggling with whether this is one of those consumption items that should be put off, or whether if I DIY the cost might not actually be so bad compared to other housing options.

I tend to agree with you on drywall. I'll need to be careful who I find if I have them do the taping as that can be ugly if they're not good.

Are you DIYing any part of your new garage? Are your experiences in line with the link you posted in terms of labor vs material costs (the 50% thing)?

Fishindude

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #7 on: September 27, 2017, 08:17:58 AM »
Depends upon your skill level and how much time you have to commit to the project.

A friend of mine who is a well versed construction professional is doing something similar right now.  He first built a nice pole building, as he knew he would want a shop on the place anyway, then built a tiny one bedroom apartment in the end of it for he and his wife (no kids) to live in while building, got all of that done in a few months.   Now he is building a brand new log cabin home, almost 100% self performed with the help of some volunteer family and friends.  Might hire out a little plumbing or electric work, but not too much.   In the end, I'm sure he is going to have a nice brand new home at about 1/2 to 2/3 the cost of hiring someone to build for him.  Zero money shelled out for labor, and zero shelled out for contractor mark-ups.

Just be careful not to bite off more than you can chew.  For the individual above, this will be an 18-24 month process start to finish, so you really need to be committed and in it for the long haul.
Banks are also wary of lending for projects like this if the borrower doesn't have construction experience and a good plan in place.

Goldielocks

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #8 on: September 27, 2017, 11:33:22 AM »
The key is to build, live in it for 2 years, then sell as a primary personal home, not a spec. build.

Next, you need to build a "standard" "builder's grade" home..  As soon as you customize, you are losing money.  The standard homes figure out how to get the most sq.ft out of materials, while providing the features that people want.   They may cut corners and closets / storage, because running the plumbing stack through that area at a 25% angle is much cheaper than adding a closet... that sort of thing.

If you can get yourself to stick to a standard plan, with a few shiny features, and an efficient schedule use of materials, and get good sub trades lined up (hard to do in a strong economy your first time), then you can absolutely make money.

terran

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #9 on: September 27, 2017, 12:32:56 PM »
Depends upon your skill level and how much time you have to commit to the project.

A friend of mine who is a well versed construction professional is doing something similar right now.  He first built a nice pole building, as he knew he would want a shop on the place anyway, then built a tiny one bedroom apartment in the end of it for he and his wife (no kids) to live in while building, got all of that done in a few months.   Now he is building a brand new log cabin home, almost 100% self performed with the help of some volunteer family and friends.  Might hire out a little plumbing or electric work, but not too much.   In the end, I'm sure he is going to have a nice brand new home at about 1/2 to 2/3 the cost of hiring someone to build for him.  Zero money shelled out for labor, and zero shelled out for contractor mark-ups.

Just be careful not to bite off more than you can chew.  For the individual above, this will be an 18-24 month process start to finish, so you really need to be committed and in it for the long haul.
Banks are also wary of lending for projects like this if the borrower doesn't have construction experience and a good plan in place.

Good point about financing. I can see how that might be a problem. I'll have to look into that.

Great idea on the pole barn with apartment. Not thinking that would work with the size lots we'd probably be looking at (we wouldn't want to be that far out in the country at least while my wife is working), but it would be great not to be paying rent during the build if that's something someone could pull off in such a process.

Is you friend building from a kit or from scratch?

Building a house is definitely a long process. I was thinking more like a year would be doable once construction starts, but I tend to be overly optimistic about such things, so you could be right the 1.5-2 years.

The key is to build, live in it for 2 years, then sell as a primary personal home, not a spec. build.

Next, you need to build a "standard" "builder's grade" home..  As soon as you customize, you are losing money.  The standard homes figure out how to get the most sq.ft out of materials, while providing the features that people want.   They may cut corners and closets / storage, because running the plumbing stack through that area at a 25% angle is much cheaper than adding a closet... that sort of thing.

If you can get yourself to stick to a standard plan, with a few shiny features, and an efficient schedule use of materials, and get good sub trades lined up (hard to do in a strong economy your first time), then you can absolutely make money.

Good points. I'm well versed in the ideas of material efficiency (build in units of 8ft, etc) and making thing more reasonable to build (keep the plumbing in close proximity, etc). I think the challenge would be finding an architect who gets it too.

I'm not thinking of this so much as a money making endeavor for which the 2 years then sell without capital gains idea is a great one, but rather as a hopefully not money losing one. I guess I'm wondering if I can get into a new house I've built with similar economics to buying an existing house, living in it for 5-8 years and selling, or whether even in that time frame I'm pretty much guaranteed to still lose money.

My hope would be that by doing the finish work (and possibly other work) myself I can avoid a lot of the chintzy builder grade things that we see in new(er) construction (at least around here) that make it seem plasticky, fake and an inch deep veneer of nice with crap hidden underneath.


Goldielocks

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #10 on: September 27, 2017, 12:58:03 PM »
^^
Okay, the answer to that one is "no".   We did that, and we had family for plumbing, electrical, finish carpentry (kitchen / bath cabinets, interior doors, fence), interior painting.   We did the hardwood and tile ourselves, the landscaping, siding, eaves and soffits, demolition, and some of the rough carpentry.  We were the general contractor.   Because of the volumes and relationships with contractors who were family, we received steep discounts on supply, but not at the volume builder levels, of course.

At the end of the day, we still spent about 20% more per sq.ft for our home than one we could have bought directly, already done.   Lots of things went into this, including having to carry 2 properties for 6 months,  not buying "builder grade" finishes in bulk, like light fixtures for some items, surprise changes from our original plans, carrying the cost of sub trades that ended up with swine flu, and the customization which created surprises as we went.   Smaller things like the number of peaks on the roof driving up costs impacted us.

Also, lifecycle upgrade decisions -- insulation type and quality,  addition of a true subfloor over the concrete in the basement, central heating versus baseboards, better efficiency on the windows, an extra skylight to reduce daytime lighting needs... all added in costs above builder's grade.   

Yes we have a better home, but it cost almost double our estimate going in, and ended up being 20% more money than buying a pre-built home, despite all the free labour.

Car Jack

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #11 on: September 27, 2017, 01:28:14 PM »
If you pay anyone by the hour, assume that if you're not there physically watching them work, it's Miller time.  Our house was built by a coworker who would get 2 solid hours out of a framing team, who was paid for 10.  He had a full time job and only looked in early and then either at lunch or after work.  He got hosed.

terran

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #12 on: September 27, 2017, 02:19:20 PM »
Yes we have a better home, but it cost almost double our estimate going in, and ended up being 20% more money than buying a pre-built home, despite all the free labour.

Yikes! Sounds like some of this was due to midstream changes (always a big issue), design choices (the roof peaks), and upgraded materials. Other than the midstream changes (which were presumably a choice?) could you have avoided some of the surprises by pricing things out more carefully before you started?

Since a new build would have been 20% less, I'm guessing you were/are underwater on things for awhile if you went to try and sell in that you'd end up having to sell for less than it cost you build? Or do you think you would be able to sell for more because of the upgrades?

If you pay anyone by the hour, assume that if you're not there physically watching them work, it's Miller time.  Our house was built by a coworker who would get 2 solid hours out of a framing team, who was paid for 10.  He had a full time job and only looked in early and then either at lunch or after work.  He got hosed.

Ouch! Yeah, I think I would try to only do hourly for someone who was working with me directly in more of a helper capacity, so naturally I'd be there the whole time.

Goldielocks

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #13 on: September 27, 2017, 10:07:24 PM »
^^  rapid house appreciation, and we bought in the only dip in the past 10 years...   so never underwater, just more like only making $50k instead of $200k for a few years there.  Now, however, many more homes near us have been torn down and rebuilt.   The reno is covered in the market now... no longer overbuilt for the area.

The home is a 3/4 teardown and rebuild with architects drawings. 

Some items that were surprises-- the structural engineer did not agree with the way the architect intended to support the second floor, and we had a beam put in.  So, the architect's original estimate was low.  (nearly a 40 ft beam with foundations on the lower level).   Original estimate did not include landscaping.   Structural engineer changed his mind half-way through and decided we needed more exterior supports to prevent a truss load going through the window.  We would have designed an alternative if he had indicated it the first time around.. So, we had to bring in 6 more foundations and another 30 ft beam.   Construction crew on hourly time got the Swine flu and it kept them low production for nearly a month.  Guess what? apprentices still showed for work, but had no one to give direction, yet it was hourly contracts and so we had to pay them.  And then pay the full crew to tear out their work and redo it (all the windows were reinstalled 2-3x). The chimney, that we were keeping to retain the wood stove in the basement as a grandfathered item -- we could not find a mason to repair the masonry liner, so we had to knock it down, AFTER the house shell was built and all the drywall was in, and then purchase a gas fireplace and rebuild a false, stone clad chimney. A two story, 10 ft wide GD chimney.  !!

We underestimated how many circuits the new code needed for the kitchen, we were only allowed to put 7 pot lights onto a single circuit according to city, this created a need for a sub panel....  Think about it, only 6 lightbulbs allowed per circuit.  That's a lot of extra wire.   The exterior inground sprinkler system was damaged accidentally.  Bin removal costs were much more than planned.   UV light changed the colour of the hardiboard, after 2 years but not the colour-matched caulk, and we needed to repaint the exterior to remove the pinstripes and polka dots.   I chose to upgrade insulation to spray foam,  then I mis ordered the hardwood and the restocking fee was steep.     We needed to pay to live somewhere for 6 months until we could move in. .. our prior landlord sold the house we were in when we let them know early that we would not renew... and the new temporary place was expensive...

Etc. etc., etc.

Would I do it again?  Nope.    This isn't a Disney ending...   I still think there is money in spec homes, but doing your own is asking to spend more $$'s than intended.

Jon Bon

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #14 on: September 28, 2017, 10:47:26 AM »
There are many moving parts here.

1. Custom Homes: I think this is an intangible benefit. Yes you might theoretically 'lose' a few bucks on this, but only if you sell. Valuing the custom features that you will get you lots of enjoyment out of is hard to quantify. I am currently building a custom garage, there are a few features that might raise the cost by 10-15% but I think it will make the garage 100% more useful and enjoyable for us. I am not sure how to do the maths there, but that is kind of my point!

2. DIY : Is going to be a HUGE savings some things more than others. I have heard 50% of the cost of a house is labor*, So that is math you can do! Drywall I would not do, those guys are SO FAST its really money well spent IMO.  Framing/insulation/windows could probably save you a nice chunk of change.

Now get out there are find your piece of land you are going to build on!

*source: https://www.fixr.com/costs/build-single-family-house

Thanks!

I totally agree that there are intangibles involved. For me, one of those is actually getting to build it, but also getting to live in it of course. This is why I'll absolutely do this someday. What I'm struggling with is whether now could be the time, or whether I should really wait. My wife just started her new job, and she's probably got one more move up the ladder in her before we're FIRE which will likely involve another move, and it's unlikely we would stay in this location once FIRE'd (although you never know). I guess I'm struggling with whether this is one of those consumption items that should be put off, or whether if I DIY the cost might not actually be so bad compared to other housing options.

I tend to agree with you on drywall. I'll need to be careful who I find if I have them do the taping as that can be ugly if they're not good.

Are you DIYing any part of your new garage? Are your experiences in line with the link you posted in terms of labor vs material costs (the 50% thing)?

Yes I am DIY a large part of the garage. We had the gas line moved last night (at like 1am, neighbors love us) so we are about to break ground next week.

The materials/labor obviously is a sliding scale. For instance I am getting my sidewalks done, 7 yards of concrete for about $1000 in materials. The quotes I got to spread this concrete were $6,000-9,000. However if you buy really fancy high end windows might cost $500 a window, but only cost about $100 in labor to install. YMMV


As for Goldielocks experiences sounds pretty wild. I guess their idea of a custom home might be different then mine? To me there is a custom home, and there is "cribs" Sounds like his house might be closer to cribs!

Sounds like Goldie ran into a far amount of bad luck as well.

Fishindude

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Re: What are my chances of not losing money on (partial DIY) new construction?
« Reply #15 on: September 29, 2017, 06:29:02 AM »
If you pay anyone by the hour, assume that if you're not there physically watching them work, it's Miller time.  Our house was built by a coworker who would get 2 solid hours out of a framing team, who was paid for 10.  He had a full time job and only looked in early and then either at lunch or after work.  He got hosed.

Sorry about your coworkers misfortune, but this is hardly the norm.   He obviously hired some questionable individuals, probably trying to go cheap.
There are still plenty of good people out there that will give you an honest days work for a days pay.