Both our parents had their homes paid for by the time they retired and we only assumed we would be able to follow in their footsteps. However, with today's world of layoffs and inflation, we found ourselves in a world of hurt in trying to follow our parents' example. We were just lucky to have a job.
As my husband was approaching retirement, we were presented with the idea that we could still own our own home by building and being our own General Contractor (GC). The idea was to build one house, then live in it for 2 years while we built another home. By selling the first home, we would live in the second home again for 2 years, while building our final home. After selling the 2 nd home, we could own our 3 rd home free and clear of any mortgage by the time we finished, if we were very careful and built modest homes for the first two builds.
After doing our research, we gained enough confidence in this idea and launched our project of home #1.
It took us 7 months to complete our first home from the first shovelful of dirt to the time we moved in. Now, I'm not saying it was super easy, because it wasn't. There were pitfalls galore and many of them we didn't escape, but we still came out with over $50,000 of equity. My husband likes to say that I earned 50K in 7 months while he continued working his regular job of less than 40K a year.
You are probably wondering how this was all possible? I will tell you in a simplified version.
It's a fact that GC's have a lot of overhead they have to cover, from the costs of their insurances, contractor's license, equipment, vehicles and trailors, computers and computer programs associated with their field of expertise. By the time they finish, they may end up with a grand total of only 10 to 18% for themselves. The reality is they usually gross 58% on each home they build.
On the other hand, you don't have any of the expenses of a licensed GC so you can make at least 42% by being the GC on your own home. You lack the experience and so to expect to make the same as a licensed General Contractor is not reasonable. Anything you earn stays in your household so your equity grows with each build.
In most states you are allowed to build your own home (be the GC) if you live in that home for at least 2 years, with a maximum of 3 home sales in five years. You have to check with your state for its' laws.
I heard it explained this way:
In 2 years time whatever wasn't done right will
generally rear its' ugly head. You must live in the home long enough to make right any errors made in construction. After that whatever goes wrong can be attributed to wear and tear.
We can attest to that personally. Actually in the first 12 months we've had 3 or 4 things happen that we will know better about when we build our next home..
There are two ways to be your own GC.
1. One is to do everything yourself (DIY) and build your entire home, using a minimum of subcontractors. This may take years for you to finish your home. You'll have to own the land and some way, get around the city or county stipulations as to how long they will allow a home to be in construction mode.
2. The other is the way we did it; to be the GC but to hire out all the work done on the home. In our case it only took 7 months from start to finish.
With this age of information and the internet, there is much knowledge available for us to learn about the responsibilities of being a General Contractor. We don't need to actually perform the jobs ourselves, merely oversee the subcontractors' work, purchase the materials with a construction loan, and pay the subs when they have finished their work.
We can actually realize our dream of owning our own home within 5 years; not quite by my husband's retirement,date, but shortly thereafter.
Mom & Dad had it right, we should own our home. If our first home-build is an example of what is to come in our lives, that's what it will be for us, too. We can build three homes, in five years and have a debt free mortgage.. Linda Baxter is a piano teacher, and a stay at home mom of nine children, (22 grandchildren). She acted as General Contractor for building (earning) their retirement home. She hired and paid subcontractors, was overseer of all construction work (with the help of her husband, RL, who is retiring from his JOB in June) She freely shares her experiences on her website, http://www.home-built4u.com
Linda Baxter is
a piano teacher, and a stay at home mom of nine children, with a total of 22
grandchildren. She acted as General Contractor for building their
retirement home. She hired and paid subcontractors, was overseer of
all construction work (with the help of her husband, RL), and did
most of this from her “armchair”.and telephone. She freely
shares her experiences on her website, http://www.home-built4u.com,
hoping to help other potential owner/builders escape some of the
pitfalls she and RL experienced while being their own GC.
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