a direct supply-and-demand relationship, pushing prices up. If you have no preexisting relationships with any subs, you’ll end up paying the full price for their time. If they’re unable to work into your schedule, you may have other costs that come from delays on your project while you wait for the subs to become available.
Finding and managing subs
Hiring and managing subs is the hardest part of being an owner-builder. A contractor has the advantage of having long-term regular relationships with subs. An experienced contractor has spent years finding framers, plumbers, carpenters, and others whom they trust to be timely, efficient, and good craftspeople. If they’ve worked together for a long time, they know how to work together, and the contractor will know when to ask for favors.
Financing implications
One other challenge with being an owner-builder is the financing. Most conventional construction lenders frown on owner-builder projects. They have three basic reasons for being concerned:
The bank is afraid the project may not be managed effectively, causing it to exceed the allotted time frame and budget.
The bank wants to be sure your job and income won’t be negatively impacted by the time demands of the project.
In case of foreclosure, the bank doesn’t want to have to find and hire a contractor to finish the home.
For these reasons, many banks that lend to owner-builders do so with stricter requirements than for regular construction loans, such as loaning less money relative to the appraised value. Other banks allow owner-builder financing only if you’re a general contractor, or at the very least they require someone with construction experience as a site supervisor. Private sources for owner-builder construction loans are available, but they can be expensive and don’t generally have permanent loans attached like the single-close loans we recommend in Chapter 9.
Chapter 2
Preparing for the Process
IN THIS CHAPTER
Any time you undertake a multistep project, you have a greater risk of something going out of control. The good news is that you can prepare yourself for the chaos and craziness that are bound to happen in your construction project.
In this chapter, we help you set up some simple systems for managing the people and tasks involved in the custom-home process. We walk you through a short analysis of your finances so you can create a budget. We take you through the process of selecting a contractor and help you understand your insurance needs for the project. Finally, we offer several tips on how to keep the home-building experience a happy one.
Organizing and Documenting
The custom-home process is chock-full of enough paperwork and procedures to give bureaucrats chills. Now is the time to be honest with yourself: Are you truly an organized person? If so, this section is simply a series of reminders and ideas for you to embrace. If not, don’t be intimidated by the challenges ahead of you. Find someone in your family who is organized, or hire someone to help you prepare for the large organizing task ahead. One good resource is the National Association of Productivity & Organizing (www.napo.net). You can also check out Organizing For Dummies by Eileen Roth with Elizabeth Miles (Wiley).
Building a workbook and portable file system
To start a difficult project like the one you’re thinking of undertaking, you need a central place to store all the original paperwork you’re about to accumulate. Because each transaction creates its own set of paperwork, you want to get organized; otherwise, you’ll end up drowning in all that paper! A typical construction project usually generates enough paperwork to fill a two-drawer file cabinet. Not only do you need to store all this paperwork, but also you’ll need to easily retrieve it throughout the process. Here are some suggested categories for your filing system:
Architecture and design
Contractor communication
Contracts
Financing
Invoices
Land purchase
Materials information
Paid receipts
Permits and approvals
Subcontractor communication
Warranties
1 Create a loose-leaf binder with dividers for the categories in the previous bulleted list.
2 After looking at each document, decide whether you may need it at the site.If you may need it at the site, make a copy and proceed to Step 3. If you won’t need it at the site, proceed to Step 4.
3 File the copy you made in your binder.
4 Place the original in your home file system.
5 Review your binder every day, adding the necessary documents from your file system.
No doubt you’ll receive email and texts from your building team. These electronic forms of communication help the people collaborating on your project to easily pass along and share invoices, designs, pictures, and memos. The great thing about emails and texts is that they’re easy to store without taking up any space in your file cabinet. Consider setting up folders or tags in your email system to sort information for all the subjects and people you communicate with. This way, you can easily reference prior communication and share it if needed. You can also create a shared folder structure in an online storage platform like Dropbox (www.dropbox.com) or Google Drive (https://drive.google.com) to collect documents.