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Over the years I have gotten many of our construction students to ask relevant questions such as: B. what size of house I am building; what do I put in; where do i install it? Looking back, these decisions are easy for me to make now, but when I started building in 1975, it was trial and error. And my hindsight is crystal clear. I find it very easy to look back and see things I wish I had known when I first started building. You will learn that in this article.
You will learn the ins and outs of being a speculative or specification writer (as opposed to a contract writer). If you’re unfamiliar with these terms, a spec writer is someone who chooses a site, chooses a design, builds a home, and then sells it to a client. A contract builder is a contractor you hire to build a home for you. By the way, I suggest you start building specs instead of building someone else’s house. I’ll explain why later.
I’ll start by showing you how to become one of the top spec builders in your area, even if you’ve never built a home before. I will expand on this information by discussing points unique to spec writing. Next, I will discuss issues specific to contract creation and issues related to both specification and contract creation.
A word of caution
I want to stress that when starting your construction business, you need to separate your business from your personal life. In the early 70’s I was involved in commercial real estate sales. I barely survived a major recession. Almost everything I owned was in my name and most of it was repossessed. If I had known then what I know now, I would have kept this big house, this Mercedes and this plane.
Many things can happen to you in the construction industry, some of which you have absolutely no influence on. According to the National Center for State Courts’ 2008 Annual Report, Americans filed over 90 million lawsuits in 2007, more than a third of which were civil lawsuits. This does not include the volume of legal disputes that were resolved before a lawsuit was ever filed. Based on the sheer number of legal battles, both in and out of court, it could be said that most Americans are at risk of being involved in a lawsuit at some point in their lives – for many people more than once. This is especially true for those who work in high lawsuit-prone occupations such as doctors, dentists and, yes, especially construction workers! You should invest in hiring professionals to protect your wealth. It’s easier than you might think. This is a time when you cannot procrastinate. I have some great horror stories to tell you, but I don’t want to scare you this early in the game. However, don’t live in fear of what might happen. You only lose if you don’t play.
I. Speculative building
A. How to become one of the best spec builders in your area
Before you buy a lot, before you buy any house plans, the first thing I want you to do is build your winning team. I call this the Henry Ford philosophy. If you read about Henry Ford, you would learn that some people thought he was illiterate. He once sued a Chicago newspaper that wrote an article claiming he was illiterate. In the lawsuit, Henry Ford emphasized that he doesn’t need to know everything about everything because he hires experts to help him with anything he wants to do. This left his mind free and clear to do all the things he really knew. Well, I’ve learned from that philosophy myself over the years. I realize that there is not enough time in this life to do everything. I now hire experts to help me with my decision making and this has been a positive factor in my success building houses.
Your success team should include:
1. Realtor
2. Landscape Architect
3. Artist/Architect
4. Kitchen/bathroom designer
5. Interior Designer
6. Lighting designer
I will discuss each of these team members in detail as we progress through the course. Don’t worry. When you’re starting out, you don’t need the best. These team members are more affordable than you can imagine.
B. Getting Your First Loan
let me tell you a story And the further you get from that story, the harder it gets to borrow money to get started.
Let’s assume you are employed. If you are not employed but are self-employed, you must have good credit or tax returns for the past three years to qualify for the loan. If you currently rent a house or apartment and want to build a house for yourself, you are a prime candidate to borrow money to build a house – for yourself. So you get the money. you build a house They put it on the market during construction. you sell it you go to the bank They borrow money under the same premise. you get the money you build a house Offer it for sale. sell it. Do it over and over again and before long you walk into the bank and the banker looks at you and says, my goodness, you should be a house builder. And you’re.
Well, that’s the easiest way to get started. Almost every contractor I know started out in the industry this way. This method also offers you the least risk. Why? Because if you don’t sell the house, just move in. This in turn makes it easier for you to sell, as a furnished apartment usually sells faster than an unfurnished apartment. You will eventually sell it and can start the process again. The bad news is that you may be moving around a lot. I remember a couple who wanted to have a free and clean house. They used this method on five houses and put their winnings back into each house. Your sixth house was built entirely out of cash. They owned it free and clear and got out of the construction business. They simply wanted to do what was necessary to keep their home clear and clean.
The further you get from the above scenario, the more difficult it becomes to get that first loan when you’re just starting out.
Suppose you currently own a house and want to borrow money to build another house for yourself. A banker will generally be negative. They tend to look at the downside and might comment on something like that. “That sounds really good, but you currently own a house. What are you going to do with your current house?” Her response is, “I’m going to put it up for sale while this new house is being built, and then I’m going to sell it.” The banker comments, “That sounds pretty good, but what if you don’t sell your current house?” The banker generally sees the downside — that is, you’ll be stuck with two house payments. If you can show that you can afford two house payments, you might get the money.
You must always have a successful conclusion to your story that you tell the banker. Never look at the banker and say, “Gosh, I’m only borrowing 70% of the appraised value. If the bank had to take the house back, the bank would have gotten a bargain. The bank could sell the house and make a good return on investment.” Never apply that kind of logic to a banker. Bankers don’t want to be in the homeowning business. Never imply or think in your mind that this is going to happen.
If you are not employed, have a credit problem, or are short of cash, your next best bet is to find an investor to start a joint venture with. I’ve done this on many large projects when I didn’t have the finances to afford it myself. What I usually did was structure the investment so that the joint venture partner would come up with very little or no money. Investors really like this! What I needed was their strong record. Understand that there are many investors, like doctors, who have enormous balance sheets, but they have very little cash. So if you can structure the investment so that it requires very little or no cash, it becomes a relatively easy investment to sell. If I worked with a joint venture partner, after the investment was sold, the investor would get back all the cash they had invested, plus a fair interest rate agreed in advance. Any remaining profits would be split 50% to me and 50% to the investor. Normally, in such a situation, the investor would let me deduct all expenses, but understandably he wouldn’t let me take any salary.
You wouldn’t believe some of the wild, crazy, ridiculous investments that require large amounts of money that I’ve seen these people put money into. Many of them have the same luck in the stock market as I do. These people should feel blessed that you have walked into their lives with a profitable real estate investment. I found these people by talking to friends, attending investment seminars, and placing ads in the newspaper.
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