Sunday, November 22, 2009

Part 8 -The Floor is On

After a hectic week of work the building is capped off.

Here's a summary of what was accomplished this week. Pretty impressive:
  • Hole dug
  • Septic tank and drain field installed
  • Well drilled
  • Footings framed and poured
  • Crawl space framed
  • Basement beam installed
  • Floor joist installed
  • Floor capped off
  • Tar applied to exterior of crawl space
I'm sure that I'm missing a bunch of stuff, but that's a pretty nice list for the first week.

Friday, November 20, 2009

Part 7 - Framing

It's starting to look like a house. After cutting a million 2x6's to length, the crawl space is in place. I love this phase of the project when the look of the building changes dramatically every day. The forecast calls for snow on Monday, so the next week is going to be interesting. Getting the floor capped will be the next major milestone.

Wednesday, November 18, 2009

Part 6 - Progress

The well drilling began on 11/17. After drilling down 150 feet they weren't able to find any usable water. This was a surprise because there was a working well nearby that had been there for many years. Instead of trying to go deeper they started digging in a different location. At 100 feet they found a water source that was able to produce 30 gallon a minute. After plugging the old well and the 150ft dry well they were back in business.

The footings were poured on 11/18. They also buried the new septic tank and the drain field was installed and approved. They have made excellent progress in only 3 days!! Here are some more photos.

Part 5 - Construction Begins

On 11/16/09 they dug the hole. The building site is pure sugar sand and the digging went smoothly.We had covered the ground with hay in hopes of keeping it from freezing too much. It must have worked :)

The guys also began setting up the forms for the footings. It was a very successful first day.

Part 4 - Paperwork

With a solid cost estimate in hand, the next step in the process was getting financing. Since we are building in Northern Minnesota it made sense to try to get financing from a local bank. Local banks are very familiar with local building codes and local contractors. You might not get the best possible construction loan interest rate, but be less of a headache than having to deal with an out of town lender. After talking with a couple of different banks we found one that was offering acceptable residential construction loan rates. Also, they didn't require a cash down payment since we would be using the land as collateral. The approval process was painless, and there wasn't an unreasonable amount of paperwork required.

At this point it was the middle of October. In Northern Minnesota it gets cold in November and we usually get snow at the beginning of the month. We needed to get the hole dug and concrete poured ASAP. Before we could dig we still had a bunch of paperwork that needed to completed.

  • Survey
  • Administrative subdivision approved by the county
  • Appraisal
  • Title Search
  • Liability and Builder's risk insurance in place

The survey was on the critical path and unfortunately the survey company told us that it was going to take 2 weeks before they could get started on it. We waited patiently and the survey was eventually completed at the beginning of November. We now had a 7.84 acre of parcel of land to work with. Luckily the weather was mild during this time. It took an additional week to get the rest of the paper work completed, and on Friday Nov 13th were finally ready to close. Everything went smoothly at closing except that there was a small tax lien against the property. It turned out to be a mistake, and we were able to close as scheduled. Arrangements were made to start digging the hole on Monday.

Part 3 - Estimating costs

With a house plan in place the next step was to figure out how much it was actually going to cost to build. Sorry, but I won't be including any actual cost figures in my posts. My father had recently built a house with a similar floorplan, so he had a pretty good idea of what the labor\materials would be. To nail down the numbers, we collected bids from the various subcontractors and the lumber yard.

Here's a breakdown of the major items:

  • Land survey to subdivide the property
  • Foundation\Dirt work
  • Well\Sewer
  • Heating\Cooling
  • Electrical
  • Plumbing
  • Windows\Doors
  • Construction materials (concrete, lumber, siding, trim, roofing, etc)
  • Cabinets\Counter tops
  • Flooring
  • Drywall taping

My father and his crew will be doing the framing, drywall, finish carpentry, siding and roofing. My brother and I plan to put sweat equity into the home by doing the following without using a sub-contractor.

  • Low voltage
  • Painting\Staining
  • Hardwood\Tile installation
  • Landscaping

Once we knew the cost of building the home we needed to figure out how much we could expect to sell it for. We don't know if we'll be using a realtor to sell the house, so we opted not to bring one in to help us with an estimate. I started by looking at the MLS for comparable homes in the area. Unfortunately, there weren't a lot of comparables. The good news is that there isn't much new construction right now, so our property should compare favorably to many of the older homes on the market. Besides the MLS, Better Homes and Gardens and have some nice tools for estimating the value of homes in the neighborhood. The sites aren't perfect, but I found them to be useful in providing a variety of different information. After a lot of research we settled on a target sales price. After taking into account commissions, interest payments, closing costs and a potentially long selling cycle (9-12 months) we felt confident that the profit margin was large enough to pursue the project.

Tuesday, November 17, 2009

Part 2 - Floor Plan

Building a home with the intention of selling it for a profit is a major challenge in today's economy. Home builders are going out of business left and right and profit margins have shrunk dramatically over the past few years. The term "real estate investor" is a dirty word in the banking industry so getting financing can be a challenge. The one bright spot is that building materials are very inexpensive right now. Homes are selling for a lot less, but they also cost less to build. With of that in mind we set out to build a small home in hopes of minimizing our risk.

The decision of where to build was an easy one. My father will be the contractor so it needed to be close to his home in Northern Minnesota. My parents own 20 acres of land which we decided to subdivide for the project.

In order to keep the cost down we wanted the house to be ~1200 sq/ft. We wanted something that would make a nice starter home or possibly a vacation\retirement home.

We started with the floor plan of a home that my father built a few years back. We decided to keep the rooms large which meant that we could only have 2 bedrooms and 1 bath. One requirements was to lay it out in a way that it would be easy for the future home owner to add a master bedroom and 2nd bath at a later date.

After numerous revisions we finally settled on a plan. It's a 2 bedroom, 1 bath rambler with a side entry attached garage. The house is 28'x42' with a 24'x26' attached garage. The house ended up being 1204 finished sq/ft. I'll be outlining the interior\exterior details in later posts as the project progresses. Unfortunately the image below is very small, but it gives you a general idea of the layout of the home.

Part 1 - Building a second home

I've been fascinated with houses most of my life. My dad is a Carpenter\Contractor and he has worked on some facinating projects over the years. One of the houses he build was featured in Better Homes and Gardens magazine in the 1980's. At the age of 13 I started working with my father in the summer. It was a great summer job, and I learned many valuable skills. I worked with my Dad for 8 summers until I started working full time as an Electrical\Software Engineer in 1997. Since then I've owned three different homes (2 were new construction) so I've had plenty of opportunities to apply what I learned on various projects around the house.

This summer my dad asked my brother and I if we would be interested in building a small house as an investment. I was immediately interested and I wasn't able to stop thinking about it. We recently started the project, and I'll be documenting the progress in a series of blog posts.