Aldeer.com Forums Alabama Deer Talk Aldeer General Forum Ask Aldeer - Owner Build Loan

Any of you have recent experience with owner build construction loans? (I.e., you act as GC)
Were you able to find a bank to do it?

Once you did, any issues managing the build? Subs treat you fairly? Permit office give you a hard time?

TIA!

Most banks won’t do it, unless you are a GC and even then it is frowned upon by the big banks. Our bank that finances all our builds could not loan to my partner on his personal build. They did give us the wink wink nod nod to build it as a spec home, and then he turned around and bought it from our construction company as soon as we CO’d it, but that was the only way they could lend the money to do it. They’ve tightened up drastically on this type of lending in the last 15 yrs. Unless you’ve got a huge sum of money with the bank, it’s a local bank and you’re buddies with the president or owners, or you hunt with everyone on the loan committee, chances of them financing a construction loan on your personal home, with you as the builder, are very slim. I know it’s not what you want to hear but that’s the way it is in today’s regulatory and lending environment.

I have experience building our own home, but no experience getting a loan to do it. We paid cash as we sent along building ours. It took us about 3 years to build it working mainly on the weekends. I would be surprised if you could get a loan if you were building it yourself. Not saying it would be impossible, just saying I would be surprised.

We had trouble getting construction insurance, until I formed my own company and gave State Farm that company's name as the builder. Then they gave me construction insurance. Then once we got it built they wouldn't insure it, because we were too far out in the sticks. Thank goodness for Brandon at Meyer insurance.

The only permits we had to get was for the septic tank installation and that was no issue.

Regarding the sub contractors, we used a few local yokel type guys and had some trouble with some of those guys showing up. Some of those guys wanted to be paid everyday. Whatever you do don't pay anyone in advance. We have some people up here that are very educated, but don't have a lot of common sense and they paid guys in advance and never got the stuff finished that they paid for. So Caveat Emptor.

You better have a family member that's a banker or real good huntin' buddy. Lot of em won't touch that now days. It will help if you have about 20% cash to get a big start on it.

If you haven't run a new home construction job or worked in that industry , having a knowledge of building , dealing with subs , order of operation and such , you'll be $ ahead hiring a GC. Here's what happens , most folks don't know how to keep a job rolling and subs don't rush to one time jobs when they have big contractors that keep them busy. That makes the job drag on and on , all the while you are paying interest on that construction loan. Now that interest is much higher , that can easily run into more than enough to pay the GC. Not to mention it's a huge headache. Take this for what it's worth.

When i did work in the side, i kept money set aside for building material and alot of times i either set up an account with the homeowner and let them charge it an id pick it up, or id pay for it and turn in receipts as cost+labor…everbody i worked for seemed to really like that..i always showed up and i always got payed. Im glad those days are over but j coulda made alot of money if ida done that full time..every person i worked for complained about their subs…all of them..an it wudnt the quality of work..it was just bein there TO work in the first place…most of these dudes know what they are doin…you just cant getem to do it…unless its a mexican..theyll work..50/50 on the quality sometimes..but theyll show up most days

It's the gc's job to make sure the job is done correctly for the cheapest price. If you are not familiar with what is correct and what is a fair price you WILL get screwed. I have seen many times my guys do side work for home owners, convincing them they'll do it cheaper cause their doing it on the side, only to do it for twice the price I would have done it for with half the tools , equipment, and knowledge. Also subs and suppliers, have relationships with gc's, giving them the best prices. It almost never works out in the homeowner favor. Most home owners who built themselves will argue this point but it's just because of their ignorance on their part!

I built mine myself. No contractors. At around 80% I ran out out of cash. Of course the risk was less for the bank at this point. I borrowed $86000, used 16,000 to finish the house. I took the rest and paid off the 72 acres it sits on. The bank is worried about the risk

We built our current home in ‘20-‘21. I subbed my build out and had no issues finding a bank for a construction loan. It takes planning on your part, and they’re going to want a detailed estimate for the build.

Most contractors/builders, are going to try and discourage you by telling you that you’re better off in the long run hiring them due to discounted pricing on materials, subs, etc. It’s a sales pitch to secure work and, unless you’re a complete idiot, who has no business attempting to sub construction out to begin with, they are 100% FOS.

If you’re wanting to do any of the work yourself, you don’t want a GC. I did my own footer, wiring, plumbing, trim work, and interior painting. Subbed out the framing, block/brick work, roofing, drywall, cabinets, flooring, and HVAC.

The biggest issue with subbing yourself is the time constraints on the loan. They aren’t going to give you two years to complete a build. We extended our deadline twice, and ended up finishing in 13 months. You absolutely have to plan well, and have subs lined up ahead of time. If a sub is known to work for several builders, and is scheduled out several jobs, find subs that are more independent with individual jobs, and ask for references on work. Get more than one bid on jobs and have subs lined up as back-ups in case your first choice doesn’t show. Stay observant of your subs and the work they’re doing.

Subbing yourself isn’t for everyone. You have to be knowledgeable, plan, and it’s stressful. You will basically be giving a year of your life away. Not many opportunities for leisure time but, in the end, it’s worth every sacrifice. We moved into ours with $350k in equity, and would have had almost double in the build had I hired a GC.

When deciding who is fos, always go with the guy who did something once, never the guys who have spent 30-40 years doing something. Guys who make their living doing something as a trade are all uneducated crooks who just rip people off. I would chance it , it's just a house

I've worked in residential and commercial construction nearly my whole life and if I was using a loan to build the house I wouldn't want be the GC. If it was my own money, I'd sub it out myself. Mainly because of the time frame. Being squeezed between the bank and sub contractor's schedules is a bad spot to be in.

When I did residential I wouldn’t work for someone who was trying to do it themselves. A few could pull it off but most have no idea how to coordinate the different trades. Nothing like showing up with your crew and the tile guy putting in the floor.

It's like the parade at Disney World, Mickey Mouse leads the parade everyday. If you can't lead the parade ,keeping everyone in their place and order, its gonna cost you time. When you have $ borrowed, tme is $. Some folks can lead the parade some can't. If you have a friend or family member with knowledge that can help lead the parade, that helps.

I didnt realize Banks had put the squeeze on doing this. I built/ Subcontracted my own 9yrs ago. Already had Water,Power,Septic on site so no permits out in the country where I lived. I have a background in construction and knew how to schedule my subs. Renaissance bank in Decatur Al did our construction loan and then converted it to a homeowners loan. They were great to work with. We put a little over 20% down, and had to put up 2acres as collateral on the house loan.
I will say this: you better be there everyday and stay on top of everything. I used a guy I had known for years who is a GC. He agreed to get me blacked in and I basically used his recommendations for the subs he uses. I did alot of the work myself at nights and on weekends. Essentially lived there (in a camper) and worked around the clock for 3.5 months. We broke ground the last week of February and was moving in 4th of July. Only issue I had was with my electrical sub. Had to fire him right off the bat. We had purchased stuff for over a year when we would catch a sale on things like fixtures. I bought every sheet of plywood/OSB for the whole house during the tax free severe weather weekend. That saved about $700. You can save a lot of money if you know what your doing but if you dont feel confident I wouldnt attempt it. I saved over 20% what he would have done it lock and key. I think he roughly quoted me like $98 per sq ft and my estimates were I finished up with $89 per sq ft. Cant build for that now, thank goodness we built when we did. There are lots of ways to save. For instance we did 8ft flat ceilings, did all the trim, tile, and lots of other things. Good luck if I can help shoot me a PM

Regardless, that guy who’s been doing it for 30-40 years is being paid to complete a build, carte blanche. They’re going to cut corners wherever possible to save anywhere they can, and many will do half-ass work anytime they can get away with it. To the average homeowner, most of this will go unnoticed.

With building myself, I oversaw every detail, and knew exactly what went into the build.

The inspector made regular inspections, during the build, and stated that there were less corrections on our build than 90% of the ones he handled.

Oh, and then there’s that cost savings and equity. I suppose one would be better suited hiring one of those contractors, that say it can’t be done without them, and spend another $250k?

For me, personally, the savings and peace of mind knowing it was done correctly, far outweighed the stress of the build. Was it fun? Absolutely not. Would I do it again, if we decide to sell? Absolutely.

It takes knowledge, time, discipline, and planning, but it can be done. Saying otherwise, simply because someone hasn’t been doing it day in and day out for years, is purely foolish.

Save yourself a lot of stress and hire a good GC.

^^^^^^ That's the way it's done.

Yep construction is easy, and easy money! That's exactly why the banks want a licensed contractor doing the work!

I don't know about that... I agree with everything but the Mexicans. I've had Mexicans F^%4k me over pretty good too. Mexican's ain't no different than anyone else, there's good ones and bad ones.

When the guys framed our cabin, I opened a credit card account with Webb Building Supply and they emailed me an invoice every time the framers would buy something there. That worked out pretty good.

Lot of the high end GCs get cost plus 10%. So saving 250k would be a 2.5 million dollar home. With that and your work is better than 90 % of those in the trades ,you missed your calling.

Find you a good GC ! back before COVID and the world turned to crap and you could hire a sub that you could trust that doesn't happen very often now days