Our parents had their houses paid for when they retired and we only assumed we could follow in their footsteps. However, with today’s world of layoffs and inflation, we find ourselves in a world of pain as we try to follow our parents’ example. We were lucky to have a job.
As my husband neared retirement, we were introduced to the idea that we could still own our own home by building and being our own general contractor (GC). The idea was to build a house and then live in it for 2 years while we built another house. By selling the first house, we would live in the second house again for 2 years, while we build our final house. After selling the second house, we could have our third house free and free of any mortgage by the time we are done, if we were very careful and built modest houses for the first two constructions.
After doing our research, we gained enough confidence in this idea and launched our #1 house project.
It took us 7 months to complete our first house from the first shovel of dirt to the time we moved. Now, I’m not saying it was very easy, because it wasn’t. There were many traps and many of them we didn’t escape, but we still raised over $50,000 of capital. My husband likes to say that I made 50K in 7 months while he continued to work at his regular job of less than 40K a year.
You are probably wondering how all this was possible. I will tell you in a simplified version.
It’s a fact that GCs have a lot of overhead to cover, from their insurance costs, contractor license, equipment, vehicles and trailers, computers and software associated with their field of expertise. By the time they’re done, they may end up with a grand total of just 10-18% for themselves. The reality is that they typically get 58% gross on every house they build.
On the other hand, you have none of the expenses of a licensed GC, so you can earn at least 42% by being the GC in your own home. You lack the experience and therefore expecting to do the same as a licensed general contractor is unreasonable. Everything you earn stays in your home, so your equity grows with each build.
In most states, you can 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 to find out their laws.
I heard it explained this way:
In 2 years, anything that hasn’t been done right will usually rear its ugly head. She must live in the house long enough to correct any mistakes made in the construction. After that, anything that goes wrong can be attributed to wear and tear.
We can attest to this personally. In fact, in the first 12 months we have had 3 or 4 things that we will know better when we build our next house.
There are two ways to be your own GC.
1. One is to do everything yourself (DIY) and build your entire house, using a minimum of subcontractors. This can take years for you to finish your house. You will need to own the land and somehow get around any 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; be the GC but hire all the work done in the house. In our case it only took 7 months from start to finish.
With this age of information and the Internet, there is a lot of knowledge available for us to learn about the responsibilities of being a general contractor. We do not need to do the work ourselves, just supervise the work of the subcontractors, buy the materials with a construction loan, and pay the subcontractors when they have finished their work.
In fact, we can realize our dream of owning our own home within 5 years; not quite by my husband’s retirement date, but soon after.
Mom and dad were right, we should own our home. If the construction of our first house is an example of what is to come in our lives, that will be for us too. We can build three houses, in five years, and have a debt-free mortgage.