Tuesday, August 20, 2013

How to Build a House

A few folks have asked me to write a post about the process of building a house. I've been resisting it because I honestly don't have that much to say! But I will give it a shot...
First, let me explain why we opted for the least environmentally-friendly option (buying an existing house or renovating an existing house is way more responsible than building new). For the longest time, my dream was to build a pocket neighborhood. I wanted to buy two acres of land and invite like-minded people and families to build their homes within an intentional community. (Editor's Note: This plan involved building rather than renovating because it would have been nearly impossible to find that many adjacent homes that people wanted to purchase.)
That plan led me to research ways to build in an environmentally-friendly way which led me to pre-fab. In case you aren't familiar with it, the pre-fab movement is pretty amazing (check out old issues of Dwell to see what I'm talking about). Pre-fab houses are more eco-friendly (because most of the components are manufactured in a factory, which reduces waste, site impact, etc.). They also bring amazing design to the masses at affordable prices.
More research led me to Ma Modular, an Austin-based company that does pre-fab. Matt and I signed up for a tour of their Luna home several years ago. I don't even consider myself a huge fan of modern architecture. At the time, we were living in a 1930s bungalow, which I loved. What I really like--regardless of overarching architectural genre--is a ton of natural light, open spaces, high ceilings, and wooden floors.
Ma Modular was very appealing to us because it's a design-build company that strives to be a "one stop shop." The woman who gave the tour of the Luna house was a realtor, and she ended up helping us find land. They also recommended a mortgage person to help with financing construction and then the permanent loan. They have in-house architects who do the design and then work with the general contractor to oversee the construction process.
When Matt and I moved to Austin, we made a really concerted effort to build our pocket neighborhood. We found several acres of land (and even a family willing to consider living next to us!), but the land turned out to be in the flood plain.

Next we found someone who was building his own pocket neighborhood and we considered building on his land, except we were ultimately uncomfortable with his admitted drug usage.

Further, we went to meetings of the Austin co-housing group, but their project fell through when the economy tanked.

Finally, we thought about purchasing two acres ourselves and then selling off pieces of it as families became interested, but we realized we couldn't afford to buy that much land and build our own house at the same time.
Meanwhile, I was doing home visits with families who were interested in enrolling their children in the school I'm working to start. Several young families all lived in a particular neighborhood which was in our target geographic boundaries for the school in East Austin. I asked my realtor to do a search for land, and she came up with a 1/2 acre on a cul-de-sac that backs up to a creek for only $49,000 (which is VERY cheap according to Austin standards). By that time, we had done so much research and work toward building rather than buying/renovating, that we decided to continue down that path.
My first piece of advice is:
  • Connect with a mortgage lender early on in the process to see what you can afford
There were several points throughout the process when we had to hand over large sums of money. When we bought the land, we had to pay a downpayment and closing costs. We had to pay the architect $5,000 in cash to modify the design of the house (the basic plan is the same as the Luna and the Ford). Then we had to pay a downpayment and closing costs again when we were ready to start construction. Then, every month, we had to pay interest on our construction loan (which increases every month as the builder takes out more and more money for the process). Finally, we had to pay another downpayment and more closing costs to secure a permanent loan.
We connected with a mortgage lender early in the process (again, someone who was recommended by our builder) and he was able to share the most amazing spreadsheet with us. It gave us conservative estimates for how much we would need to spend at every point in the process. When we were working with the builder to finalize the construction budget, we could enter different scenarios into the spreadsheet and see how the ultimate cost of the house affected everything from our downpayment requirements to our monthly mortgage payments.

If you are in Texas, I definitely recommend contacting Dan Reagan at dreagan@houseloan.com. If you're outside of Texas, you can search the Cornerstone website for a lender in your area (I hope they'll be as good as Dan!).
Fortunately, Matt and I had a lump of money because we sold our Houston house ourselves which helped us save 3% on realtor fees and we had bought in a popular neighborhood, which meant that the value went up in the three years we lived there. We were able to buy that house in the first place because we only spent $2,000 on our wedding. When we moved to Austin, we kept that cash liquid by renting.
I want to reiterate that Matt and I do not have tons of disposable income. We both work in the non-profit world (specifically within the field of education for economically-disadvantaged children). However, we've both been in the field since graduating from college and we're in our thirties, so our salaries have continued to increase over the years. What really helped us was that lump of cash from the sale of our first home and our extremely frugal lifestyle from October 2012 through August 2013.
The other thing that helped us was living in a vibrant city (the real estate market is booming in Austin) and buying in a neighborhood that is increasingly popular (young families are getting priced out of central Austin). The appraised value of our project went up $50,000 from October 2012 (when we closed on our construction loan) to August 2013 (when we closed on our permanent loan).
So once you have a clear sense of what you can afford:
  • Do your research and find a company you trust.
I definitely recommend contacting the company's clients for references. We were able to tour two houses and talk with the homeowners about their experience.
  • Ask a lot of questions.
Even though we love the company we chose, we still had to ask a ton of questions to uncover the hidden costs of things and to understand the process from start to finish. I think, in general, a lot of people who build their own homes have a lot of disposable income, so builders aren't necessarily used to talking about every nickel and dime. Well, when you're literally saving every nickel and dime to make it work, you need to know! I just remember poring over every document and every budget and every line item so I could ask questions and understand what was going on. For example, I really pushed our builder to tell us actual bids for most of the line items in our budget, versus just using historical bids.
My penchant for planning really helped throughout this process. It also helped that the builder had already built the house twice in Austin. Touring those houses helped us understand what our house would feel like, and it helped clarify what kind of changes we wanted to make. Honestly, I don't think I would have liked to build a house from complete scratch. I don't think I have the spatial reasoning skills to predict what it would feel like and what I would like.
I literally spent hours upon hours visualizing the house (based on the two versions of it that I had toured) and thinking through everything (that's how we ended up with a sponge drawer, a built-in soap dispenser, and pull out trash and recycling bins). I also spent a lot of time anticipating things and proactively reaching out to the builder (for example, we picked many of our finishes way in advance so we had a lot of time to think about them instead of deciding in a rush).
My other piece of advice is to:
  • Build relationships.
Matt and I always try to show genuine appreciation toward the people we interact with. Whenever we say nice things about people behind their backs, we try to take a second to send an appreciative e-mail or thank them to their face the next time we see them. Builders are accustomed to working with very demanding and entitled people; Matt and I tried to be the opposite. By the end of the project, it felt like the builders were going out of their way to stay within budget and help us.
In retrospect, I am both glad that we decided to build a house and glad that it's over. I am so eager to live within the same neighborhood where I work, my husband works, my children go to school, and I exercise. I am also incredibly grateful that we get to live on a 1/2 acre, on a cul-de-sac, on a creek. It feels like the perfect place to raise two children, a bloodhound, and chickens. I can't wait to garden in the front yard, build a pool for endless spring/summer/fall fun (we have a really long hot season in Central Texas!), and clear out some of the forest down by the creek for a fire pit and some Adirondack chairs. I am giddy about the idea of a home flooded with natural light, tall ceilings, and wood floor.
As I type all of that, I still can't believe it's actually happening. Although I wasn't able to actualize my dream for a pocket neighborhood, I am still grateful to have been able to dwell in possibility and create this kind of homestead for my family.
Definitely let me know if you have specific questions about the process!

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