Debt-Free Build? Share your experience please.

[Thoughts-from-Jules]

I am hoping quite a few of you have done your builds debt-free, if you have I want to pick your brain a little.  DH and I are very interested in trying this idea but we are also feeling unsure due to the fact we feel like we've waited so long to do this we aren't sure we have it in us to wait that much longer to save 100%.  Having said that I think we could also adjust our "dream house" accordingly because I believe our dream to be debt-free might be stronger than our desire to have "that" house.  We'd like to know what things you all did to make your dream fit your budget, where you had to cut corners or ideals to make the budget meet the reality. 

Here is what I have thought of so far.....reduce the square footage seems like the most obvious as well as keeping the structure pretty simple.  Forget things like solid surface counters or super nice cabinets or solid core doors.  Find discount windows, and building materials of course when we can.  Try negotiating when possible.

The things that make me more nervous are cutting corners on things like HVAC, water heaters (I'd like to go with tankless), because those cuts will cost us long run with possible higher energy consumption.....but will we care if we have no mortage as a result of those cuts?

I just see it as advantageous to find a way to adjust our expectations so that we CAN do this mortgage-free because then we'd be free to save up for some mountain land for a cabin, or to go on a vacation now and then or to be able to weather the storm of life more effectively.  Sure, we have a heafty emergency fund NOW but what happens when that gets drained from an emergency will we have enough savings capacity from income to rebuild the savings in a reasonable time if we have a mortgage? 

Now don't get me wrong, even our "dream home" we are considering building would only give us a mortgage of $125,000 with a payment of less than we have currently (if we go with a 30 yr).  We've already cut some corners but left in a few things that we think will give the home the character and style we like (solid core gentle arch alder doors in the main floor, nice flooring, lots of porches, a bedroom for each of the kids etc)  So even that big bad scary in our book  is reasonable.  On a 15 year mortgage it would be the same as we have now.  Which is approx 19% of our take home pay including taxes and ins.  I feel like we've been smart, made a lot of right decisions and kept out of consumer debt, but can we do even better?  Absolutely!

So share your secrets, share your sacrifices, and hidsight on how you might do things differently if you had it to do again.

[ScottA]

You'll need to create a realistic building budget before you do anything. This is the amount you plan to spend each month on your project. If you want to keep costs down you'll need to do most of the work yourselves, so you'll also need a time budget. Depending on the size of the house you'll need 3-5 years to build it working part time. Most of the project you can take your time but the framing and roof will need to be done in 90 days or less. This is a huge amount of money and work in a short time. How will you manage it? Obviously keeping it small will help with everything including future energy bills. Good luck.

[OlJarhead]

In our case it was easy because we aren't giving up our home for the new one and our new one can take as long as it takes.

So, we build on a cash basis regardless.  We budget a lot more then some might think mind you, and it's easy to burn through it.

Basically it works like this:  $1k per month in cabin budget pre-budgeted.  Extra cash added when available.

The budget must be constantly managed and monitored but we don't use credit, or if we do it's the free financing sales at HD which we then use the money in the budget to pay off anyway so as not to incur an outstanding balance for more then a more or three.

It's tough at times, mind you, because I want to do more, faster, bigger etc but then I look at the budget, stick to it and move on.

Don't know if that can help in your case but it's worked for us!

[OlJarhead]

One thing I would do differently is NOT cut the budget in framing and not over frame.

What I mean is that I decided to go with 2x6 floor joists when I should have gone with bigger, same in the loft.  On the other hand I could have, and should have framed the walls on 24" centers since I went 2x6 there.

Sometimes when trying to save money you change something only to realize later it wasn't the best idea   It works, but would/could have been better.

Sometimes I look back and think:  I could have saved had I just had more patience....on the other hand I wouldn't be where I am today either so perhaps it's a trade off!

[Thoughts-from-Jules]

Here is where we are at.  We have some money in our house fund (just took a hit due to paying for a funeral for MIL) but it is at about $10,500 and we have a seperate $10,000 emergency fund that hopefully we will not have to touch (we wouldn't touch it for the house for sure).  Then we are debt-free other than our current house.  We'd like to sell our current house in which we have $25,000 equity but would probably only see $18,000 of it after realtor etc.  So we don't have a lot right now but we have the capacity to save $700 per month (and have been).  We figure in a year if we keep going at the same pace (of savings per month, plus side work DH has been doing, and extra checks and tax returns) we'd be at about $25,000 total (not including the equity on our current house, we'd live here in the mean time)...which we figure could be enough to dry us in.  I just don't know if we have patience to look at a house that looks done from the outside but is far from it on the inside and have to wait probably years to be able to finish it completely.

We thought about selling this house sooner and setting up a single wide or something temp on the property so we'd be right there (although we are only 5 mins from it now).  This seems like a waste to spend to set it up and a harship to have 4 kids in a single wide, but could free up some funds from the budget not having a mortgage.  I called about construction loans and land only loans and how that all worked.  Looks like this bank uses an actual appraisal for land value and not just what you paid for it.  I guess a lot of times when they go to do the construction appraisal on your plans etc they simply go with the purchase price of the land (as it's worth for 2 years) and not it's actual appraised value (we hope to get a really good deal on property, wish us luck on that too hee hee).  Also they simply want a loan to value of 80% (which is better than some we've checked with) so we can take advantage of some of that owner builder equity and reduce the amount of cash needed at closing.  They WILL require a general contractor which would be a problem except......DH thinks either his employer would do it (a respected builder in the area)...or I have 2 siblings and a father who are general contractors so hopefully between all that we'll be covered (can't decide if we want family involved or employer either way it could be tough, but they just have to be the contractor on record).  The bank has to approve the contractor so hopefully one will be of their liking.  We have other connections in the industry if none of those work out.  We plan to do 80% of the work ourselves.  We plan to sub out the HVAC/woodstove, and sheetrock at this point becuse DH and I have done alot of the other stuff ourselves before and think we can handle it (ask us in a year if we still feel that way!)

So there is where we are starting from...

[ScottA]

Get a bank involved and they will tell you what to build. You can forget downsizing, they will want you to build a 3 bedroom 2 bath minimum depending on your area and maybe up to 1600-2000 sf. I know it's tempting but your dream can end up leading you right back to where you are now.

[Thoughts-from-Jules]

I can totally understand this dymanic of the bank wanting you to build something they could easily resell in the event of a foreclosure.  That was also a worry of ours in our own personal spending styles, would we spend more just because we had a construction loan to draw from anytime we "needed" something? (of course we would to some degree). 

About them wanting us to build minimum standards....we'd fit well within that...while I love the idea of a smaller home (we live in a 1350 sq foot home now and feel fairly comfy here and could see how a smaller even more efficient home would be a plus) we've decided we need a little more space if we want to stay sane.  We were shooting between 1750-2150, because we have 4 kids and we'd like to sprawl a little if we can afford to.  We can shave that back to 1600 and still be comfortable and we might have to when all is said and done.  Someday we will be just a couple again and maybe we can downsize to a semi-tiny house once the kids are out of the house.  With 6 people in the house we'd want 2 bathrooms anyway.lol

[ScottA]

You'll think I'm nuts but I researched it a lot before we built. You need 400sf for the couple plus 100 sf for each child. So for your family you only need 800 sf. plus maybe 100sf of unheated storage. After WW2 the average size home being built was in this range. In Japan the average was half this.  My wife and I live in 400 sf with no problems at all. We have no room for guests but it is enough for us. All the extra space you are wanting is for what? Stuff? Privacy? You are a family not an apartment block. Forcing people to share space brings them closer together in the long run. It teaches them to share and not to be so selfish. Think about it. Is a 10x10' room not big enough for a child? A 300sf common area is a room 20x15'. Even if you added a bit to this you could still make due with 1000sf max. Lose some stuff, share some space, save a fortune. Just my opinion.

[OlJarhead]

Frankly I wouldn't build a traditional home these days, the market and economy scares the bat crap outta me.  Having said that though, your idea I think, is a good one.  Trying to build it debt free IS the answer.  So why not buy the land and put the money in like we have on a monthly basis instead of all at once.  You yourself said you have a budget of $700 a month plus enough to get started.

That's what I'm doing now and it is the answer to me

[NM_Shooter]

The core of my home was not built debt free, but the addition we put on was.  We currently have a 3800 square foot home that we darn near own nothing on.  So we sort of did the build a bit backwards.  We took out a loan to get into a smaller house, and then as time and money permitted, we built our addition to give our kids each a room, added on a guest room, and put a big play room on the back of the house.  I'm pretty happy with the way it turned out.  I put on a 1600square foot addition for about $90 a square foot.  And we didn't skimp on quality.  Here is a picture of the playroom :



I'm pretty proud of the way it turned out, but it also cost me 4+ years of my life.  But my family likes to use it, and it keeps my kids in the house.  

So... if I were you, this is what i would do.

Build small, with eyes on addition(s).  Do this smart.  Talk to an architect.  

When we moved into our house, it was a two bedroom house with a small office.  The kid's bedroom was actually bigger than the master bedroom.  That room got divided up into a hallway and a closet when we built our addition.  

Figure out which way you might run your additions, and pre-run plumbing stub outs there.  Build in a chase that you can snake wiring through, and be smart about how you do the HVAC stuff.  You may want to go with split systems as they will be more budget friendly.  But air flow through a house with an addition can be tricky.  Don't ask me how I know.  

Having a good plan for an addition will include any additional drains you need too.  

Don't skimp on windows or doors.  

I think I mentioned getting a good architect to help.  X2 on that.  

Good luck.  It will be one of the most frustrating and rewarding things you have ever done.  It will test your relationships with those you love.  Just remember that there is nothing you can't fix  

[Thoughts-from-Jules]

So  much to reply to I LOVE IT!  Ok first off, like I said we live in a 1350 q foot house now and I think the living room is too long and I don't like how it is all broken up with doorways to get places and limits places to put furniture.  It has enough storage, we live simply, but we do homeschool and that creates needs for more book storage and place to spread things out.....I'd love to have a small room or area to spread out school stuff and leave it so we don't have to keep clearing off the kitchen table everytime we need to eat.  This would make things easier for us. 

ScottA- I don't know about those square footages for a family of 6......that would be tight!  Not concerned so much about bedroom space (those can be smaller since they only really sleep there) but an area large enough for a dining table for 6, (even a built in nook), and a kitchen with enough counter to create something, as well as bathroom space and a place to put a sofa and chair to sit in for 6 people would indeed be challenging for 6 people.  I like doing things differently and breaking the mold whenever possible (especially if I can do it debt-free) but I don't know if I am dedicated enough to live in a 800 sf house!  I think if you had just living area, dine in kitchen, small bedrooms we could get close to that but once you figure in hallways and transition areas as well as entry, HVAC needs, or stairs we'd have to leave more sf on average than those guidelines.  If someone showed me a family home with that range of square footage that has everything a person needs for reasonable comfort I'd surely consider them!  (even if my 2nd bathroom came in the form of an outhouse or composting toilet!)

NM_Shooter....  As far as planning additions I think this is very wise and your advice on that was great!  I could see something like that working (I might go start drawing up ideas now).  However, our dilema is that now is the time we need more space with the kids at home.....in 5 years our daughter might be off to college, and every 3-4 years after that another one will probably be leaving....we'd barely  have the main house truely finished!  Hey if we wait long enough we really can build an 800 sf house...just wait for all the kids to leave! lol  That is one way to save money! lol

There is so much to consider, for one the "dream" and how important that feels, for two the long term financial impact, and three we need to go ahead and LIVE OUR LIVES and enjoy it, even if we make mistakes.  Sometimes we tend to not do anything because we don't want to make too many mistakes and we are learning to slowly get more adventureous and go for it.

[Thoughts-from-Jules]

NM_shooter, I forgot to say how nice your addition room looks.  That timber detail is stunning!

[ScottA]

Told you, you'd think I was nuts. Make it one big room with the bedrooms around it or above it and it will work. We make do just fine in 400. If you build it right it won't feel small. See for yourself http://countryplans.com/smf/index.php?topic=3419.0

[Don_P]

Have you considered adding on to this house, purchasing land when you find it and build the 800 sf house at your leisure?

[Squirl]

I can't tell you how to do it, but I can share what I am doing. My goal is to get the certificate of occupancy as soon as possible to have the option to move in. I did not cut much on the initial build.  I have large joists for added insulation.  I did go with OSB over plywood.  I am going to go with just a few cabinets of what ever I can find on craigslist.  I don't need a full kitchen, nice floors, or appliances for a certificate of occupancy.  I have thought about a cheap used water heater to be replaced in a year or two, but it probably won't fit in my design.  I also have only one bedroom in the design with the 144 sq. ft addition to be put off until after the CO. That saved be around $4000.

Going smaller with the option of expansion is a well used tool.  Scott was right about the median home size being 900 square ft during the baby boom.  I heard that last year and it help me to adjust my outlook.  You might also be able to save by leaving things unfinished.  Such as running the hookups for a second bathroom but leaving it as a closet till you have the time and money.  I'm just throwing out ideas.  

[OlJarhead]

Have you considered adding on to this house, purchasing land when you find it and build the 800 sf house at your leisure?

We think alike

[Thoughts-from-Jules]

ScottA~  I've been eagerly following your build for a long time!  All along actually.  I thought all your ideas were inspirational and love how you made everything so efficient and usable.  I can totally see a couple being comfortable with that space because it is so well thought out and the storage area/loft is a great addition as well.  I think the little bedroom loft is quaint and creative as well.  Kudos for you bucking the "normal" way of thinking. 

DH and I put our heads together and started brainstorming what we thought was the most and least important for our future house  I managed to scale is easily down to 1440 sq foot.  I think I could further trim.  I admit it would be a little harder to get excited about building a much smaller house.....only because I am worried about resale values, everyone wants more square footage not less.   

Here is what we came up with:
bedrooms and closet sizes don't matter as much as living area/kitchen/dining.
We really want a mudroom/utility so we can dump the dirty boots/clothes have room for pantry cabinets, washing machine etc.
We love a kitchen with an island because we spend 75% of our family time helping each other prepare meals and hanging out visiting while someone does dishes etc. 
An expandable dining area is important to allow for longer tables for holiday dinners (and area that opens to a living room would be perfect for this)
We really really enjoy a 6ft long soaking tub in the master bathroom (no jets)
We'd like some covered porch area to make for 3 season expanded "living area"
We'd like some character from the outside, curb appeal....we have a boring ranch house now with no roof dormers and a very flat pitched roo.f We have always envisioned some farmhouse charm.

There is more but those are the things that jumped out first.

[Thoughts-from-Jules]

I think kids sharing rooms would be easier if we had 2 girls and 2 boys, we have 1 girl the oldest at 13 (she is in a room that is 9x11 right now and it is plently large enough for her and her things), and 3 boys ranging from 10 down to 5 years (they are in a room that is 11x13).  The kids all get along fine but I think as they become teens this might be harder to manage?  I was thinking of some awesome bunks with unique storage areas.....for that room along with storage areas for their things tucked in unique places...I know we can make the most of a smaller space. 

They all really really want their own rooms.....of course.  I also thought of a larger open loft area with neat seperation drapes or something less permanent so later DH and I can use that space however we want when the kids are gone.  I really like flexible spaces that can be used for lots of different things as life's seasons change.

[MushCreek]

Some random thoughts (the only kind I have anymore):

Consider a basement, if it suits your land. It's cheap additional square footage when you add it all up.

Do you have land? Have you budgeted for it? Have you budgeted making the land buildable? We are finding out right now what it costs to get the land ready. Clearing, driveway, utilities, excavation, permits, it all adds up.

If you have enough land, consider one or more outbuildings. I'm building a big barn first. That will be 'home' while I build the house, and a place to store all of our stuff. one third of the barn will be partitioned off, insulated, and finished as a great room. I'm putting a bathroom in the barn as well. This great room will be used for larger get-togethers, but will only be heated or A/C when actually in use. We'll have a small house, but expansion room when we need. In many areas, small outbuildings don't add to the tax bill, and permits often aren't required. You could have a number of sheds- one for Daddy's man-cave, one for Mommy to get away for a few minutes; a playhouse for the kids.

Storage- Where will you keep your stuff while you build? One of the keys to small-home living is having enough room for all of your stuff. There are two options- make a major change in your attitude towards 'stuff', and get rid of it, or figure out creative places to put it so the house isn't cluttered. Our house will have a basement, plus the barn. Coupled with an attitude shift to get rid of stuff, we'll have plenty of room. I always tried to figure out why there's plenty of room when we rent a small cabin on vacation, but our much-larger house feels cluttered. It's because the rental cabin has only what you NEED, not the other extraneous stuff.

Look at the future- by the time your youngest is a teenager, your daughter will be 21, and either in college or (hopefully) on her own. Kids that hang around after 18 should be happy with whatever they get.

[Squirl]

Basements are an "it depends" type of situation.  It can be cheaper, but it may not in a code built house which conforms to modern energy standards. I know my building inspector would never give me a CO with an unfinished basement.  He made that very clear to me regarding the insulated envelope. You have to pour a slab over rigid insulation, frame it, insulate, run utilities, waterproof, put an emergency escape opening, build thicker more reinforced walls, and excavate more. I would check with your building department first. Since you had mentioned that you have to have an engineer and drafter stamp your plans, I assume this is a more code enforced area. Is there a square foot exemption to that rule?  In most areas around my area, there are exemptions for homes under X square ft, normally 1500 don't need a stamp from anyone.  They would even accept a very detailed hand drawn plan as long as it is well labeled as to what you are doing. That would save you some serious cash too. Mushcreek makes a great point about storage building.  Many of the people's stories I have read accomplished their goal of cash building by shifting their approach to their stuff.  It is amazing what we pay to store, heat, and cool stuff that we rarely use, such as seasonal clothing and seasonal recreational equipment. I also plan on a large garage with storage and a root cellar to live comfortably in a smaller house.

[Squirl]

Oh, and I am willing to draw down my savings and float myself some credit (not more than cash I have to pay it off) to get more work accomplished in the summer/fall, and build my reserves back in the winter.

[dablack]

We are also a home schooling family of 6 (four kids).  I don't see how we could live with less than 2000 sqft.  The only way to do with less than that for us would be to put two kids in each 10x10 bedroom and have the dining room double as the school room.  As home schoolers you do lots of activities at the house.  We do lots of projects and all sorts of learning activites.  We need room!  We buy in bulk, make our own bread and other things.  If it were just my wife and I we could do very well in a 1000 sqft house but there is no way with four kids and home schooling. 

We recently moved from a 2200 sqft house in Houston to a 1650 sqft renter here in Lufkin for a job change.  Once our house in Houston sells, we will be looking for land.  We will finance the land and build with cash. 

We are planning on the universal two story, that will most likely be 20x45 with a finished attic.  I'm planning on plywood subfloors that will be the final floor for a couple of years ( just throw some poly on there!), and only one bathroom.  I'm building simple cabinets for the kitchen and shelves for the large mud room.  The HVAC will be in the conditioned attic (cooling is the big expense here), but I probably won't put that in until later (still thinking on this), but will build with it in mind and just use window units until later.  So we can get in there with plywood floors, a simple big kitchen, one bathroom and stop paying rent!  Then I can finish out the other bathrooms, put in flooring, put on a big porch as cash allows once we are in there.  I'm hoping to put most of our "stuff" on the third floor until we get the 1st and 2nd floor all the way finished.  That way most of our things won't be in the way.  So the first room I will finish once we are dried in will be the 3rd floor and then we can start moving our stuff there.  These are just our ideas at this point but we are moving that way. 

Austin

[Thoughts-from-Jules]

These thoughts and discussions is exactly why we are here......to gain excellent perspective and ideas on how to do this as smart as we can.  I so appreciate everyone's input.  We are thinking hard about what to do and how to do it.  Thankfully we are still in the planning stages and haven't gotten too far into it yet.  We have options, lots of them and I like that.  We worked on a plan that got us down to 1440 sq foot but I found it hard to get excited about it, there was little character and it just looked like a manufactured home rectangle with an addition of two bedrooms.  I want to be excited about whatever house we build, I have to find a way to do built-ins or something to create that custom home feel and make it more usable.  Another idea we had was a bunkhouse similar to this awesome rental house I found http://www.vrbo.com/238668






This would work well for our boys....I think they'd love some version to this and we could do it detatched (but what about heating and cooling?)   We plan to heat our home 75% with wood, only when we are gone or it is super cold would we use the backup heat pump.  Do we put in a small woodstove for the boys (they will be old enough to stoke it etc by then) or just do a wall mounted propane heater?  It just makes me nervous not having them in the same building envelope as the rest of us.  I guess we could built it onto the house so the heat and other issues wouldn't be a problem.

Also that rental house has a neat eating nook that could save some serious sq footage but I don't like how you can't get out to grab something if you are on the inside...not a huge deal but everyone complains about that and I would agree that would be an issue for us.


Anyway what do you think of some of these ideas?

[Thoughts-from-Jules]

DH is not a fan of basements.  In the excavation field he has had to dig along far too many and add french drains or reseal the basement walls and back fill again.  You'd think since he knows how to do it RIGHT he'd be fine with it but he just doesn't care for them...we talked about a daylight basement but we are in a code area and he said it would be cheaper to do a traditional 2 story than a basement.  The lot we have our eye on and hope to make an offer on in about a month is 2.5 acreas and towards the back of the property that overlooks the hay field it starts to slope enough we could nestle a fine daylight basement in there.  I need light in the winter though or I get a little blue so we'd like to keep our sq footage above ground.

Good to know we aren't the only homeschooling family on here!  It presents and unique set of challenges.....we are in our home all the time.....with everyone except dh here, the home gets more wear and tear as does furniture and other surfaces than a family that leaves for work and school everyday.  I've come to appreciate this aspect but won't deny it is a major challenge sometimes.  Having a little space everyone can go study quietly helps get through the day of lessons and having that one extra what we call "flex" area would be such a nice thing to have.  Somewhere you can do homeschool, or later have an office, or for my sewing and DH's fly tying or whatever life seasons has you in for interests.   We had also considered doing unfinished floors for a while (painting the floors with basement floor paint) and saving up for flooring.  We've also considered simple cabinet frames with curtains on the base cabinets and open shelving on the walls until we could afford all the cabinets in the home.  Waiting on the landscaping as we can afford it, (doing plants swaps for perennials and bulbs etc with family and friends). 

I told DH last night I'd rather give up some of those things or have to wait on flooring or cabinets for a while than give up on the dream house and that sq footage.    The design is good even though it is 2150 sq foot the woodstove in the middle should heat things fine, and all the rooms are off the main areas so no long hallways to try to get heat down etc.  We'll keep working to see if we can't come up with a plan that still has character yet smaller in general.  I designed a passive solar house I liked but again it was a rectangle with single story and I just can't get excited about it. 

[UK4X4]

Debt free, maybe not entireley but my plan is as follows

Borrow against present property - so no controls against where and what I buy/ build - luckily it is bought and paid for already and rented out

Get the property dried in with the initial money- pay back any left over from the initial build

Then carry on building as funds allow- I might have a small payback over 3-4 years but no longer.

Thats every bonus yard sale and living frugally meaning I can invest more in the project-

Paying back the loan would be priority 1- as interest is wasted money as far as I'm concerned