7. Pick a Plan 43
Off-the-Shelf Plans 45
Determine Your Needs 46
8. How Nice Is Too Nice? 51
Is It a Good Investment? 53
9. Will It Appraise? 57
10. Am I Normal? 61
11. Go Shopping 63
Take Good Notes 65
12. A Borrowed Idea Is a Good Idea 69
13. Pump Up the Volume 75
14. Where Do You Live? 79
Master Bedroom and Bathroom 79
Kitchen and Family Room 80
15. Value Engineering 83
What Is Value Engineering 84
Master List of Cost Savers 84
Choose a Cost Effective Style 114
16. Do It Yourself 117
Sweat Equity Work 118
Work You Can Do During Construction 118
17. Decorate for Resale 123
Inside the House 123
Outside Decorating 125
18. Rental Properties 127
What Makes a Good Rental House? 127
Who Rents, and Why? 128
Property Management 129
Cash Flow 129
Set Up an LLC 129
19. Who’s Doing the Building? 131
Hiring a Builder 131
Acting as Your Own General Contractor 132
Contents
iv
Hiring a Manager 134
Becoming a Builder 135
Let Someone Else Build It! 135
20. Contracting 137
Let the Fun Begin! 139
The Contract 140
Insurance 143
Subcontractor and Contractor Payments 144
Lien Waivers 144
Volume Is King 145
21. Financing 147
Construction/Permanent Loan 147
Construction Loan 148
Permanent Mortgage 151
Home Equity Loan 152
Loan Terms that Can Cost Money 152
Look Competent 155
22. The Moment of Truth 157
Glossary of Terms 159
Index 169
About the Author 178
Contents
v
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Along the way, many people asked me what we were doing and how
we did it. The home-building principles that are second nature to my
wife and I were completely foreign to many of our friends. Even people
in the home-building industry were interested in some of the unique
approaches we used. These experiences inspired me to write this book.
Preface
viii
Acknowledgments
I
would like to thank my wife and family for letting me dedicate the
time required to write this book. I thank Steve Mungo for allowing me
to use some company resources and drawings. Dennis Dahm, Real
Estate Courses, Inc. was helpful in providing information on real estate
and financing. Dawn BeVard created the illustrations. A Field Guide to
American Homes (McAlister, 2000) was referenced for architectural style
information. The American Institute of Architects provided contract
information and Fred Gertz provided legal council. My wife Gina, mother
Gail and friend Jon Buzzell were all very helpful during the writing
process. Thank you to all for your help and a special thanks to God for
making this book and all other things possible.
ix
Copyright © 2004 by The McGraw-Hill Companies, Inc. Click here for terms of use.
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Introduction
A
lthough there are many ways to make money in real estate, this
book teaches a strategy that is uncommon, yet time tested and
proven. Many builders build their own homes and move frequently from
house to house, making big profits with each sale. Very few people out-
side the building industry do this because:
1. They are not aware of this practice.
2. They are not builders.
3. They don’t know all of the inside information that builders know
about building a profitable house.
Most people are not aware that they can make money doing this with-
out being a builder or an industry insider.
Despite the fact that a home is the single biggest investment most
people will ever make, most people will look at a new house as a HOME
for their family and not as an investment opportunity. You have to live
somewhere! Why not make the biggest investment of your life the most
profitable as well? Over 3 million people will buy new homes this year.
The buyers just keep coming. Over time, real estate prices have consis-
tently risen because the demand is seemingly endless. After all, everyone
needs a place to live. Supplying this demand can open the door to wealth.
This book specifically details strategies that cut the cost of building a
home while positioning you to sell that home quickly and profitably when
the time comes. Cost effective design and construction in a highly desir-
able property turns into big profits upon sale.
xi
Copyright © 2004 by The McGraw-Hill Companies, Inc. Click here for terms of use.
Consider this simple example:
Two houses are built side by side in a community. Both are the
same size and have similar rooms and features. Both are for sale
at market price. The first seller will make 5 percent profit. The
second seller will make 30 percent profit. What makes the second
house more profitable? The 25 percent difference represents the
lower cost of construction for the second home.
There are huge cost differences between similar types of homes. Prof-
itable builders are keenly aware of the subtle differences that add up to big
money, and they guard this information closely. You will learn how to
save money through innovative design and thorough planning. You will
also learn how to build a well-planned home without giving all of the sav-
ings to the builder. The critical last step in this process is to plan for
resale during the entire process in order to maximize the number of
potential buyers who want to buy YOUR home. Planning for resale now
pays off when you sell.
Builders do not make a killing on every house they build. In fact,
profits are surprisingly low. But when you build using this strategy, you
will save what builders spend on marketing, advertising, real estate
agents, model homes, salaries, trucks, office space, equipment, accoun-
tants, telephones, and trailers, as well as some construction interest. In
a typical market, this can add up to over 15 percent of the price of the
home! These are real expenses that builders have, but it’s money that
can go right into your pocket along with the builder’s profit.
Rental Investments
Once you see how successful this strategy is, you may want to build a few
rental properties. The strategy works equally well on rental investments.
Build a good house for a lot less money, then rent it. Let the equity build,
or use it to fund other investments.
Most people buy older homes when they purchase rental properties. Oth-
ers look for bargains that are in bad shape and then fix them up to increase
Introduction
xii
the value of the property. Some investors keep and rent the fixed-up proper-
ties, while others sell (or “flip”) them. Buying distressed properties and flip-
ping them is a widely known real estate investment technique. But why not
do it with new homes? Isn’t new always better than used?
You are never sure what you’re getting into when you buy an older
home. Their attraction is the equity you gain after fixing it up. Building
a new home as a rental investment creates instant equity, and a lot of it!
An added benefit of having a NEW home is that it is years away from
needing expensive maintenance. Once you understand this process, it’s
easy to build a number of rental homes that increase your wealth in
increments larger than many people make in a year!
Why don’t more people do this? Builders sell new homes to rental
investors all the time. They typically come to the builder looking for a dis-
count and buy whatever is left over and not sold. Often, builders will
discount a home that has a bad floor plan or a bad lot. But why invest in
a leftover? Go build yourself a superstar property that everyone wants.
This gives you your best chance to make money.
Get Started Today!
If you approach the construction of your new home using the principles
in this book, you can build your family a great house that will:
1. Cost much less than neighboring homes
2. Appeal to a wider variety of buyers when you’re ready to sell it
3. Make you much more money when you sell it than your neighbors will
make when they sell theirs
Build one house for your family or build a rental empire. The choice
is yours, and so is the money. Start pursuing your financial dreams today.
You will see how the right knowledge and great planning can pave the way
to living debt free in your personal home while you amass equity through
rental investments. Whatever your goals, real estate has consistently been
one of the strongest long-term investments. This book will give you the
keys to a wealth-building strategy that will get you building your own real
estate riches!
Introduction
xiii
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