Buying Property and Building Your Own Home - Tips, Tricks, Advice

[DETRoadster]

The smaller plants in the property are struggling with this heat and prolonged dry period. Haven't had any significant rainfall in over 2 months. I built this water tube out of sewer pipe. I fill it up at home then truck it to the property. Hook up a hose and gravity drain it. It holds about 15 gallons. With my Jerry cans I can bring 30 gallons of water on each trip. Been coming up here every other day for about 2 weeks. Things are finally perking back up and looking less pathetic and wilted.

[///d]

When looking to buy land to build on, how does it work? I'm looking to buy land and build in the near future, but my current location prevents me from being able to talk to a bank about the process.

Do you buy the land first, and once you have the land then talk to the bank about a construction loan?

Or is it like applying for a mortgage where you get the number for the amount you can spend total, then you start your land and contractor search? For example bank says you have $500k, contractor says your construction is going to cost up to $200k, so you then have up to $300k for land? (way more than I intend on spending, but just examples)

[chassis]

If it were me I would buy the land as a stand alone transaction. Done. More easily accomplished in a rural non-subdivision setting.

Then engage a builder to design and build the house you want. You will get an estimate from them. Then sit down with the bank and talk about a construction loan process. It’s done every day.

The above suggests you are able to acquire the land for cash, which may or may not be your situation. You would also be liable for property taxes starting from the time you own the land, whether or not a house is built on it. This affects your cash outflow.

[vreihen16]

Originally Posted by ///d

Do you buy the land first, and once you have the land then talk to the bank about a construction loan?

There's a chapter in the DIY barndominium book that I bought about construction loans. Their suggestion is to wrap the land purchase into the construction loan, because banks are more familiar with that approach...which is even more important when financing an "unconventional" home like a barndominium.

With that said, we just closed on our land without a construction loan. Our current mortgage will be paid off in less than 4 years, so we pulled some equity out using a HELOC to buy the land for cash. The plan is to try and build our Garage Mahal (barndominium) without a construction loan, and ultimately sell our current house and move into the new place debt-free and with some extra cash.

In terms of property tax, it is under $10 per YEAR for us on five wooded acres in SC. It will probably go up to about $100/year for us, since we are out-of-state residents.....

[DETRoadster]

Originally Posted by ///d

When looking to buy land to build on, how does it work? I'm looking to buy land and build in the near future, but my current location prevents me from being able to talk to a bank about the process.

Do you buy the land first, and once you have the land then talk to the bank about a construction loan?

Or is it like applying for a mortgage where you get the number for the amount you can spend total, then you start your land and contractor search? For example bank says you have $500k, contractor says your construction is going to cost up to $200k, so you then have up to $300k for land? (way more than I intend on spending, but just examples)

Not the be "That Guy" but if you rewind back to page 1 of this thread and start reading, i've lived through many of the questions you have. I've detailed every step of the process we went through. Try that and if you still have questions, by all means post them up.

Most banks dont like dealing with land loans. If you default, they get stuck with a piece of property that's undeveloped and much harder to sell than a property with a house. of all the banks out there, only a small % do construction loans and of those even a smaller % do land loans. It is entirely possible to get a loan for the property, then a loan for the construction, or to wrap them all up into 1 loan, but it's a more complicated lending process and the bank will make up for the added risk with much higher interest rates.

We did the following:

Step 1 - Get HELOC on current house
Step 2 - Buy property outright using HELOC
Step 3 - Refi current mortgage + HELOC into new mortgage at lower rate
Step 4 - Pay for "soft costs" out of pocket (we are in this phase now)
Step 5 - Get construction loan and begin construction (Mid next year)

[DETRoadster]

Time for a little update. After a couple frustrating interactions with some banks re. construction loans, our architect recommended we look into a "portfolio lender." Banks typically fall into 2 categories:

1) Banks that write loans then sell them to Fannie Mae and Freddie Mac.
2) Banks that write loans and hold onto them in their own portfolio.

Banks that sell to Fannie and Freddie have to follow the government's rules on how the loan is structured. The borrowers also have to meet certain criteria. This is meant to curb risky lending and protect the borrowers and in most cases this is a really good thing. There's number of circumstances though where the borrowers can get hung up on an underwriting requirement that grenades their ability to borrow what they need.

Portfolio lenders still have to follow government lending rules but in general have a lot more flexibility, especially in certain circumstances.

It just so happens that my wife and I fall into one of these tricky situations with my wife being self employed. The Fannie and Freddie lenders average the last 2 years business tax returns for her and use that to determine her income. 2019 was awesome and 2020 was a shit-show. "Too bad" the big banks say. "Your income drives what you can borrow and your income was negatively offset by your 2020 performance." The portfolio lenders on the otherhand are able to step back and say "Well yeah, 2020 sucked, but we can also see that YTD 2021 is outpacing even 2019 so not only have you recovered from 2020 you are growing. We like that."

Another cool example of Fannie/Freddie vs. portfolio lender has to do with how dent to income is calculated. The Fannie and Freddie tied lenders look at monthly debt vs. monthly income and will only allow you to borrow up to the point your monthly debt is 43% of your monthly income. So if you make $10k per month and your only debt is your mortgage or rent at $2k per month (20% of your income), they will allow you to borrow whatever amount will equate to $2,300 per month (23% of your income), for a total of 43% debt to income. Well the portfolio lender we are going though says "Look, we know your mortgage is $2k/month, but we also know you could rent that place out for $2k/month if you really got in a bind while you were building the new house. So we are going to overlook your mortgage as a debt, thus allowing you to borrow more and stay in your current house while you build." Pretty cool!

Finally, our portfolio lender offers what's called a cross collateral construction loan where you use the value of your existing home as collateral in securing the construction loan. Yes, that means tht if you cant pay your construction loan they can take your house. So, risky for a borrower who doesnt have reserves, but for borrowers like us where my wife's self employment income is tricky to calculate and we have enough cash reserves to just pay off the construction loan and our mortgage if we were so inclined, the risk is minimal.

Some very cool and creative options by these portfolio lenders that I'd certainly recommend looking into for anyone who is about to build and needs a construction loan.

[DETRoadster]

Second meeting with the architects today. Starting to look at floor plans and how the house will sit on the lot. Lots of refining needed but it's nice to be underway.

[spazzyfry123]

Originally Posted by DETRoadster

The smaller plants in the property are struggling with this heat and prolonged dry period. Haven't had any significant rainfall in over 2 months. I built this water tube out of sewer pipe. I fill it up at home then truck it to the property. Hook up a hose and gravity drain it. It holds about 15 gallons. With my Jerry cans I can bring 30 gallons of water on each trip. Been coming up here every other day for about 2 weeks. Things are finally perking back up and looking less pathetic and wilted.

It's nice seeing the versatility of these vehicles - cool idea!

[DETRoadster]

We knew from the start that this process was going to have ups and downs. That it wouldn't be all roses. Well we hit our first major snag last week. We signed a contract with a small architectural firm about a month ago. They seemed very knowledgeable, helpful, and understood our vision. My wife, who is an extremely perceptive and intuitive person had a couple of little red flags with the lead architect (and co-owner of the firm). Dumb stuff like she thought he was snippy in an e-mail response, etc. Well we had our first design review session last week and they hit the mark in a lot of areas but missed in a few important ones. OK, not a big deal right? it's just the first meeting and this is an iterative process where we throw stuff on the wall and see what sticks. We provided open, friendly, honest, feedback in the meeting and could just feel that they weren't super happy that we were wanting to make some significant changes to the design. Easy stuff to change and important. Like, we told you we want the guest bedroom on the other side of the house, not sharing a wall with the master. And, you left out the home office. Like, just forgot it. I work from home full time sooooo, kinda need that office. Their response was thet they laid out the house to take advantage of all the trees on the property and out desire to cut as few down as possible. OK, yes, that was a request of ours. But we pointed out that while their layout did indeed maximize tree saving, it also pointed the house in a direction that didnt take advantage of the views and didnt leave room for a shop. We suggested we could use a copy of the site map to sketch out a layout that would accomplish all goals. They seemed SUPER offput by the idea that we would sketch out what we want and they would simply "make it happen." We got what felt like a pretty heated email from the architect who suggested that while clients sketching what they want might work for some firms, it doesnt work for them. He needed "some time to think about his response to us" and then ghosted us for 5 days. he came back with a very nice, very reasonable e-mail. But at this point my wife is pissed. Pissed to the point I dont think she can work with the guy. So now we are faced with pulling out of the contract and owing maybe $10k, or, sticking it out and I'm stuck managing the relationship and trying to keep it all glued together. This is NOT the spot I was hoping to be in just a month into this portion of the project. As much as I hate to do it, my gut is telling me $10k is not worth my wife being a miserable bear for the next 6 months and setting our project back by a few months as we interview new architects and start all over.

Lesson learned: Trust those little red flags early.

[MaC-N54-E82]

Originally Posted by DETRoadster

We knew from the start that this process was going to have ups and downs. That it wouldn't be all roses. Well we hit our first major snag last week. We signed a contract with a small architectural firm about a month ago. They seemed very knowledgeable, helpful, and understood our vision. My wife, who is an extremely perceptive and intuitive person had a couple of little red flags with the lead architect (and co-owner of the firm). Dumb stuff like she thought he was snippy in an e-mail response, etc. Well we had our first design review session last week and they hit the mark in a lot of areas but missed in a few important ones. OK, not a big deal right? it's just the first meeting and this is an iterative process where we throw stuff on the wall and see what sticks. We provided open, friendly, honest, feedback in the meeting and could just feel that they weren't super happy that we were wanting to make some significant changes to the design. Easy stuff to change and important. Like, we told you we want the guest bedroom on the other side of the house, not sharing a wall with the master. And, you left out the home office. Like, just forgot it. I work from home full time sooooo, kinda need that office. Their response was thet they laid out the house to take advantage of all the trees on the property and out desire to cut as few down as possible. OK, yes, that was a request of ours. But we pointed out that while their layout did indeed maximize tree saving, it also pointed the house in a direction that didnt take advantage of the views and didnt leave room for a shop. We suggested we could use a copy of the site map to sketch out a layout that would accomplish all goals. They seemed SUPER offput by the idea that we would sketch out what we want and they would simply "make it happen." We got what felt like a pretty heated email from the architect who suggested that while clients sketching what they want might work for some firms, it doesnt work for them. He needed "some time to think about his response to us" and then ghosted us for 5 days. he came back with a very nice, very reasonable e-mail. But at this point my wife is pissed. Pissed to the point I dont think she can work with the guy. So now we are faced with pulling out of the contract and owing maybe $10k, or, sticking it out and I'm stuck managing the relationship and trying to keep it all glued together. This is NOT the spot I was hoping to be in just a month into this portion of the project. As much as I hate to do it, my gut is telling me $10k is not worth my wife being a miserable bear for the next 6 months and setting our project back by a few months as we interview new architects and start all over.

Lesson learned: Trust those little red flags early.

Sounds like you know what you have to do. Time to find another option and cut them loose.

[nyalpine90]

Originally Posted by DETRoadster

We knew from the start that this process was going to have ups and downs. That it wouldn't be all roses. Well we hit our first major snag last week. We signed a contract with a small architectural firm about a month ago. They seemed very knowledgeable, helpful, and understood our vision. My wife, who is an extremely perceptive and intuitive person had a couple of little red flags with the lead architect (and co-owner of the firm). Dumb stuff like she thought he was snippy in an e-mail response, etc. Well we had our first design review session last week and they hit the mark in a lot of areas but missed in a few important ones. OK, not a big deal right? it's just the first meeting and this is an iterative process where we throw stuff on the wall and see what sticks. We provided open, friendly, honest, feedback in the meeting and could just feel that they weren't super happy that we were wanting to make some significant changes to the design. Easy stuff to change and important. Like, we told you we want the guest bedroom on the other side of the house, not sharing a wall with the master. And, you left out the home office. Like, just forgot it. I work from home full time sooooo, kinda need that office. Their response was thet they laid out the house to take advantage of all the trees on the property and out desire to cut as few down as possible. OK, yes, that was a request of ours. But we pointed out that while their layout did indeed maximize tree saving, it also pointed the house in a direction that didnt take advantage of the views and didnt leave room for a shop. We suggested we could use a copy of the site map to sketch out a layout that would accomplish all goals. They seemed SUPER offput by the idea that we would sketch out what we want and they would simply "make it happen." We got what felt like a pretty heated email from the architect who suggested that while clients sketching what they want might work for some firms, it doesnt work for them. He needed "some time to think about his response to us" and then ghosted us for 5 days. he came back with a very nice, very reasonable e-mail. But at this point my wife is pissed. Pissed to the point I dont think she can work with the guy. So now we are faced with pulling out of the contract and owing maybe $10k, or, sticking it out and I'm stuck managing the relationship and trying to keep it all glued together. This is NOT the spot I was hoping to be in just a month into this portion of the project. As much as I hate to do it, my gut is telling me $10k is not worth my wife being a miserable bear for the next 6 months and setting our project back by a few months as we interview new architects and start all over.

Lesson learned: Trust those little red flags early.

im plumbing designer for more then 20yrs and i work side by side with architects. Their goal is to accomplish every wish their client desires. My projects are condos, apartment duplex, custom homes, townhouses. You should have no issues getting what you want on vacated lot. YOU are paying them to design your dream house, how you want it and what material you want. ALWAYS speak up if you dont like something. IF you are not happy with their design, YOU can tell them that. Too much money on the table for them not to get it right. Building a home is the easiest task, you dont need to worry about any existing conditions.
find another firm.

[dreamingat30fps]

Originally Posted by DETRoadster

We knew from the start that this process was going to have ups and downs. That it wouldn't be all roses. Well we hit our first major snag last week. We signed a contract with a small architectural firm about a month ago. They seemed very knowledgeable, helpful, and understood our vision. My wife, who is an extremely perceptive and intuitive person had a couple of little red flags with the lead architect (and co-owner of the firm). Dumb stuff like she thought he was snippy in an e-mail response, etc. Well we had our first design review session last week and they hit the mark in a lot of areas but missed in a few important ones. OK, not a big deal right? it's just the first meeting and this is an iterative process where we throw stuff on the wall and see what sticks. We provided open, friendly, honest, feedback in the meeting and could just feel that they weren't super happy that we were wanting to make some significant changes to the design. Easy stuff to change and important. Like, we told you we want the guest bedroom on the other side of the house, not sharing a wall with the master. And, you left out the home office. Like, just forgot it. I work from home full time sooooo, kinda need that office. Their response was thet they laid out the house to take advantage of all the trees on the property and out desire to cut as few down as possible. OK, yes, that was a request of ours. But we pointed out that while their layout did indeed maximize tree saving, it also pointed the house in a direction that didnt take advantage of the views and didnt leave room for a shop. We suggested we could use a copy of the site map to sketch out a layout that would accomplish all goals. They seemed SUPER offput by the idea that we would sketch out what we want and they would simply "make it happen." We got what felt like a pretty heated email from the architect who suggested that while clients sketching what they want might work for some firms, it doesnt work for them. He needed "some time to think about his response to us" and then ghosted us for 5 days. he came back with a very nice, very reasonable e-mail. But at this point my wife is pissed. Pissed to the point I dont think she can work with the guy. So now we are faced with pulling out of the contract and owing maybe $10k, or, sticking it out and I'm stuck managing the relationship and trying to keep it all glued together. This is NOT the spot I was hoping to be in just a month into this portion of the project. As much as I hate to do it, my gut is telling me $10k is not worth my wife being a miserable bear for the next 6 months and setting our project back by a few months as we interview new architects and start all over.

Lesson learned: Trust those little red flags early.

$10k???!! Damn, can I start a pretend architectural firm and just piss off all the clients and bank the $10k? That's nuts! Personally I would just make them fix it until I had exactly what I wanted or THEY quit and refunded my $$.

[vreihen16]

This reminds me of the section about conflict resolution that I used to teach in my autox safety steward course. Autox course designers are mostly the creative type. Confronting them with a change to their artwork for safety reasons or just moving the cones yourself is considered murdering their creation. Instead of confrontation, the smartest way to handle these situations is to pull the course designer aside and ask them what their inspiration was in the dangerous section. Let them come up with a remedy that's acceptable to them and safe for you.....

[DETRoadster]

Hey Gang! We are going to begin interviewing builders and are compiling a list of interview questions. if anyone has any good questions that you think someone in our situation should ask, post them up!

[kscarrol]

So issues with design/architect resolved?

[spazzyfry123]

Is there a clause in the contract that benefits the customer in situations like this? I'm sure they write it, so "no." But it would seem fair that if they are unable to reasonably meet your needs, shake hands and offer a pro-rated refund.

[DETRoadster]

Originally Posted by kscarrol

So issues with design/architect resolved?

Originally Posted by spazzyfry123

Is there a clause in the contract that benefits the customer in situations like this? I'm sure they write it, so "no." But it would seem fair that if they are unable to reasonably meet your needs, shake hands and offer a pro-rated refund.

Sorry guys, I jumped ahead without mentioning where we are at with the architect.

We had some "come to Jesus" meetings with them and are now, I believe, in a much better place. They had a breakdown in internal communication which they owned up to, that lead to us providing input to the architect that didnt make it down to the CAD guy who was actually doing the grunt work. On our side we owned that we sometimes over communicate. Too much unfiltered, unorganized, input too quickly and verbally. It's hard to keep up with us. We also got a little too excited and didnt carefully read their proposal to catch thinks like "consideration will be given to XYZ" as opposed to "a firm requirement for the project is XYZ." Finally, we went a bit overboard talking about "saving every tree on the property" when in reality we understand some will need to come down. They over-indexed on the "save every tree" requirement and that lead to compromises on the layout that we werent cool with. Bottom line we are a classic case of wanting to save the trees, until those tees get in the way of my garage, and then well, "cut those mother F'ers down baby!"

We did a fresh walk-through on the property with the architect and the project manager last weekend. Dropped stakes at possible corners for garage, livingroom, bedroom. Really underscored which views and orientation of the house we want. And went tree by tree mapping out "must keep", "Negotiable", and "dont care if it goes". That all really opened up the sandbox for them to play in and reset requirements and expectations.

Next meeting is this coming Wednesday. That's where the rubber will hit the road and we will see if we actually are in a better place. I feel like we are though. My wife is happy, so, that's a good thing.

Should things truly go south there's pretty reasonable language in the contract about working out issues in good faith, mediation if issues cant be worked out, and only paying for services rendered to date. We can walk at any time for any reason without providing cause.

[DETRoadster]

2nd meeting with the architect this week. We are narrowing in on the site plan. The orientation of the house on the property is a little wonky at first look but remember our goal is to preserve as many trees as possible. This orientation takes advantage of a natural clearing on the lot and also paves the way (no pun intended) for a driveway that doesn't blow through a bunch of trees.

Overall very happy so far. All of our goals are accomplished with this layout.

We should be getting some elevation views of the exterior to look at in about 2 weeks!

[DETRoadster]

Lots of progress in the last 2 months! The city shot down our request to change which side of the property is considered the "front". We had attempted to convince them that the side of the property facing the street is the "front" where as the city contends that does matter and what dictates the "front" of the property is where the driveway enters. For us that's the side of the property, perpendicular to the street. So now the side is the front and all the building setbacks changed, meaning the entire house plan had to change! It's OK though, we ended up with something we are even happier with. We are officially out of the "Schematic Design" phase and into the "Design Development" phase where the floorpan is agreed to and locked down. Now we are working on the fun stuff like cabinets, fixtures, etc.

Lessons learned over the past 2 months: Don't underestimate just how hard the city will dig in to enforce arbitrary rules. Stay flexible; the plans WILL change. Be patient.

Now for the fun stuff....

[Alfisti]

Tall trees near a house like that make me super nervous, seen too many come down and saw through a house from top to bottom.

Ilike your process though, you're a thorough SOB.

[nyalpine90]

mech rm looks a bit small.
are you able to make any changes?

[DETRoadster]

Originally Posted by Alfisti

Tall trees near a house like that make me super nervous, seen too many come down and saw through a house from top to bottom.

I like your process though, you're a thorough SOB.

Yeah, its a concern. Some of the neighbors in the area go stay at hotels during windstorms. Our neighbor down the hill has a 52" Doug Fir directly up slope from her house. it's gotta be 170 feet tall. it's absolutely massive. The nice thing for us is that the big wind storms tend to blow from the south to north and our neighbor to the south has a ton of mature trees along the property line, acting as a good windscreen.

Originally Posted by nyalpine90

mech rm looks a bit small.
are you able to make any changes?

We are definitely pinched for space back there due to the property setback. The simple answer is "no". At least not without cascading changes that impact other things. Only thing we will have in there is an on-demand water heater and an HVAC air handler. Should be enough space I think, but what are you thinking? Am I missing something?