About once a week on average I run across someone who questions my plans to build my house basically by myself. The first question is always, “How long do you think it will take you?” They then usually get around to recommending that I contract much of the project out to “save time”.
But today’s conversation on the bus went much further. The fellow was a builder and I suspect was even familiar with my project (he got on the bus in my neighbourhood). He basically called me a fool and idiot in almost those words. When I told him about the lack of progress or more specifically how little had gotten done since the official start in May, he laughed (not in a good way) and advised I was going to ‘piss away all your savings in holding costs’. Fortunately he got off the bus a few stops later, but I was feeling like I had been put through an old fashioned washing machine ringer – I felt deflated. My mood was not helped when I got all the way down town to the convention centre only to realize I had the wrong day and the trade show is tomorrow. Oh well – at least I got there and back on one bus ticket.
I have know that my holding costs are low, but today’s ‘assault’ made me want to sharpen the pencil and look to see if this truly is making sense. So here goes.
Current Monthly Costs
- Mortgage * $ 2450
- Hydro $ 15
- Property Taxes $ 314
- Rent $ 1400
- House Insurance $200 **
- Storage Locker $84
* Our mortgage will be paid off in next couple of months. We had planned on paying it off before starting construction but needed the cash flow since the construction loan does not kick in till after we pour the foundation.
** This includes our contents in our suite as well as the construction coverage. It also covers the full finished value of the home even though it will be two years before we reach this value. A rip off if you have ever seen one.
SO this leaves us with a current monthly holding cost of $4379. The relevant pre-moveout monthly total was $ 3244 for a difference of only $1135. Why so little difference? Well for starters our Hydro inc. gas used to be $163 and now our rent includes utilities and I only have to pay for the job site electricity. The property taxes were also much higher accounting for a livable house ($555). The only thing that was lower was the house insurance bill that was only $80 prior to move out.
S0 – how far would $1135 a month get me. Well, the two labourers from Embers cost me $335 a day for the pair all in. So I could get two labourers for 27 hours a month for this difference, or just over three days. Does anyone think that I will save a month of work by hiring two labourers for three days??? I sure don’t! And once the mortgage is paid off, this will lower the holding costs even further but does raise the difference a bit to $1213 monthly.
I know, I know, this is not a fair comparison. I need to just look at the extra costs it is costing me to take one month longer in the construction, so the pre-tear down costs are somewhat irrelevant. So here we go again:
- Hydro $ 15
- Rent $ 1400
- House Insurance $75 *
- Storage Locker $84
- Interest on money borrowed to date $260
* I am only including the extra cost for the actual course of construction coverage as we would be paying the rest even after the house is finished.
** I have also not included the mortgage since it will be gone shortly, or included the taxes as they will only go up when the place is done. By rights I should decrease a bit because once we move into the new place, we will have to pay utilities again. But lets keep it simple.
This adds up to $1840. Lets call it an even $2000. This would get me 6 days of labour. While better, it sure would not reduce my build time by a month and therefore would be a net loss. With two labourers I do not become 300% efficient (including myself). I may gain 40% to a max of 50%, because I now have to divert my energies away from getting stuff done to supervision and instruction. So lets say I hire 2 labourers for a month. This will cost me $8000 (inc Saturdays) but will only have shortened my build time by two weeks max or $1000 of holding costs. And if I hired 2 skilled skilled labour, my costs would be well above $10K and I may get up to 80% increase in efficiency (I still have to tell skilled labour what I want done and monitor that they are doing it right). So I save $1500 by spending $10K+.
If any of you critics are out there and want to question my logic, please do. I welcome the input, but no matter how I crunch the numbers, the math just does not add up to real savings to me.
To me this is totally evident by this last example. The finished house has been appraised by both the bank and insurance company at a build cost of between $850K and $950K. I have budgeted $450K but am fully prepared at this point for that to escalate to $500K. That is a savings of $350K minimum. That is the kind of money we would have to spend to significantly reduce our build time to say 1 year (pretty standard around here for many homes). If I did reduce build time to one year, I would save $24K in holding costs.
Spend $350K to save $25K. I don’t think so! Thanks for letting me get this off my chest.
Work has been progressing well with the tarp modifications. I bought the final rope and parts needed this morning and finished rigging all of the ropes this afternoon. I also finished tensioning the tarp to the north tree so that it no longer sags on the main cable and covers the entire build site.
All that is left is the final tightening of all the tie down ropes, and the ‘tressing’ of the ropes underneath the tarp, so that they can not slip, and so they provide intermediate support to the tarp between them to prevent pooling.
The tarp has been subjected to some pretty strong winds again today without incident. The changes in behaviour between before where the tarp was the structure, and now where it is a passenger, are very clear. I really do not have any fears from a wind perspective any more and now just need to ensure it slopes to drain.
Thanks for visiting.