Perfect, high end, fast and cheap……..Sure no problem

There was a radio guy I used to listen too had a favorite expression.  Sometimes you just need to say it out loud to have it sink in.  If I were to summarize the conversations I have with most of my customers after I let them tell me what they are looking for (and I often do this for them) it would be the same for almost all of them. They would like a big but not to big house, they really want to just be done with it quickly without having to wait for ever for it, nothing to fancy but at least it should have all hard wood floors, a nice kitchen because they love to cook, an open floor plan with lots of natural light, they want it really well-built not some piece of junk but they have a limited budget. Summary, “Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.”  Read that again and this time read it out loud……..”Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.”   Now actually say the words out loud, they do in fact sound different when you say it out loud…..”Can you build me a perfect house, loaded with fancy things and do it really fast and really cheap.”

Of course I can…….is the answer any salesperson would feel obligated to give you.  Sadly, I am a builder and not salesman and with that, here is what I know.  The best subcontractors out there have earned the right to be discriminating and with that they chose not to work on jobs where they cannot make money and they take their time and will get it done when it can be done right.  Most people intellectually understand this, yet in the middle of a project that they just want done, it goes away.  The best materials out there are better, they install better, the work better, they wear better and they look better and they are a lot more expensive.   The world is full of products that attempt to be most of these things but they are either very expensive of they fall short in some way.  So does this mean it is hopeless?  No!!!  If you can have realistic expectations it is far from hopeless.

Modular home manufactures negotiate contracts with suppliers every year.  They go to companies that make Cabinetry, flooring products, Doors and windows as well as lumber suppliers and roofing and siding companies and try to set competitive pricing agreements with them.  They have all learned the lessons of cheap garbage products, ones that are difficult to install, fall apart easily and do not stand the test of time.  They have learned that Cheap usually cost you money in repairs and service calls.  What is interesting is if you were to go through 40 modular manufactures website, and look at the product lines they carry you will see the same names over and over again.  Why because they are the BEST VALUE.  In other words the manufactures have done the homework and research, product testing, market research and price negotiations for you.  Combine all these products and put them together in a controlled and inspected facility, which will allow the completion of construction to happen more quickly on site and well you are headed in the right direction.

Then hire a contractor who knows the sub-contractors in your area, has worked with most of them, fired many, lost a few to high prices and has weeded through to find the best value in workmanship and you are well on your way. The end result of combining a quality Modular home with a Solid General contractor is you get most of what you want.  It will not be perfect but it will be really solidly built, it will have the quality of products that you chose to pay for, it will be built considerably faster than the time it would take anyone else to build it right and it will likely save you a lot of money over building the same house another way.

That to me sounds like a really good choice.

Cost to Buy v.s. Cost to Own

You know for a long time I have said that you can buy more house on the open market then you can build new for the same money.  Sorry, that has not changed yet.

This is another way of saying. old house are cheaper.  But they may not cost you less to own.  Cost of ownership is a function of what you pay for it, plus what you spend to keep it up and live in it less the money you sell it for.  Let’s say you buy a house for $200,000 live in it for 10 years put about $40,000 ($4000/year) into improvements and maintenance and then sell it 10 years later and it sells for $240,000.   Add in annual taxes, heat light and power and interest expense on your mortgage and you might have lived there for a cost of $100,000 which sounds like a lot but really is pretty cheap.  Do the same math with a $1500/mnth apartment and you could be out more then double that.  If you are really smart and buy a house right, do lots of maintenance work yourself over the years and the market grows you could live for free if you sell your house for enough over what you bought it for.

Now if you bought a new house for lets say $260,000, clearly a lot more money then the cost of buying the older house.  But for the first 10 years your cost of Maintenance and improvements should be next to nothing so lets say $10,000.  Theoretically a newer house should be more energy efficient so the cost of heat, light and power should be lower. Now when you go to sell it, it is likely a relatively new home compared to the old home.  With that it likely more modern with a layout (floor plan) that is closer to what people are looking for today so it’s market value is considerably higher.  If this is true and again assuming you made good choices you could sell this house with the same 20% value increase for $312,000 with lower operating cost and living expense and might well find yourself getting paid back with a net positive 10 years later.

So while the up front Cost to Buy was higher the Cost to OWN is much lower.

All of this comes from my own experience.  My wife and I bought our second house a number of years ago and it was at the time the most popular house design on the market.  The classic center hall colonial on  a great lot in  a great neighborhood.   However, 10 year later we listened to a realtor tell us how no one wants a L/R and a Family room as well as a D/R with an eat in kitchen anymore.  Additionally the rooms were small and cut up and now everyone wants a big open great space with less rooms.  Our closets while they were the huge double door closets with lots of space, they were not walk in.   Because of these things and despite all the time and money we had spent keeping the house like new and modern it was still a floor plan that was very hard to sell, worse yet, it did not carry high market value.

We bought this house used at a time when it was the end of that designs run.  The needs of people are every changing and with it what holds value changes too.

Windows are like Sneakers…………

I am a runner and I have been for many years.  When I first started running I went out and bought a pair of Nike’s like you see in all the adds, the ones the professional athletes all use because they are the best. Six months into my running career I had my first injury and sought out the advice of an industry professional. My issue? I had the wrong shoes. 15 years later and hundreds of running shoes trial and error and I love shoes from a company called Mizuno.  You have likely heard of them but most would assume they are a second rate company smaller and without the technology of the big boys.  Yet, if you went to a road race you would see that many more seasoned athlete are running in shoes from companies like Mizuno, Saucany, and Asics then the big brands like Nike, Adidas and Under Armor.

As we go through the process of designing and spec-ing a house we are going to build for a customer the conversation eventually comes to windows. Everyone asks for Anderson, some say Pella or Marvin.  Why? because these are companies that have branded themselves as manufactures of quality products that we are all familiar with.  Yet if you go to builders job sites the brand you will see most builders using are from a company called Plygem. Why? because as a professional builder who has to offer a quality product we can stand behind without driving cost up this window is the industry standard.  Is is sexy? No! Can you brag about the manufactures name? No!  Is it a better window at a more reasonable cost.  Ask anyone in the industry and you will get a resounding yes.

Modular builders are always fighting the stigma of be second rate construction quality because for the early years of the industry they were.  However, today the modular industry is in many ways driving the choices the site built industry is making.  They look at what the Mod guys are using, they know they did all the research to determine what the best value is and they just follow their lead.  I believe some people feel that if they tell their friends they built a modular home but it has Anderson windows they get Street Cred for that.  When was the last time you were in a beautiful home and went over to read the label you can barely read in the lower corner of the windows to see if they were a fraud?  You don’t, you look at a beautiful well built house and think, Damn! this is nice.

Don’t get stuck on name brands, the simple business concept of most huge companies is that if they do an effective job branding their products they can charge extra without increasing the real cost of making the product and improve profits.  Don’t pay extra for things that do not have any real added value.

House Poor- safer than Life Poor

House Poor- safer than Life Poor

I talk to people every day about what they want to spend on a house.  I think the most common statement today is, “We don’t want to be House Poor”

At first I thought, “well that is smart”.  Unlike in the early 2000’s when everyone over extended, housing bubble, mass foreclosures, values dropping, you know the story, people are being smart and not spending more than they can afford.  However, the conversation usually continues with statements like, “our bank approved us for a lot more” but what we want it a payment lower than typical apartment rent.  We would like to own a house with a payment of $900/mnth including everything. Excuse me!!!

First, sadly in today’s world that is just not going to happen.  Take out a couple hundred dollars a month for taxes and perhaps Mortgage insurance and you are not going to buy and own a house for a mortgage lower than your truck payment.  Sorry, I would love to help you, but it is not realistic.  Additionally I learn that the bank, in today’s very conservative, post housing bubble restraints has approved them for a far more realistic $1500/mnth but instead they are going to stick with renting.

Since the 1930’s the federal government has been creating programs to promote home ownership.  HUD, FHA, USDA, VA loan programs are all created to make home ownership accessible. The reason for this is that smart people learned a long time ago that the best way for people to manage their life financials intelligently is through home ownership.  Think of it as a forced savings program.  You are going to make a payment every month so someone why not make it an investment in your future.   I am going to make the huge leap and speculate that the people who do not want to be “house poor” are not taking 20% of their paycheck each week and sticking it into a retirement account.  Instead they are paying rent and putting it in someone else retirement program.  Do the math, pay $900 a month over 30 years (assuming it never goes up which we know it does, a mortgage does not) and you have given $324,000 dollars to someone else. I am sure they will thank you.

Now go the other way and buy a house. Lets say you buy a $200,000 house at today’s interest rates with 20% down and your mortgage rates and your payment is $775/mnth add $300 for taxes in my area and you are now paying $175/mnth more than the rent. But roll it out 30 years, pay it off, figure most houses increase in value 100% over 30 years and now you have a $400,000 debt free asset, or savings account.  That is a $724,000 swing over renting over 30 years. All because you don’t want to not be able to go out to eat dinner when you want to or some other form of entertainment.  Strangely these same people always seem to have $800/mnth in vehicles payments which is another huge waste of money. But I digress.

Today’s banking requirements for Mortgages are very conservative.  At an average of 43% DTI the government and banks have a pretty good idea what you can realistically afford after normal life expenses and they will no longer loan you enough to see your fail. But no, they are not accounting for your social life.

If you are going to make monthly payments for some place to live, why put it in someone else pocket so that you can go out and have dinner if you can be putting a large portion of it into your own pocket. We have become very fond of complaining about the division of wealth in this country, but I think some of us are responsible for it ourselves.  We gripe about the wealthy apartment owners who take all of our money but we are unwilling to give up the toys to allow ourselves the luxury of owning our own place.  Meanwhile we have all of our money tied up in depreciating assets like toys and vehicles while they have it all tied up in investment properties. Who is at fault?

Get house poor, pour your money every month into a mortgage payment that keeps you from wasting it somewhere else.  Someday you will be the one with the resources to loan your kids money to buy their first home. What could be more rewarding?

Three types of Modular Builders

I think sometimes it  can be nice to hear what others have to say.  I would like to think we are a chameleon and can do all three of these but this is good information

Three Types of Modular Builders

14 Ways to Piss Off Your New Home Buyer

This is a good article from another blog I thought was worth sharing

14 Ways to Piss Off Your New Home Buyer

Standard???

One question I have daily that is really hard to get people past is “what comes standard with your houses”?

I understand the intent of the question, to simply rule out anyone who’s “standard” does not meet your expectations.

The hard part is when you tell them there is not “standard”, you can almost see their brain spin.  Partially because nothing else in the world is purchased this way and most of the others in my industry love to promote standard.  I guess the simple answer is building code minimum.  That address, walls construction, insulation values, etc. But what about appliances?

Well again that becomes a question of what you want.  Do you need them? then the house will come with them, do you have your own? then we will change the standard to not have them.

The manufactures play a role in this also.  This is from Ritz Craft (a manufacture I use) and it is the standard specifications for construction for a series of plans they market.

Benchmark homes Standard Specifications

It’s pretty cool to.  But if I order one of these houses the first thing they ask is where is it going.  Within my own county the “standard” is different between northern and southern in that one requires a 50 lbs snow load and the other a 60 lbs snow load.  Throw in that this manufacture is in PA and they ship houses from VA to ME where wind loads, snow loads, climate zone etc are infinitely different and “standard” kind of goes out the window.  Oh and don’t even get me started on windows.

The simple answer is you get what you want.  End of story, there is not standard, a price when you get it will have a detail that goes with it and defines the construction and tools in the house as priced.

There I just saved you a ton of head aches.

Drop Ship………..you want one?

First let me say this, if you want me to drop ship you a house I will do it in a heartbeat.  This is by far the easiest deal we can make and for me it is risk free. It is neat and clean, you give me a check and I send you a house.  For years this is how the modular home industry was run.

Then the factories had to get involved and messed it all up. Tired of phone calls and court claims for house failures associated with a botched set up the factories started regulating who could set their houses if they were going to have to stand behind their product. Generation two of the Modular home industry was DSF. Delivered, set and finished.  Yes the prices went up a little but at least the house came to you and was finished.  Right? and it was warrantied.  Right? Not even a little bit.

Then the banks got involved and messed it all up. Turns out banks got tired of foreclosing on houses they lent money on only to find out they were not completed and were a disaster and were not worth the money that was owed on them. Now they want a general contractor to build them.  But wait. How is a retailer that sells stuff going to play General Contractor.  Isn’t that a different set of skills all together.  I know how to sell stuff to people not build it for them, if I did I would be a builder. So that is who you want to buy a house from. Right?

I have people come into my office every day that want to tell me all the experiences they have had and how prepared they are to make sure this is done right.  They know about 2×6 walls and insulation and crappy cabinets all that stuff.

The truth is, most of us don’t.  I have been in the building industry my entire life.  I have run every piece of construction equipment that exist.  I can do carpentry, electrical, heating work, I can weld, read plans and do architectural designs.  But I screwed up my first modular home. (I fixed it but I screwed up the job a bunch of times first)

How?

1. I did not make the site open enough to get the house into it, a minor delivery day nightmare.

2. Then on set day I did not have the sill plates down and did not have lolly columns on site (the first thing the set crew needs) Oh yeh and there was not a spot close enough to the foundation to put the crane the size I had ordered to lift the house, the weight that is was the distance it needed to to get it on the foundation. And we had to take two more trees down to swing it after we moved the house boxes with a dozer.

3. OK, ready, lift set it on the foundation which was perfect, square and exactly the right size, but for some reason there was a lot of daylight between the sill plates and the bottom of the house, that cannot be good. Fine we will shim it and insulate the seam.

4. I want the second box tight, really tight, pull it tighter. Crap, now we can get the cables out without damage and the roof does not line up right because it was designed for a 3/4″ gap, damn they build these accurate.

Need I go on? It is not complicated but it is also not easy, and you don’t know what you don’t know.

Be Carefull.

Great Article on the impact of Primary Mortgage Insurance (PMI) on your new home

You have heard me talk about the expense of mortgage insurance

Good to see someone else talking about it

Read This

https://homes.yahoo.com/news/this-mortgage-cost-is-no-longer-necessary-223904035.html

Do you have 2×6 walls?………..My Favorite question

Do you have 2×6 walls? I would say that is a question I hear every day.  Clearly what the customer is trying to ask if, “are these quality homes” while at the same time making it clear that they know enough about construction to know that 2″x6″ walls studs are better then 2″x4″ so that I don’t try to pull the wool over their eyes. Sadly, this question fails to do either of these.  Every house built in our area has 2×6 walls, so the answer they are always going to get is yes.  It is the code minimum so you could not get a building permit to build with less that 2×6 so it is by no means a distinguishing characteristic.

That said, it is not for the reason everyone asks and there is a debate going on right now in the residential home construction industry about 2″x4″ walls actually being better.  You see everyone thinks we use 2×6 because they are stronger.  They are not, the crush strength of a 2×4 is exactly the same as the crush strength of a 2×10 in vertical load which is what walls support.  90% of all the 200+ year old houses in this world were built with 2×4’s and are still standing.  We changed to 2×6 not for strength but for a larger cavity for more insulation so we could improve energy efficiency.  That said every stud is a thermal break and a 2×4 wall with 2″ of foam on the outside plus R-13 in the cavity would actually be as strong and better insulation.

Could you imagine if my answer some day is, No!…. we use 2×4’s because they are better. Now that would throw some people off.