Infill - Taking advantage of building in this climate?

[crazieness]

My hypothesis is: If I build a custom infill (for living NOT filipping purposes) in the next year, then I will be able to build a higher quality, yet cost-effective home (as compared to the past 3 years or what can be built 2 years from now) because I will have access to better quality trades, at a lower price.

Assumptions:
1. The cost of labour should offset the increase in cost of materials (due to a weak CAD) as in general, labour costs are 2-3 times the cost of material
2. Cost of labour will go up in 2 years where the CAD most likely will not change.

I have an existing inner city lot that I'm looking to build a custom infill on. The intent is to live in this home for at least the next 7-10 years, if not longer. Putting aside the current economic climate and risks with unloading some cash now, I do feel there are may be advantages to build now per my hypothesis above.

I'm now looking to find the right approach to build this and have been exploring the below options, which assume I have pre-designed the home and have blue prints and spec package ready for them build off of:

Option 1. Using a tendering approach, identify a builder whom I want to work with and pre-negotiate a flat fee to build the home. They would be responsible from demo right to handoff of possession, including the subsequent home warranty. My assumption is that this would be hassle free (hopefully) and I would know exactly what I'm paying upfront.

Option 2. Identify a General Contractor (GC), and pay cost + X% (existing GC fee standards have been 20%, not sure if that has changed).

I do not know what the impact to home warranty would be and how to limit the GC from taking me to the cleaners on costs (with exception to change orders). I could ask for actual invoices to get the cost, but he could be getting a kick-back which I guess be controlled. My desire would be to incentivize the GC to get the lowest price possible taking into consideration quality.

Option 3. Identify a GC and pay cost + a flat fee for managing the project. Again similar to #2, I am not sure of the impact on home warranty and need to figure out how to incentivize the GC to get lowest price for quality offered.

For # 2 and 3, I don't want to spend excessive time on due diligence by getting my own quotes, but it looks like I'd have to do this in order to reduce risk of getting taken for a ride. This makes me wonder what I'm paying the GC for - which really looks like they are making sure we stick to the timeline and that he's using his professional expertise to limit deficiencies. I'd then need to look at incentives to make sure we are on schedule while still meeting quality standards. Otherwise I may as well:

Option 4. Be my own GC and get access to trades who are probably willing to pay more attention to me given there isn't much work to be had. Obvious benefits would be $ savings on a GC fee and visibility into actual costs. But, since I've never built before, it may take a bit more time to complete the project and I probably won't know what to look for to limit deficiencies, so I'd have to hire 3rd parties as required to do quality checks. There is no home warranty on this approach, but the savings would be the "budget" for deficiencies.


I'd like to get thoughts / input / insight / ideas on:

1. My hypothesis - am I out to lunch or does it make sense?
2. How to effectively structure an agreement with a builder, GC or trades person to maximize quality at a low price, especially for # 2 - 3 and 4.

[jwslam]

Option 1: You're gonna have a heck of a time fighting for things you want that end up being out of the scope you had previously set with the builder. You'll also see corners cut for cost savings on their part. Because it's flat fee, they make more profit on cutting costs.

Option 4: You'll get exactly what you want for a lot more legwork. Exactly as you said: because you sound like you're not familiar with building, they're gonna pitch you with crap sales pitches that you don't know are bullshit and end up accepting.

Somewhere in 2 or 3 is probably ideal.

[ExtraSlow]

I don't think that infill builders are really feeling the pinch yet. So you may not be getting too much of a discount from "this climate". I know in my area (central-north) three are still dozens of infills still being built.

It's good that you have your lot already, as from what I can tell, tear-down houses haven't decreased in price at all.

Very interested to hear everyone's thoughts on this, as building my own infill is one of my life's ambitions.

[Mibz]

Originally posted by ExtraSlow
you may not be getting too much of a discount from "this climate".

This was my initial thought, but I have nothing to back it up except the handful of guys I know in construction/general contracting that are doing just fine.

Now if you wanted an independent project manager you'd probably be looking at pennies on the dollar :P

[firebane]

On my street we've had 4 infils go up in the last year. The latest one beside us has been an absolute CLUSTER FUCK.

They started the project last year in December in the middle of the winter and had our street blocked off for sewer pipe for almost 1.5 weeks.

They then asked me if they could pile some dirt in my yard for a day which I agreed to and now its almost 2 weeks later with no resolution in site.

On top of that the builders actually building the place are absolute horror shows. The put up a sidewalk in the back but never put rebar into the foundation of the garage nor did they tap the edges of the form to ensure the concrete had settled properly. Also they never packed the ground down and just put the concrete down which the ground below is already falling out and away.

Then lets not even talk about the garage they built. The door opening was supposed to be 15' on both sides but they short changed it by 1/2" so the door opening is more like 14.5' instead. They put windows inside the garage when they weren't supposed to and those windows have 2x6 casings placed in 2x4 walls so you have 2" of window casing protruding into the garage. The floor itself is so shoddy that the door doesn't even come all the way down and you have 3/8 of gap below the door.

Then lets talk about the actual cement they put on the house AND garage that is already cracking in SEVERAL places and not small ones either.. like an entire wall is spiderwebbed.

Soffits are all crooked and not even.. Wood is showing all over in the eaves area.

TLDR: There is some shady as fuck contractors looking for a cheap buck for work but that is what you will get.

[gwill]

I think you best bet is to meet with a couple of infill builders and then a few GC's. After meeting with both sides of the equation i think you would have a better idea of how things work. Before jumping into a builder and a GC do you have any idea what style of home your building, are you hiring an architect for the floor plan, how big of a home, what types of finishes are you wanting?

Your infill builders will be more of a 1 stop shop vs hiring a GC. I think you worry too much about a GC taking you to the cleaners on things. If you do your home work with comparing prices with infill builders then you'll have a rough estimate on what your costs should be. I also think grabbing quotes to verify pricing from your GC will be much easier than you expect.

There's a house forum called houzz.com you can ask GC vs infill builder questions on. In terms of building custom homes and infill its probably the best places you can get advice on this topic from.

[Feruk]

Originally posted by crazieness
Assumptions:
2. Cost of labour will go up in 2 years where the CAD most likely will not change.

I believe this assumption is wrong. Cost of labour and CAD are both dictated by one driver... oil price. They move together. One (CAD) just moves faster than the other.

[max_boost]

Well I think you can get a dream team together over coffee to make this happen. Beyond's extensive trades, experts, utilities, brokers, drafters etc. InRich/Tile_Dave/A790/Sugarphreak/ercchry/Cos/TimLacroix etc. All bases will be covered.

Or you can pay Beyond homes top $$$ to build you a sick ass home and boom all done.

Good luck though. Keep us posted on the progress. It's a very involved process and something most people don't tackle unless they are hands on themselves.

[crazieness]

Originally posted by Feruk

I believe this assumption is wrong. Cost of labour and CAD are both dictated by one driver... oil price. They move together. One (CAD) just moves faster than the other.

Feruk - Makes sense. What I read from this is to not expect a major fluctuation in labour should oil prices stay in the $50 - $60 range for the next year and a bit.

[crazieness]

Originally posted by gwill
I think you best bet is to meet with a couple of infill builders and then a few GC's. After meeting with both sides of the equation i think you would have a better idea of how things work. Before jumping into a builder and a GC do you have any idea what style of home your building, are you hiring an architect for the floor plan, how big of a home, what types of finishes are you wanting?

There's a house forum called houzz.com you can ask GC vs infill builder questions on. In terms of building custom homes and infill its probably the best places you can get advice on this topic from.

Thanks gwill - I'm in the process of meeting with infill builders and GC's to figure this out. It would be great if I could find a project plan to leverage. Would make all of this easier to understand.

Thanks for the link to the other forum, I'll check it out.

[crazieness]

Originally posted by max_boost
Well I think you can get a dream team together over coffee to make this happen. Beyond's extensive trades, experts, utilities, brokers, drafters etc. InRich/Tile_Dave/A790/Sugarphreak/ercchry/Cos/TimLacroix etc. All bases will be covered.

I'm always open to having a coffee with anyone. Feel free to PM me and we can set something up. My treat.

[martincc]

Option 4. ..... There is no home warranty on this approach....

There is home warranty for owner built home. Two options actually. You can pay $750 and go with no warranty which means you cannot legally sell the home for 10 years (well you can, but need to buy warranty for the remaining years, problem being no one offers a NHW for an existing home yet) or go with Millennium Insurance for owner-built NHW. Fee is $4500 and they hold $10k in trust for two years which is refunded if no claims are made. They also bundle construction and liability insurance if you are acting as prime contractor. There is a bit of paper involved but its not too bad to apply. I believe Progressive also has an owner built NHW program but I went with Millennium.

I am also in the same boat as you as far as pulling the trigger on a new build. I had a couple investment properties but sold everything this spring when the NDP got in. Infill I had was built by Birchwood which we bought as an unfinished spec home and sold for a decent profit after finishing and the capital gain period was up. I held onto a serviced 1/4 acre I own in the Springbank area and am now just waiting to see what happens this winter with the effect of all the layoffs downtown, peoples severance packages run out and the capital flight from Alberta takes hold. We have plans approved for a 4000sqft house we plan to build, live in, then sell after 1 year capital gain is up again, hopefully netting a tax free capital gain again. I looked at all ways of building this next house and ended up settling on GC'ing myself with some help from friends in industry. I learned a lot on the other builds and so far my costs on paper have been very close or better to what home builders were quoting (before their 15% fees). Make no mistake, it is a ton of work and hours even at this stage. I don't think this slow down in energy has hit home building yet. I manage an $80milllion budget for a small oil company running 3 drilling rigs in this market and so far our wells costs are down almost 30% since the spring and continue to fall daily. I didn't see near the same effect yet when quoting out this house so like any investment I am waiting until the spring and re-evaluating with the thought that the slowdown in oil should translate into some what of a slow down in housing. I did see in September data new home starts were down almost 30% year over year so maybe it is starting. I could be completely wrong but that's my take as someone on the front lines of the oil industry and also sitting on the fence watching housing. I didn't like any of the custom home build options for pricing structure so will give GC'ing a go.

[speedog]

Fairly new in my third career in a home building trade and there certainly is no shortage of work for the foreseeable future and rates for contractors such as myself are as high if not higher than ever. Most of the other trades I see on a daily basis are saying/seeing the same thing and I still see lots of infills and smaller multi-story buildings going up in the inner city - if anything, things appear to be busier in the inner city than they have been in the past.

[black300]

As said earlier building a home yourself needs attention and knowledge of construction.

Like others have stated, getting warranty by building yourself is almost impossible these days due to strict regulation controls. And warranty is 99% required by any banks or financial institutes that will lend you money. Loan or mortgage, they will want to see warranty.

A builder will charge you a premium and will cut costs to ensure his profit per square foot is increased.

I know someone who may be able to help you with GC, they did our parents home on an acreage (5000 + sq-ft). He also has a home building company but I am sure he will be GC and take care taking fees (that's what we did).

PM me if you want his contact information, and feel free to come take a look at our parents home or his personal home he built.

[martincc]

NHW for owner builder is not hard at all. Not sure where this comes from. Again cost is $4500 and 10k refundable deposit. If you want to keep your 10k invested you can use an irrevocable letter of credit backed by something like margin on investments or physical assets. For me the application was a form, a resume, list of sub trades, a net worth statement supported by bank/account summaries, a copy of my general liability/course of construction insurance, completed and approved home plans and a copy of my land title and a cheque. Yes you need the warranty for financing and also building permit (from Rocky View at least in my case). Every builder I talked to gave me the same talk about new home warranty being impossible to get. As of June only two companies supplied it to owner builders. It was very easy to get and a small price to pay to comply with the regulations and also gives you the ability to sell the house if you want down the road. The one thing with GC'ing yourself is you need to be pretty liquid with cash.. you need to float the cost yourself until each stage is completed and bank releases funds for that stage once they inspect and approve it. So on a larger home your always ~200-250k ahead of the bank giving you financing for each stage. I would assume a single infill would be the same ~850k build cost assuming a $200-215/sqft spec.