Other than the expected response of "dont do it", any advice? My wife and I found a LOT in our neighborhood that we want to build on while still living in our current house. The lot is for sale and we are currently getting quotes for Land Clearing, House Pad, etc. After that, I'll have a better idea on if we can afford a new house or not.

I think my biggest challenge is going to be financing and getting approved for a construction loan....in the range of $500K....and then converting that to a permanent loan. I've talked to a couple of banks and havent gotten very far. I figure I'd at least need to obtain a builder's license (hard to do?), create an LLC, and put down 20%. I've never built a house from scratch before, so I know that is going to work against me, but I know I can do it....convincing the banks is another story though.

I have all the sub contractors in place that just did a $100K remodel on my home and are also all the same subs that built my current home 5 years ago (and most of the other homes in our neighborhood as well).

Any help would be greatly appreciated. I do know it would be a lot of work and I'm aware obstacles I'm currently unaware of, but we could build our dream home this way and I'd enjoy learning the process.

Advice on who to talk to and what the next steps should be for us?

THANK YOU IN ADVANCE!!!!

Texas presents challenges in acting as your own GC for construction because it is next to impossible to obtain the proper liens on the builder and property during construction in order to secure the loans. Several companies and individuals have made a side industry off of facilitating these transactions as straw GC's. I will let others discuss that.

If you're in Texas builders aren't licensed.

Let me ask you this. If it were you own money you were loaning would you loan it to someone who had never completed the task required?

There are lenders who will do it, but we won't. Here's why. Lending is about risk. What's the worst case scenario? If you as the borrower are no longer viable how likely are you as the builder going to be to work with the bank to complete the house?

I've financed several one time close deals where the borrowers were legitimate commercial construction professionals and they decided against it.

Will your current job/business allow you to take off at random times anywhere from 5 am to 5 pm M-F and spend ~ 20 hours a week for 6 months to meet subcontractors and to oversee construction ?


If you can qualify with existing debt load then I'm sure you can find a local small bank that will allow you to build a spec house with 20% down.

If you can't find a bank to do it then you will have to resort to alternative financing such as hard money, cash out refinance of existing house equity or borrowing against retirement accounts to get it built.

In the end with little experience I don't believe you will end up saving much and may actually spend more and will more than likely end up with a lower overall quality house.

Construction and building is based on relationships and trust. Subs are going to charge a 1 time Joe more than they do for builders that keep them busy year around. Same for suppliers who offer discounts to volume buyers. From my experience people that try to self build also end up underestimating the final cost. I have seen situations where self builders use the cheapest subs for the loan qualification and when it comes time for them to show up they end up having to hire more reputable and expensive subs because they get stood up. I'm not trying to talk you out of this but a 500k new build is a little more involved than a 100k remodel. Good Luck

Great feedback so far. Thank you!

My wife is a stay at home mom and more handy than most men. She will manage closely and I will coordinate and schedule remotely from my office. Our remodel involved converting our back porch to a massive game room and new back porch and I was really proud of what we were able to do as the GC on that project. I dealt with with 15 different sub contractors and had it completed in 2 months. The reason I feel so confident about this is because I literally have all the subs I need and love every single one of them....my framer is amazing, and so is the architect, electrician, drywall guy, cabinet guy, concrete guy, brick/stone guy, foundation engineer, roofer, door guy, window guy, etc, etc, etc. I basically built a small house with this game room addition....but more complicated having to demo and convert an existing back porch. If it wasnt for the subs I know, I wouldnt even consider it. There are new homes being built in our neighborhood each month and I've compiled contacts over the last few years for this.

If you have 20% of the project saved up then you can get a hard money loan for around 15% interest plus a few points as a short term loan to get the house built, then you get the joy of paying closing costs on a regular mortgage..

As others have said this is likely a pipe dream and is paying $40k-$50k in interest & fees appealing to you?

Get your GC on your remodel to build you one.

Why don't you find a GC that will do it for a greatly reduced fee (if you do most work) ...or maybe have one of your better subs be the GC in name only. No idea how viable that is...

What do you do for a living? How long have you worked in the industry?

I'm in sales and have been doing it for about 12 years

Amegy Bank in hou

I did one few yes back- however, I paid a flat fee to guy that had built homes before. He "managed" the subs, etc

Other posters are correct- You better have 2-3 hours free a day, know very well how to mange cash flow etc

Sb

I've been a mortgage lender in community banks for over 30 years. Your best bet is to find a reputable builder with a good track record and pay to have your home built. The subs you have in mind probably all work regularly for established builders who they depend on for their livelihood. At some point in your construction, it's very likely that, on some days, they will have to choose between working on your house or one of the regular builders houses. They will obviously want to keep their primary builders happy, leaving you for days or even weeks when no one shows up. I've seen it happen. Plus, as someone else mentioned, banks mitigate risk. In the current banking environment, very few banks will be willing to take a chance with half a million on someone who's never built a house. Have a professional home builder build it and save yourself a lot of headaches!

The only way to get this done without major hassle is to hire a builder at a flat fee for 'oversight' as stated earlier. DO NOT mention to a lender what you intend to do. As others have stated, a lender is not giving a regular person lots of money to have a fun little house project.

I'm with Amegy and custom construction is a big part of our business. Typically have 500 or more going at any time. We have worked with contractors with verifiable home construction experience if we can confirm their financials, etc but they have to meet the same standards as any other builders and if something goes sideways they're on the hook to finish the job.

chn4 said:

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I'm in sales and have been doing it for about 12 years

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Ok, follow up question: Can any Joe off the street with no experience do your job as well and efficiently as you can?

Being your own GC can be done and as others have stated it does take a lot of time and effort. In addition, don't think that you are getting preferred pricing even if the labor and vendors say you are. You can "chew them down" and they will be super nice and come down some acting like they want the work but rest assured you are paying at or very near retail for all labor and items (which is still ok) and they know how to play the game very well.

Small local banks are your best bet, unless you are working inside of a subdivision or city that requires a builder on record, bank/vendor/previous client references, etc., and then you will have a bit of a hurdle to jump.

Best of luck!

how about buying some lots and building some spec homes and let your wife be the GC. We are considering doing this purely from the standpoint my wife wants to build homes, not that we want to build our own. It could help you with the issue of subs prioritizing their work with full-time GCs if they see you are playing ball and could be doing this as a legit side business (side in the since this is not your main income).

Getting financing for specs with no experience and no business history might be even harder.

This, on both points. Amegy is supposed to be great, but I would also look into Cadence, Hancock Whitney, and Bancorp South. I just closed a construction loan with Hancock Whitney. They did a construction loan that converts to a permanent loan within 1 year of closing, interest only during construction, and competitive rates/fees among the other names listed above.

You should be able to have some preliminary conversations with banks to determine very quickly whether or not they'll even consider letting you be the GC. I tend to agree with everyone else on here but it shouldn't stop you from trying. Your balance sheet/income will go a long way in determining how much "risk" they perceive in the process. For what it's worth, I'm in real estate development and I wouldn't personally want to take this on, but if you've done an addition you should have an idea of what it takes to get it done. A new house is in some ways easier to handle.