How to Build in a Recession: #3

Through human history, most people would have been unsurprised by the story of how I built our original cabin as related in my previous posting. Building a place to live without money, using one’s own labor and locally available materials was normal and common for several thousand years. It’s still true in many parts of the world. I’m not suggesting that we’d want to go back to the old, more difficult ways, but submitting to complete dependency on others and to aculture of endless, daunting indebtedness should also be considered situations to avoid, not accept.

Construction professionals are fond of saying that time, quality and money are the three factors in play that affect a building project’s outcome, and you have to choose among them because you can’t optimize all three. The supposition is that if high quality is the priority, it will require more time and money; if time is the priority, then quality and cost control will suffer; if saving money is the priority, then quality and time will be compromised. The reverse is true too. If the project is given a large budget, quality can be enhanced, but the time to achieve that quality may need to be increased too.

But the big consideration I want to point out is this: given enough time, it becomes increasingly possible to accomplish both high quality and decreased cost. As people are forced to complete every detail in their construction in an arbitrarily finite amount of time, they are forced into higher costs or quality compromises. The loss of the freedomto build incrementally, usually forced in the terms of the constructionloan (or the personal desire for immediate gratification) is causing new homes to become simultaneously worse and more expensive.

Patience and perseverance are tools that can be employed by anyone to help make big dreams achievable and affordable. When building codes and lending agencies take those tools away from us, we should be fighting back, just as we would about any other personal freedom in jeopardy.

Were it not for my ability to defer gratification and finish my own homeslowly, I would have had to choose between continuing with my still-fledgling business and properly housing my family. Here, then, is another way to build when personal or national recessions crimp the normal processes.

Big Need, A little Money
(Where we embrace a work always in progress)

We hadn’t intended to stay in the cabin so long. It was rustic but comfortable; small but debt-free. At 500 square feet, it was fine for two people and tolerable for a family of three (our first daughter, Emily). But when we knew our second child was coming (our second daughter, Corona), we knew we needed a bigger home.

By then (1979) our business kept us plenty busy, even if it was only occasionally profitable. I had an income and some savings, but I wouldn’t have met the requirements to borrow as much money as would be needed to build a new (and complete) home. So I did what had to be done:racing against a growing womb, I decided to ignore the barriers and made plans to build immediately.

Banks were typically friendly institutions back then. Local bankers wereoften trusted financial advisors as well as lenders. I know; it seems far-fetched, but it’s true. Anyway, the first thing I did was to make anappointment with my banker to find out how much I could borrow and how much information about the new home I would need to bring in to them to get a construction loan. On that visit, I had no plans or drawings with me because the drawings I had were still rough, and I really just wantedto understand my financial realities and the loan process. Despite having nothing on paper to show the bank officer, I left the bank after ashort and casual meeting with loan commitment, which came in the form of a handshake. It wasn’t enough to build the house, but it was all I felt comfortable borrowing. I was determined to stretch it as far as possible and get my family into a larger home. With my personal savings and the bank loan, I had about $36K.

Unlike the cabin, I couldn’t do all the work myself. I had a business torun. Much of the work would have to be contracted. I would have real costs that were going to eat through most of the money. Therefore, we had to start subtracting from the big dream and distill it down to the essence. Our plan was a 30 ft. x 36 ft. story and a half cape, with primary living on the first level, three bedrooms and a bath on the second level and small loft spaces on the third level. We also wanted a south-facing solarium, a screened porch and an entry porch.

But we couldn’t do it all at once. With my sweat equity and the borrowedmoney, my goal was to build a high quality, energy-efficient enclosure and finish the first floor so that we could move in. The bedrooms, second floor bathroom, third floor lofts, and all the appendages would have to wait. We tried to not compromise the things that affected the long-term performance and durability of the home, while sacrificing and cutting back on things we might be able to change or finish at a later date. When we moved to the new house in1980, with our borrowed and savedmoney gone, here’s what we had:

• 10 inch, heavily reinforced poured concrete foundation
• Drilled well
• Septic system (real plumbing!)
• 3 in. rigid foam insulation under concrete basement slab
• 2 in. rigid foam insulation inside foundation walls
• Timberframe structure: oak and recycled timbers deemed not good enoughfor clients, but beautiful to us.
• R28 SIP wall and roof panels
• Fixed windows purchased for $10 each from lumber yard going-out-of-business sale. They were paired and mulled with operable windows, purchased for full price.
• Cedar clapboards
• Asphalt shingle roofing
• Brick chimney
• Plank subfloor on primary level was sanded, finished and used as a finish floor until we could afford hardwood flooring
• Kitchen cabinets: built from butternut trees from our land
• Second and third levels: floors planked, but otherwise empty
• Heating system: central wood stove and the sun

The photo below shows the house we moved into, waiting for the solarium and screened porch. The bedrooms and 2nd floor bath weren’t in yet, but we were moving from 500 sq. ft. to the nearly 1000 sq. ft. on the main level. It was huge step up for us. Though the house wasn’t complete, allthe visible surfaces were finished, making “finished, but not complete”our motto for the next years. As we tackled projects, we have always tried to consolidate the construction areas to minimize the disruption of our lives. We tried always to have the house look finished, even though it took years to complete.

Benson House, ca. 1999

The original core building proved to be remarkably energy efficient. When it was finally completed, we had 2400 square feet of living area, kept warm by passive solar and one central woodstove. It also won’t freeze. Through the coldest winter conditions, we can leave the house for days without worrying about pipes freezing. The secret to this building’s performance is the separation of the supporting structure from the insulating skin. With the frame on the interior and protected from the potential compromises associated with being subjected to air infiltration and moisture, its durability is optimized. Likewise, the insulation system is less compromised by structure, allowing it to be intrinsically tighter and more contiguous. This high performance “chassis” was the primary achievement in the original construction. Exterior finishes and interior “fit outs” were accomplished as time and money allowed and some of it changed several times in the following decades, but the core building remains today, even though you may have trouble identifying it in recent photos.

I don’t know my total costs exactly and I certainly don’t know what it would have cost to borrow the full amount when I started the project, soI’m going to make some assumptions about how the theoretical math worksout: I’m going to assume the house would have cost about $250K

Lessons of this project, by the (theoretical) numbers:

As built:

Initial construction: $36K; $30K borrowed (assume 8%, though interest rates were higher then); $6K savings
Loan period: 5 yr.; payments approximately $600 per month
Cost of loan after 5 yr.: $36,500
“Paycheck” cash invested over following years to complete:$215K (this is a worst case scenario)
Total of loan and incremental cash investment: $250K

If I had borrowed the full amount:

Full construction: 250K at 8% (again, 1980 rates were higher)
Loan period: 30 yr; payments approximately $1830 per month
Cost of loan after 30 yr.: $660,000

Now you can see what I’m getting to. Banks don’t give money away. The very best way to save money is to borrow less. By “suffering” with our “finished but not complete” home, we theoretically saved $410,000!

No wonder banks are discouraging people from building incrementally!

All these many years later, our house has changed again. We recently invested again and made yet more changes to our home.

Benson House ca 2008

• For added living area, we eventually took off the solariumand added a great room.
• Dormers were added to the bedrooms and the second floor bath for addedspace, light and ventilation.
• The screened porch was removed and became a larger three-season porch.
• An addition to the north side gave us added room in our study and gavespace for an additional second floor bath.
• We added to the entry side for a larger laundry, a new porch and a pantry. It also added space to the master bedroom.

Even today, our home is finished but not complete. I’m planning some much-needed bookshelves; we’re talking about adding doors to the study; what about a little separate writing room? Or perhaps we’ll just relax.

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