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Buying Land and Building a Home

Over the last few months, I’ve received several requests for information on how does a land purchase and building your own home work? This is a very good question and there’s lots of new developments in this area. We’ll go over these in this month’s newsletter.

First, a few disclaimers. This article was written on 08/12/2021 so pricing, availability of labor, laws, rules and regulations can and will change. Also, building a home isn’t for everyone. There will probably be cost overruns, shortages of building supplies, labor challenges, building permits, inspections and a countless number of hurdles to overcome. You’ll need to have ample funds and endless patience to get to the final move into your new home. The good news is that it can be done and you could have a unique home that is everything you ever wanted.

We’re going to go over 4 basic steps: Financing, Land Purchase, Home Selection and Builders/Contractors.

Financing – Traditional home mortgage loans are based on a home that is completed and the value of that property is the collateral for the loan. In buying land and building a home, the mortgage company has no guarantee that the property will be completed so you’ll need to pursue a different type of loan. One of the most common types of loan is a Construction Loan which converts to a Home Mortgage when the property is completed. The funds are usually released to you in 5 stages which can include the purchase of the land. The other 4 stages are used for materials, labor, permits and other necessary steps to complete the construction. Needless to say, the Construction Loan has a higher interest rate until it’s converted to a Home Mortgage. If you’re wondering why it’s different for a new home builder that build tract homes, those projects have funding already in place for the building of the homes. Your home mortgage won’t be in effect until the home is completed.

Land Purchase – There’s a lot to look at in a location. Accessibility, schools, shopping, even availability of utilities and services. When you’re talking to your realtor, be sure to have great clarity on what you have to have. Some of you will have to have city water and sewer. Others will be ok with well water and septic tank. You may require high speed internet or city gas as well as electricity and trash service. Also, if you find land that might work for you and your family, be sure to do thorough research with your realtor. If the property is part of a Home Owners Association or Common Interest Community (HOA/CIC) you’ll want to review the rules and regulations carefully so that there are no surprises when you break ground.

If you’re wondering what a septic system and well water is, here’s a couple of great websites to view:

Home Selection – There’s been a lot of new developments in this area. Let’s first review the traditional method of purchasing plans, hiring a general contractor and completing the build. If you choose this path, you may want to meet with a variety of general contractors early in the process to see what their capabilities are and their preferred systems for the build. Many will offer home plans they are familiar with which can make for a simple process and minimize challenges. Your general contractor should take the lead in permits and inspections. I suggest staying with a local builder as the rules and regulations will be unique for Northern Nevada. Here’s a link to a website that offers a plan for homes with lots of information:

https://openbookbuild.com/

The other path to go is a manufactured home. These homes are pre-assembled at a factory and driven to the site on a large flatbed truck. If you go this route, you’ll want to consider accessibility of the land and the cost of transporting the home to your land. It’s a good idea to find a builder that’s in your area. Keep in mind that this type of home doesn’t appreciate in value like a stick build, tract home or custom home.

https://www.forahouse.com/

The upgraded option is a Kit Home. At this builder, they assemble the home in pieces and transport it to your location and assemble it on your property. There are a lot of Kit Home companies, do a google search to find more.

https://goldcountrykithomes.com/

There’s a new company based in Las Vegas that is attempting to revolutionize the home building process. Basically, they are attempting to mass produce homes like Henry Ford did to automobiles in the early 1900’s. This company is in the early stages and while they are just doing a casita (studio) version, they are planning to have many other modular designs that can create multi-level and multi-room homes.

Update 2/1/2023 – Boxabl has just completed their second factory, which is right next to the first. If you’re on vacation in Las Vegas and you’re interested in this option, it would be worthwhile to stop by and take a look at the factory. I believe they offer tours and if your feel you’re ready, you could check how long the waiting list is for a home.

https://www.boxabl.com/more

General Contractor – This by far is one of the most important decisions. If you have a relative that is a General Contractor and already building homes from ground up, consider yourself lucky! At the least, he can advise you through every step! Needless to say, you’ll need to have a great relationship with your general contractor. Trust and communication will be vital to the success of the project. You’ll want to do lots of research on the candidates before making a decision. Here’s a few suggestions to help in the research:

  • Check to see if there are any ratings or reviews
    • Google
    • Better Business Bureau
    • Consumer Protection
    • Yelp
  • Ask for references and call to verify the building experience.
  • Ask for the address of homes they’ve already built so you can do drive by’s.

We’ve covered a lot in today’s newsletter and it’s just the tip of the iceberg. I’m really interested to see how the www.boxable.com option develops. This could definitely change the home building process. Keep an eye on our newsletters for an update in future. One last item, your realtor is actually in charge of contracting the purchase of land and the property that is attached to the land. Realtors don’t get too involved in the process of building a home, that’s what a contractor does. So you’ll need a Realtor for the purchase of the land and a Contractor to build the home.

Let me know if you have questions or want further information. Until next week, stay healthy and safe…Bryan