Is An Owner Builder Loan Recession Proof?
Topics: owner builder loan, recession, mortgage, real estate, owner builder
Certainly owner builder construction loans have changed over the last couple of years in response to the tightening of the mortgage industry’s metaphorical belt. However, there are still some good owner builder construction loans available today. And, the main features of owner builder construction may make it a winner regardless of the current state of the economy.
A couple of years ago, when the nation’s housing market was booming, so was the nation’s mortgage industry. People were buying and financing homes at a frantic pace, reaping the rewards of seemingly endless increases in home values. Owner builder construction loans were booming, as well.
This specialty product was a big hit, because the boom in the housing market meant that general contractors were going to charge a pretty premium for their services. Owner builder construction offered a nice alternative. A person could eliminate the costs of a builder by opting to manage the process without hiring a general contractor. The borrower would hire and manage the sub-contractors, and therefore save anywhere from 15% to 40% in equity in the new home.
This process worked great during the golden years of recent past. Whereas the average person who hired a licensed builder had to make a large down payment out of his own pocket if he wanted instant equity in his new home, an owner builder achieved the instant equity through the sweat that he or she put into managing the construction of the home.
However, what about today? Nowadays the housing market is pulling back, and values have dropped substantially. The nation’s economy has entered a recession. But, does owner builder construction still make sense? Are owner builder construction loans recession-proof?
To answer that question, we have to look back a couple of years one more time. When the market was booming and house prices were shooting upward, there was one drawback to construction - whether you hired a builder or managed the process yourself. The drawback was supply and demand. Contractors were not only expensive, but also difficult to work with due to an extremely high demand for their services. It was common for owner builders to find sub-contractors unresponsive to their requests for project estimates. In some areas around the nation, sub-contractors had a twelve month waiting list.
Let’s fast forward to today. The beauty of owner builder construction loans today is that there is an over supply of sub-contractor labor available to the borrower. As an owner builder, you can easily find sub-contractors who are willing to work for a fraction of their past costs. Why? Because sub-contractors are feeling the crunch just like the rest of us. The housing boom has ended, and there are many sub-contractors who are badly in need of work.
Therefore, today, an owner builder will find great labor rates when building his own home. The smart owner builder will request multiple bids from various sub-contractors. For example, you should get plumbing estimates from at least three plumbers in your area. In this way, you’ll find the best sub-contractor at the best rate. In fact, you may find that the sub-contractor will provide you with a bid to perform the labor only to reduce it as time goes by. It’s just a simple matter of supply and demand. The sub-contractors know they are competing for work, and therefore they are offering the best prices that have been seen in many years.
With the decreased labor costs, the good news is that owner builder construction still provides a great opportunity to earn instant equity in your home. You are still cutting out the fees of a licensed general contractor. And, you can still move into your new home with 15% to 40% equity. The key today is to smartly shop for the right sub-contractors to do the labor.
This does not mean than an owner builder should always hire the cheapest labor. Indeed, quality of work and professionalism are as important as ever. However, in today’s economy, the overall labor costs will be much lower, and an owner builder should take advantage.
Today, owner builder construction loans are especially useful if you want to limit the amount of cash that you put into your new home. Most mortgage products across the country are requiring larger down payments. Gone are the days of the ubiquitous 100% loan. But, owner builder loans still provide options for you to build with little to no cash out of your pocket. A good owner builder loan will be able to provide financing to cover all of your costs based on a strong spread between project costs and value.
Remember, an owner builder will build a home for costs that are well under the fair market value of the property. Even in today’s economy of dropping home prices, there will still be the same spread in cost versus value, because the sub-contractor labor costs are reduced.
Therefore, an owner builder loan that will end money up to 80% of your home’s value will typically be enough to cover 100% of your project costs. In other words, you can build your new home without spending a lot of cash out of your pocket. And, you’ll still move into it with a lot of instant equity due to the fact that you eliminated the general contractor costs that typically come with average construction projects.
So, even though the country’s economy has entered a period of recession as the housing market has pulled back significantly, an owner builder construction project will still offer some great benefits to the borrower. In the recent past, an owner builder would earn lots of sweat equity as house values were skyrocketing. Today, an owner builder will earn lots of sweat equity as sub-contractor labor costs are falling just as fast, or faster, than house prices.
Chris Esposito and Owner Builder 101 provide construction loans for people who wish to be owner builders and cut out the costs of a general contractor when building their own homes. Call (877) 876-3688 to speak with a representative or visit www.ownerbuilder101.com.
Previous Articles Highlighter:
Importance Of Comparison Shopping (1)
Topics: Comparison Shopping , Shopping , Money Saving , Finance Most major products and services come with a range of prices. Shop around and there's a good chance you'll uncover a lower price for the exact item or service you're looking for.
The Importance Of The Long Term Trend When Investing In Shares (2)
To do this I personally like to use the daily charts for my entry point. It stands to reason that if a company's share price is rising over the longer time frames, then a good entry point would be when it is temporarily oversold on the shorter time frame, ie the daily chart.
Where Should You Be Investing Your Savings? (3)
With the UK financial situation shaken up, where is the best place to keep your hard earned savings safe and sound? Share prices from around the world seem to have been massively affected by recessions faced in the major global economies.
Re-mortgaging Advice During The Credit Crunch (4)
The cost of living is rising at the moment. Fuel and the cost of running a car has increased, which means more than ever people would like to save money on their mortgage.
Ada County Tax Assessor Wrong Again - Taxes Go Up (5)
If you see that your homes value has increased you may want to file an appeal. After all, it is your money they are taking. Shaun G is President and CEO of www.ExpertHomeOffers.com.
What Are Travel Service Credit Cards? (6)
Look at the benefits of paying for your travel with your travel services credit card. You have peace of mind knowing that you have comprehensive travel insurance if you should happen to fall ill or have an accident when travelling in another country.
Tips To Resist Impulsive Buying (7)
This is usually where the better per-unit deals are. Don't stop unless you're actively selecting an item. Displays are designed to attract you to stop for a moment and just look, which is often enough to get you to pick out the item.
Tips To Choose The Best Online Savings Accounts (8)
Anjitha Sakthidharan is a financial adviser and well known for his finance related articles. You can find more financial articles written by the author by visiting the following link.
Recruiters Say Wealth Managers Win High Pay Deals Despite Credit Crunch (9)
The mathematics doesnt seem to add up, said one head-hunter, who asked not to be named. Some recruitment consultants said the wealth management market is quieter now than 12 months ago, largely because those private bankers and wealth managers looking to move their client bases are thinking twice about doing so for fear of alienating clients.
Picking The Best Wealth Advisor Is A Daunting Challenge (10)
In all of these situations, families tend to look to one lead advisor otherwise life becomes very confusing for them. One has to be the chairman of the board in how things are to be done, Mr Rhodes said.
How The Retailers Make You An Impulsive Buyer (11)
Topics: Impulsive Buyer , Impulsive Buying , Shopping , Money Saving , Finance There are always shopping carts. These have a huge bin compared with the size of most items for sale in the store, making it psychologically easy to toss in an item you don't need.
The Differences In Real Estate Investing, Flipping, And Fixing (12)
Professionals know what they're doing and they have to make good decisions about which properties to buy. In addition, investors are often at the mercy of the up and down housing market.
A Forex Program Designed For You To Quickly Learn Currency Trading And Be Profitable At It (13)
William R. Alheim, Jr. possesses a Masters of Accounting Degree from Florida International University. He is a Certificated Public Accountant license issued by the state of Florida.
Monte Carlo Rocks The Property World (14)
There is no doubt that property in Monte Carlo is valuable, and that it is among the most sought after real estate in the world - but are the press reports suggesting astronomical prices for an average apartment accurate?
Credit Cards Loans Can Help With Your Debts (15)
The idea behind credit cards loans is to take all of the balances from the various credit cards that a person has and pay them all off with a loan that has an interest rate that is fixed and typically much lower than the interest rates on even the best credit cards in the industry.
Many People Are Reaping Financial Rewards Thru Forex Investments, You Could Also (16)
There is one central characteristic that the new investors have that are becoming affluent over night and that is desire. That's correct sir, the most important feature the people raking in the huge cash are the ones that want it the most.
How To Shop On A Limited Income! (17)
You're bound to find some unique treasures by hunting at garage sales. Church Bazaar's Everyone loves bazaars! Check your church's bulletin and other church's in your area for their bazaar.
Interested In Real Estate Listings In Florida? (18)
Really if you do enough research and really look around, chances are you will find something in Florida that you absolutely fall for but has an affordable price you can work with.
Learn Forex Trading - The Number 1 Mistake Novice Traders Make That Professional Traders Never Make (19)
You don't have to take much, just enough to buy a new car, maybe a BNW, take a three week vacation to the Fiji Islands or put a new addition on the house.
Timing Your Shopping To Save Money (20)
By the end of the year, inventory dwindles, so acting earlier assures a determined buyer of the best selection. Also, monitor the number of days that a truck or car sits on a lot.
Newer Articles Highlighter:
Hattiesburg Real Estate -- The Best Of Mississippi (1)
Retirees are also looking at Hattiesburg real estate, especially after the September/October 2008 profile in the Where to Retire magazine, where the town's renowned cycling trails and other amenities (including cultural opportunities and state-of-the art medical facilities) were cited as attractions.
Forex Trading: No Longer Just For Professionals (2)
But as any investor would do well to remember, forex trading can also throw out nasty surprises, even if events such as Britains ejection from the European Exchange Rate Mechanism in 1992 are thankfully relatively rare.
Family Limited Partnerships Seen As Next Big Thing In Wealth Planning (3)
There is certainly a bit of a buzz about such partnerships, principally in the context of an alternative vehicle to trusts for holding the family business or assets, she told WealthBriefing.
Foreclosures Soar: Reverse Mortgages To Aid Distressed Seniors (4)
However, now that you can add job losses of over 156,000 in Florida and 101,000 in California, those numbers are rising even more. With the weakening economy and with the jobs lost, the effect on seniors has been devastating.
Risk Appetite Models Face Ultimate Test (5)
Ashok Shah, chief investment officer of London and Capital, has not seen a marked decline in risk appetite by investors. These individuals have spent a long time building up their wealth and do not want to have to set up, run and sell another company to make more wealth.
How To Redecorate On A Budget (6)
Add color A great way to change the tone of any room is to add a burst of bright, new color. Buying small pieces, like a throw blanket, an accent pillow, or a new print to hang on the wall, can be reasonably inexpensive (especially if you hit shops on sale), and will really add some punch to the room.
Oklahoma Real Estate: Founded On Oil And Freedom (7)
Seen as a paradise of equality and freedom by tens of thousands of former slaves across the southern United States, the state's Indian Territory enjoyed a population boom. By the early 20th century, there were in fact more African-Americans in Oklahoma than the combined total of Indians and Caucasians.
Earn Extra Money By Doing Market Research (8)
Why not try it out now and sign up for online surveys. Cache Spencer writes about how to make some extra cash every month filling out free paid surveys.
Better Understanding Of Adjustable Rate Mortgage Loans (9)
The teaser period may induce some borrowers to view an adjustable rate mortgage as more of a bargain than it really represents. A low teaser rate predisposes an ARM to sustain above average payment increases.
Mortgage Rates Experience Historic Drop (10)
A lot of people now blame Greenspan for causing the housing bubble and our current problems. While he might be partially to blame personally I think the massive number of subprime loans (basically loans to people that have a poor credit history) and interest only loans contributed to the problem as well.
Home Buyers Different Insurance Options (11)
Title insurance covers your land. This is your assurance that the property you buy remains yours even if someone makes a claim against your property. If you get this insurance it is worth ensuring your coverage includes defense costs, so all legal expenses are covered.
Real Estate Caused The Economy Slow Down (12)
Well it might not matter if you think it is fair or not. If the government can stop the foreclosure crisis it will help close the bleeding wound of the United States economy.
9 Simple Tips For Keeping California Insurance Rates Low (13)
9)Driving during bad weather is unsafe and can be fatal. Wait out a storm that impacts visibility or causes roadways to become flooded. Even strong winds can cause serious accidents.
Don't Be A Victim Of The Market When Trading (14)
During that critical trading period, you might believe that the sudden downcast predictions are true and lose hope in your trade. Or you can choose to believe in your own judgment, your die diligence, and the luck of whatever special trinket you use to sway the winds of good fortune in your direction.
Will Closing My Credit Card Account Affect My Credit Score? (15)
Topics: credit report, credit card, credit score, FICO, credit history, fix credit, repair, credit, free, get, fix People often think that if they pay off a credit card or don't use an existing card and then close the credit card account that they'll get a better credit rating or raise their credit score.
An Investors Guide To Romania (16)
Topics: overseas property investment, real estate, romania A member of the European Union since 2007, Romania is a country of almost 92,000 square miles - roughly the same as the UK - but with a population of only 22m people.
The Best Forex Training Is Right At Your Finger Tips, If You Only Knew Which Way To Look (17)
This is exactly why the large international financial institutions send there people to them. While there are many Forex mentoring programs on the market today, I have found three that provide the best Forex training available today.
Important 1031 Exchange Rules (18)
This is the reason why it's important to find a certified public accountant or some other advisor to guide you through the exchange. If at any time the assets from the sale of your business property are combined with your personal funds, then the IRS will disqualify your tax-deferred exchange and require you to pay the money that you were trying to save.
Your Short Term Health Insurance Options (19)
You may not be familiar with short-term health insurance plans. But take a look at some of the frequently asked questions regarding short-term health insurance. Short term health insurance is health insurance that lasts for six to 12 months, depending on your needs.
Purchase Reverse Mortgages: Enjoying No Payments In 2009 (20)
The Purchase Reverse Mortgage effective date is January 1, 2009 for FHA to begin to insure the loans but there is no reason seniors cannot begin to look now! Michael G.