Unlock the Door to Affordable
Home Ownership

DOLLARS & SENSE OR SWEAT EQUITY

There is a lot about the old adage of "Sweat Equity." This is an additional way to shelter money when looking into buying a home as an investment tool. Why not build the home yourself? Not only will you have the satisfaction of seeing what you have created by the work of your own hands but also by doing any of the work on the home yourself you are creating "Sweat Equity."

Now, talk about tax shelters. By building your own home and living in it for a couple of years you will not only have the tax write off from the interest you paid while living in the new home, but when you sell the home there is extra value due to the Tax Free "Sweat Equity" you created with your own hands.

Actually you will have a greater savings from not paying interest on the amount you didn't have to borrow since you built the home for less than what you would have since you saved the Equity by doing some or all of the work on the new home yourself. You can save a lot of money over a 30-year period this way. It reduces your monthly payments and depending on which tax bracket you are in would be an even greater savings especially if you need to sell the home after living in it a few years.

People might say that they can't or don't know how to do the work themselves. With direction and assistance I have seen several go beyond their reservations, some have worked real miracles and have saved thousands of dollars in sweat equity. Even those that didn't have time to do any of the work but (with assistance) just oversaw the building project ended up with several thousand dollars saved.

Bottom line is that most people have the ability to use budgeting skills but very few actually use them. Not many people start out with a budget in their life let alone a budget when building a home and usually don't have the financial side of the building established or planned out before breaking ground. They get anxious to get started and before they know it their funds have been depleted and they start looking for a bank to lend them more money to finish up. Banks don't like being put in this situation.

By setting up a budget and building the home on paper first before getting started, a person can tell if they are biting off more than they can chew (which almost everyone does). By budgeting first and making adjustments before they get in too deep financially everyone will be with in a few dollars of where they wanted and needed to be when it comes time to start building and won't be in trouble when its time to move into the permanent loan upon completion.

You will have sweat equity, the building will apprise properly, and any bank would love to have a customer that has value in a new home when it is completed with value already built in. Thus saving the owner builder from potential bankruptcy and leaving the bank with an unfinished home. Which is exactly what happened several years ago and today is the reason why banks won't lend money to people that want to build their own home themselves without the use of a General Contractor. Rightfully so, the banks go tired of loosing money and taking over unfinished homes.

Don't do as owner builders have done in the past. Buy land and a used mobile home, live in the mobile home for a couple of years until you get part of the home livable, then live in an unfinished home for 10 years while you are trying to get it finished but don't because you are burned out and other projects seem to take greater priority.

A wise public speaker once said, "Begin with the end in mind." By working with a Local Owner Builder Consultant you can take the sting out of the Owner Builder stigma by getting construction financing, budgeting, and planning first. You can get the home finished within an average of 6 months. It takes the guesswork out of it and keeps the suppliers, banks, and mortgage brokers happy. Most importantly, you finish your building project on a schedule, in budget, and in a shorter amount of time. It isn't easy building your own home, but you'll find out as others have, it's worth it.