Starting My Own Home Builder Buisness?
I was wondering how difficult it would be to simply start my own home builder business. I have read numerous books on being a general contractor and its seems like I was born to to this. I was just wondering if any of you guys could think of anything that might be a hurdle in starting this business. I plan on just building a few homes for rental properties at first then I would start buying a large piece of land and build homes to sell. Sound Good? or is their another way of maximizing profits by doing something else.[ Edited by senatorcbp2 on Date 06/05/2004 ]
Check out all the laws in your area.
Getting a contractors license isn't that hard, it all the add on costs.
I'm looking at developing a 15ish unit townhome project. Asked about defect insurance (people can sue for 10 years in CA for defective construction)
Here's the quote.
1) Wrap up policy- covers GC, Developer and all sub contractors who do work on this project- I just issued one for a project in Sunnyvale- 7 units- and the insurance premium is $325K + taxes and fees.
325K just for the 1 insurance policy, that doesn't include E&O, general liability, comprehensive, workmans comp, buying land, architecture fees, permits, etc.
If it's just 1 SFR, what I have found to work better is to be the deal guy, developer, money person (credit) and partner w/ a GC you like.
It seems there are many other ways to make money. Being in business is a hard way to make money. It is quite rewarding but it can be hard.
I think you should speak to some GC and see that as a developer you would make more money with less headache. You should probably offer or get a job with one of them to see how the business works.
Heres to positive cashflow.
Man, the reality is, you can't go read a couple of books, and become a builder. It'd be like reading a book on heart surgery, and decide that that sounds easy, and cut someone open. I thought I knew a lot about building, until I partnered with a builder, and found out I didn't know squat. lol Partner with someone that'll TEACH you, and LEARN. Oh, yeah, a BIG hurdle might be the fact that a lender will only lend to someone that knows what they're doing, and why wouldn't they??? Would you loan boatloads of money to someone with no guarantees you'd ever see what you were paying for finished?
jam 200 there was no way I thought that I knew anything about being a home builder by reading books. Believe me I have brains and a good education but I think that it is something that I will work on to gradually become in the future. I am 23 and know that I will have to work for someone locally to learn everything about the business and that this is something not to jump into blindly. I just want to know from others opinions the ups and downs and the little things that I may not be accounting for in doing this type of career. Thanks guys for your responses, insurance was one thing I was wondering about.
Building is a tough business. As someone else mentioned, getting financing is tough for someone starting out. I suppose if you have the money to finance the first few jobs anything is possible. I know of several builders in my area that have never swung a hammer and know squat about building but they have money. If you intend to build spec homes it probably won't be too bad, however if you intend on survivng by jobs under contract you'll probably have a tough time because there are a lot of other builders out there and many of them that think working for free makes sense. In any event, good luck.
Regardless of what sort of business that people start...... most are destined to fail for several common reasons.
Contracting is no different, infact there are more reasons that such businesses often do fail.
Other then the capital flow or lack thereof here are some of the other things to consider;
how much knowledge oo you have of the business
how savy are you at running a business and knowing basic principles that will keep you going
how many GOOD subcontractors and Suppliers do you know tha will work for you........many of the good subs do not want to work with a green contractor...they dont always have time to "teach" them.....
how is your credit......can you get a loan with a traditional lender or do you have to go another route......
how well do you know the market in which you are targeting....
what do you know about insurance, worker comp, employment commission, osha, irs / taxes........the list goes on.
how good are you at estimating and maintaining a budget.....
Contracting can be rewarding.......but its not easy.
I have worked in many highly stressful positions in my life.......contracting has been the most stressful of them all.....you need to know how to deal with the stress as well as not allowing it or the job to effect your family life......
As others have said.....developing is the way to go....but be aware that it also has great risk associated with it as well.
NC_Yank
I am a contractor and I think it is a great abusiness but one thing I learned when I tried a completely different type of busi;ness years ago is to never again jump into a new business field untill I have worked in that type of business for a few years. Otherwise you just do not know what you are getting into and whether is really what you want.
Yes I will work for someone first. I am the type of person who likes to know as much as feasibly possible about something before I try it. I am also a realist ( some call me pessimistic). I think of everything possible that could go wrong then I try to fix them before they happen. I know that I cant see everything in the future but planning extensively I think is the best way to go.