Tuesday, October 8, 2013

So, You Want to Be a New Home Builder

For anyone that wants to become a new home builder, I only have one piece of advice…Do It Right! It has never been harder or less appealing to want to build houses for a living than it is right now.

Personally I can’t imagine wanting to go back into being a General Contractor. 30 years ago, all someone needed was a business license, workmen’s comp and liability insurance.  You already owned a hammer, saw and some saw horses. Everything else you needed was owned by the guys you hired. Those people may or may not have had much experience but they showed up and worked. Well at least the ones that were on work release or parole did.

Today, becoming a GC is quite an undertaking. However, there is one type of new home construction that makes that life a lot easier…modular. A ton of the work is done in the factory along with many of the required inspections and stamped drawings. The new builder will find a lot of help in all phases of home building from the factory sales rep to the engineering staff to the production floor management and on to the service department.  

Site builders will have to slug through these things on their own.

But whether you want to go modular or site built there are some fundamental things you have to know before you get started.

Do I need to be licensed?
Yes. I don’t know any state that doesn’t require you to obtain a license.  You will have to take exams, go through background checks, and show proof of insurance coverage. Many states require you pass both a bookkeeping exam and a construction exam.

How much can I make?
That is the big question, isn’t it? First things first. Be prepared to live off your savings for at least a year. If you are lucky enough to get an appointment with a customer and sign a contract on the very first day you open your doors, it could take up to a year to get complete the house.

Pesky little things like mortgage approvals, plan reviews, water management surveys and much more will be the same not matter if you build modular or stick. Where you can cut your time to completion is by using modular. The old saying the “Time is Money” is no more evident than when you are trying to get your buyer into their home by a date on the contract.

So just how much can you make? The national average for small independent new home builders is about $80,000. You can build a monster home or several smaller ones but it’s hard to break the $80K barrier.  And that’s before taxes.

Do I need an office?
Years ago many small builders worked off their kitchen tables. That won’t fly today. It’s like someone calling to you to step in the alley and saying “psst, want to buy a house real cheap?” You wouldn’t do that and neither will your customers. They will come to your home office though. If you can’t afford a storefront shop, at least set up an area strictly dedicated to your business.  Smart phones and tablets make working away from the office easier but you still need that “office” to work from.

And don’t forget that you will need a bookkeeping system. There are many software packages that serve as one-point entry systems for transactions and invoices, and for recording material and labor costs to reduce your time in the office but you have to learn how to use them.

These are just some of the areas that need addressed just to open the doors to your business. 

Next time we’ll explore how to be a builder, a salesperson, a marketing expert, service manager, production manager an OSHA specialist.  That is if you’re still interested in becoming a General Contractor. 

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