Remodeling vs. SpecHomes for start-ups?
I’ve got a query for the experienced business owners hereabouts:
I’m currently a lead-carpenter for a very high end custom home builder in the mountains of NC (Watauga County), and have been in this position for the past couple of years. Previously I operated as a custom carpentry business working for myself freelance (occassionally hiring the odd helper or two) doing custom residential remodeling in New Orleans, Seattle, and Atlanta, GA. Oh, and I built a house or two during my individual operation days.
Thing is, it’s time to move on from my current situation of employee back into the world of self-employment. BUT, I need to decide the best avenue for a small outfit like I will be at the outset (myself as lead carpenter, and two good carpenter/helpers) to pursue when it comes to generating initial jobs and projects that will enable a small company to develop operating capital and a viable future in our market here.
In Watauga Co, our current building trends seem to be lots and lots of new construction in the $600, 000 to $2+ million market. However, you’ve obviously gotta be one of the “big boys” or have a good “in” with a local architect to get projects of this size. I could hire enough qualified help to handle one of these, but I don’t think I have the necessary contacts to get hold of a project this size.
The new construction market in the range $225,000 – $600,000 seems dead here. Every other real estate listing currently is in this range, and it ain’t moving. I’ve deduced from my limited experience as a 31 year old who has spent the past 12 years in custom building that this mid-range customs are owner-only (they ain’t gonna sell if you decide to build one of these mini McMansions).
That seems to leave me with either building spec=homes in the sub-$200,000 range or to focus only on remodeling. Specs scare me, b/c in this troubled time I’m nervous about tying all my meager little credit up in one project which might not move. Then I’m bent over the barrel squealing for the bankers. Doing nothing but remodels also has its cons though, b/c in the past i’ve run into dry periods where service calls were all the money I had coming in.
In what market have you guys had the best luck? Are most of you new construction, renovations, or a combo of both? And, do you leave a stable job (even though there’s no possibility of advancement in it) for a contract on a project that might only take 6 weeks?
I know these are all typical little points that might seem trivial to someone whose been in business 5 years (or 50) with an established crew and set monies for insurance and marketing and payroll costs, but for an individual with little capital but great desire to work and succeed they’re big concerns.
Oh, and I’m not a sole propietorship; I’ve formed a partnership with an excellent businesswoman whose day job is in banking. Her role will be to handle all the office management and business paperwork type functions. I will be the field partner doing the actual building. The only drawback: she’s young and poor also. The plus: she’s young and hot and we’ll be marrying soon. But anyway, that’s another subject.
I’ve been reading the posts awhile and appreciate any help you guys might be able to give me. You can tell me to shut up and quit being scared about jumping in, too, but first at least tell me your business approach.
Chris the coffeyman Oy
Chris, if we have read your post and are still in the business.......we've been there. You want to make more money, build with the big boys. You are probably thinkin' your boss visits the site to meet the owners a couple times a week, makin changes, makin money and what could be so hard, you just need a chance.
Been there. You'll figure it out. If you love the trade and are willing to work hard, you'll do ok at worst ( build your own house, pay it off early, and be comfortable )
Just keep a few basics in mind.
First and foremost, its a business, don't do anything if it isn't profitable, unless it's for your son's little league. You have a good start with your significant other. Try all types of jobs and make sure she tells you which one's are in the black and keep doing them.
Contact those architects you mentioned. They are always interested in someone who can deliver the quality for a lower cost, they'll love you until you become one of the big boys and charge more. In that price range, additions and renovation will keep you busy.
And, you can't beat a man at his own trade. Find guys just like you for subs in elect, plumb, roofing, etc. Pay em well and fire them if they don't produce.
It;s always customer service that gets you the job. Be yourself, have a good presentation, don't lower your price without lowering scope. It's just like life, everybody loves a straight shooter. Good Luck, an old guy.
Edited 1/20/2003 1:00:57 PM ET by Mdbuilder
Well said , but I had the feeling you could have went on . LOL
Tim, don't do this if you don't absolutely love being a carpenter/builder because one thing is for certain, business is the necessary evil part of it. Building specs and custom monuments to myself was my mistake 25 years ago. Like someone else has said in this conversation, specialize in something (closets, sunrooms, basements) eventually and it will payoff and you'll be able to spend more time with your coming family. You're right, LOL
First... People deal with people... if you are not a person that likes dealing with people... keep your job and hope the lady becomes president of the bank
two... people deal with people
three... and i might be wrong here... but know how to do every job... not so you can but so you'll know if others can... I've never let anyone underbid a job for me... i know what it should take and if they come in low... i tell them and explain "you can't do that for that" i never want a sub to tell me "man i lost my butt on this job" no one wins
four... and don't leave this to you partner.... from my experience most bankers know little about money... know the value of Money... know how banks work.... get a great CPA that likes you and understands what you are doing... learn and know the vocabulary of real estate... know what ROI is know
five... any money you don't spend is money you don't have to make... if you spend $10 how much do you have to bill? $50... $100?
six... you make more money with smart buying than you do anything
the one thing i do know is how little i do know... i have to make up alot of this with just working harder... not being lazy will get you 10 steps ahead everytime
oh yeah... people deal with people
six... you make more money with smart buying than you do anything
I'm a remodeler because I love a challenge. New construction is boring, to me. A lot depends on your personmality and how you work. You already know the diff between the two fields, mostly that remo involves a lot more hand holding and close communication.
Remodeling market is expanding now while the new house field is barely stable, making specs scary.
The biggest warning I have for you concerns your plans to mix marriage with business. That can be a rocky road to negotiate. I won't plunge too deep into those waters but be sure you both share the same goals in this venture and aren't looking at it through star-crossed eyes.
Excellence is its own reward!
i don't know which way to point you. We do debris removal and recycling in primarily new construction. About 1700 homes last year. But... can you work in addition to doing the remodeling? New construction? You're young. No kids. Wife won't miss you. Now is the time. Take some pressure off the new venture. How much money you got stashed? Never want to get yourself backed into a corner or against the wall and HAVE to sell a job to make rent.
Maybe your present employer would be flexible in the hours. Find a job in the evenings or 2nd shift. I worked 2 years in trucking while getting my business started. Lots of trucking companies need people to unload trucks from about 300 pm to midnight or after. Find someone that needs somebody depenadable and wants to work hard.
Oh and if you do spec new construction start in the low end. Mistakes you will make are less expensive. And your risk is that much less. You don't have to hit a home run your first time out. Singles are good.
Just a few things I will mention that are keys in my mind .
Helps to have nitch that noone else has , to make you stand alone . You will be competing against the best out there.Look at them and then your self. You have to do it better , cheaper or something . What it normally amounts to is that you put more in for less money .
Buying is the top key. Dealing , saving, etc.
A study of winners showed they were willing to do what losers werent willing to do.
My plan for you on what you have said;
Marry her and get it over with so you two can get down to business . Both of you work your day jobs and live cheap. [no toys or time consumming hobbies] Be certain children is a ways off.
You work 8 hrs on a day job starting as early as it will permit . You work evenings and weekends on the house. Do most of it your self and be able to handle the monthly interrest on the note. Start with a repo or a cheap lot to build on . If you cant make 20 percent on a deal , do it , but count your labor in the figgures. She should be able to handle everything that you wont have time for as her extra job. Move in the house after its done and put it up for sale , if it hasnt sold in 2 months after completion.