“What is your advice on building without a loan, i.e. building with cash?
Well Josh, you pose a simple question, or so it seems, but not a simple answer.
First of all, I have to assume you have enough cash to build (or have build for you) a house and bring it to 100% completion.
If not, stop, where you are, and read my page on trying to build a house “out of pocket”, that is; cash available, save, pay for foundation, save, pay for framing, save, etc…
If you have enough available cash, then here is my advice, whether you are an owner/builder or using a General Contractor (home builder):
1. Think like a bank (construction lender).
2. Protect your money as a bank does.
3. Establish a budget just as a construction lender would require one.
4.0Establish a cost estimate based on my estimating advice and/or your builder’s estimate/contract to build.
5. Be sure the job is feasible for the amount of money you budgeted, just as a construction lender would.
6. Plan on buying Title Insurance coverage for the amount of the money you plan to spend (at the very least), just as a construction lender would. Title Insurance is a “necessary evil”.
7. Plan on using the Title Insurance Company to disburse all construction draws (disbursements), just as a construction lender would. If you buy a Title Insurance policy from them, the cost of draw disbursement should be nominal.
8. Even though it is your money, the Title Insurance Company’s job will be to protect your money against mechanic’s liens due to unpaid bills.
9. Unpaid bills occur when either a subcontractor or a supplier doesn’t get paid by the person you paid (Your General Contractor). It happens!
10. The title company will investigate the payment of bills and/or the filing of liens prior to all money disbursements (draws) during construction through the use of “sworn statements” and “waivers of lien”
11. You could attempt to perform these duties (those in #10) yourself, but it’s not an easy job for a novice!
12. If you are using a General Contractor, by having a third party (The Title Insurance Company) be the “bad guy” when paying him (or her), you can maintain a better relationship with your General Contractor during the construction process.
13. To not take these precautions would be folly.