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Our First Construction

Updated: Jan 10, 2023

This was our first new build and (only) house hack and it's the project that truly launched our investing journey. We built this 1,500 sq/ft bungalow in 2014 when we were 21 years old using an Auto Construction loan. It took less than 4 months to build; we poured the footings on July 22 and moved in November 1st.

Loan process:

When we applied for the loan, the bank required the architectural drawings we did along with the lot info that we hadn't yet purchased, and our construction budget (as well as all other financial papers like income tax statements, employment letters, etc). They then had our house plans appraised by a professional appraiser who determined a value of let's say 100,000$ for easy math (we don't discuss actual numbers for privacy concerns). The bank agreed to give us a loan for 80,000$, which is 80%, and it was up to us to build it for that amount. No need to put a penny of our own money in it unless we went over budget, then it would have been our responsibility to pay the difference.

Now once approved they didn't just give us the entire 80k and said "Good luck!". Instead they would do a cash advance of a certain percentage as the construction progressed. When we needed an advance they sent the appraiser on site to do a progress report and the bank would send us the amount of money that corresponded based on their specific guidelines.

We only needed a total of 3 advances:

  1. When we started they gave us a first draw of X$ (which was the value of the land). This Xk brought us all the way to drywall stage thanks to trades not sending invoices right away - score! (keep in mind every time you call for an advance you have to pay the appraiser fees which is a few hundred dollars. Every dollar counts when you're trying to stay on budget, so you try to do as few as possible.)

  2. Since about half of the construction was done by the time we called for that 2nd advance, the amount we got was a much bigger chunk that enabled us to coast to the end.

  3. The 3rd and final advance was at completion and gave us the remaining of the budget, minus 10% (in Ontario they hold back 10% until 60 days after completion to make sure there are no leans on the property).

Here's what we did ourselves for this project:

  • Project manager and general contractor

  • The architectural drawings (the home owner can do their own drawings in Ontario without needing an architectural stamp. Given our background we were able to do this)

  • Framing of the basement perimeter walls

  • Electrical (the home owner can do their own electrical in Ontario as long as they get an Electrical Safety Authority permit)

  • Drywall install and taping

  • Trim work

  • Flooring

  • Cabinetry (thank you Ikea)

  • Paint and all other finishing

Other areas we saved money:

  • We got our tile on sale for 0.60$/sqft

  • We got our hardwood flooring on sale for 3.49$/sqft

  • Almost all of our plumbing fixtures we got free from a big renovation job my dad was doing. The client was gutting his not-so-old home and redoing everything so we took it! In the photos below is a shower and 2 sinks we got, FREE!

  • The stuff we couldn't get on sale we got basic models and upgraded later on

  • We ripped MDF to do all the baseboards and casings

  • Installing Ikea cabinetry ourselves saved us a tone (these cabinets in the photos below are their low to moderate priced styles)

  • Appliances we either bought used on Kijiji or on a promotional interest free credit card

You can easily blow a budget way out of the water when shopping for the finishing. This same house could of cost so much more if we would of gone for the expensive tile, fancy kitchen and exotic fixtures. We kept it simple and figured worst case we'll upgrade it later. I got to say though it's not bad for a kitchen that cost us only about 8,000$ in total (including appliances).

Right after we finished building, we applied for a government grant to recuperate part of our taxes (usually when you buy a home you don't pay taxes so the Ontario government gives you back some of the taxes you paid on materials and labor during construction. It's a little more complicated than this but I recommend speaking to your accountant. We received 12k from this grant and immediately got to work on the basement apartment with that money. We also used the Home Depot 18 months interest free credit card to help pay for materials. That baby rents for 1,300$/month.

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