Difficult Conversations – Paying for your house in six years – Part 2

Last week, I described the concept of a couple owning their house in 6 years, without paying more than twice the cost of the property in a 30-year mortgage. This article provides further details.

The house should be designed as both a starter and retirement house. This would be a 1,000 sq ft, 3-bedroom, 2-bathroom, open concept styled house, with a laundry/storage room. The house should be designed for comfortable wheelchair access, which includes 12’x12’ bedrooms, 6’x10’ bathrooms and laundry/storage room, and 40” wide corridors.

STRONG AND DURABLE.

The house should be designed and constructed to survive the recent Category 5 hurricanes that struck the Caribbean in the past 4 years, and a magnitude 7 earthquake (that struck Haiti in 2010). The Barbados building code’s standard is a Category 2 hurricane – but that is not enough.

The cost of additional materials to resist the Category 5 hurricane, is approximately a mortgage payment for one month – so it is easily affordable. The additional cost for earthquake resistance is $0.00. You just have to know how to assemble the existing building materials.

Retired and disabled persons may not have the funds and mobility to repair and maintain their houses. Therefore, the house should not only be designed to survive natural hazards, but be extremely low maintenance.

LAND.

The lot size should have a 10 ft distance to the side and rear boundaries (instead of the minimum 6 ft Town Planning requirement). This minimizes the risk of fire jumps, and provides more privacy.

It should also have approximately 20 ft distance to the road for the option of planting a tree and parking a car. This results in a minimum 3,000 sq ft lot.

COSTS.

The cost of the house should not exceed $150,000. An individual can save approximately $1,000 each month for 12 years, and build the house in year 12, with no interest payments. A couple can save twice that amount and build their house in year six, without paying interest.

The main risk of saving now and building later, is that the costs of construction may increase over 12 years. If twelve couples engaged a contractor to build two houses each year, 12 houses can be built in 6 years. The unit cost of the houses should be less expensive than if the contractor was engaged to build only one. Excess materials purchased for one house can be used on another, to the benefit of all couples.

DISPUTES.

To reduce the risk of disputes, the quantity and quality of work to be done must be clearly and accurately defined, and disputes independently adjudicated. To further reduce the risks of disputes, the contractor should prepare samples of the quality of finishing work for approval, prior to starting that work.

For example, the contractor should prepare a 3 ft x 3 ft sample of wall painting and floor tiling for approval, before painting or tiling the house. If the contractor is unable to achieve the required quality o the sample, then specialist finishers should be engaged.

With this method, the contractor will have an incentive to do quality work, and repair all defects. Also, couples building after year one can see the quality of what they are getting, and the issues that are arising, and make improvements before the other houses are built.

LAND.

Each participating couple should either own, or plan to own land within five years. Since it is a starter house, they do not need look for their ideal lot at this time.

Two couples need to own land, and have town planning approval for their house, during the first year. If a couple does not own land in six years, then they would simply have saved $150,000, and can do what they want with it. Couples are encouraged to own their land before building on it.

PAYMENTS.

Two methods are proposed for managing payments to the contractor. One is for each group of 12 couples to form a company, which will own the land and houses for six years, and then transfer ownership of each house and land to the respective couple at the end of six years.

Since we seem to have a challenge trusting each-other, banks and credit unions get to benefit. However, to get into into decades long debt at this uncertain time is extremely bad advice.

Couples may negotiate a 7-year mortgage, but start saving immediately to minimize the amount borrowed. By getting a mortgage, a couple can build their house whenever they want, and pay off the loan within seven years. To get some group construction benefits, two couples can engage a contractor to build two houses in one year.

I am currently designing the starter house described in this article, with full construction details to guide contractors. The drawings should be available for anyone to download, free of cost, around July this year.

Grenville Phillips II is a Chartered Structural Engineer. He can be reached at NextParty246@gmail.com

47 comments

  • William Skinner

    @ Grenville
    Good follow up ! Excellent good got thought.👍🏾

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  • William Skinner

    Excellent “ food” for thought.

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  • GP could do some number crunching and/or consideration about the following idea for feasibility
    a couple builds a small house and large house on a plot of land and sells the large house for the total build cost for both homes

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  • @ GP2,
    What are the measurements of the building’s footprint?

    I presume that all the houses in your proposed housing scheme will share the same services?

    This should include a central energy supply system via photovoltaics; a solar hot water supply; a water collector which reuses and recycles waste grey water; a bio digestive on site which will provide an alternative energy source and break down human waste which can be can used on the land to provide fertiliser to the soil.

    The development should also have a shared communal land area which should be used primarily for growing food and planting food bearing trees.

    You should also look at the self-building market rather then going directly to a contractor.

    Your scheme should be rooted in communal.

    Excellent idea. Keep up the great work.

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  • @David,
    Check your spam.

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  • Digestor not digestive!

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  • communal living!

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  • should they not be prioritized for covid vaccine in case they have to mass migrate

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  • Hi TLSN:

    This is not designed as a commune-type development. ne person can have their lot in St Lucy, and another can have theirs in Christ Church. They will share no other services than having the same contractor, who will build two houses in one year, one house at a time.

    Since the contractor understands that the houses are linked by contract, and he will not do the second until he finishes the first, and that retention for the first will not be paid until he completes the second, then he has significant incentives to do good work – or have good work done.

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  • NorthernObserver

    “that retention for the first will not be paid until he completes the second”
    Since I am unfamiliar with the Barbadian laws governing holdbacks, is this legal? The lien date for all subtrades and suppliers, is governed by the substantial completion/occupancy date of the project? If the prime contractor agrees to this, he is on the hook to ensure all bills are paid in a timely fashion, even though he will be short the retention/holdback monies. I would want a premium to do this.

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  • Tarion

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  • N Observer:

    Retention is common in construction contracts – worldwide. If you charged a premium for this normal practise, you will soon go out of business for being uncompetitive.

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  • Grenville

    You have decided not to want to understand anything this writer and others said last time.

    Liked by 1 person

  • No comment.

    Liked by 1 person

  • Missing from Grenville’s idea is the running cost associated with constructing a house- insurance, ongoing maintenance etc.

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  • NorthernObserver

    @GP
    I am familiar with retention. But you are proposing retention on #1 until #2 is finished. At 2 homes/yr, retention is likely to be 6 months? In many places you have only 30-90 days to register a lien for non-payment. Hence why I asked about the law in Barbados.
    @Lawson
    Tarion is about defects…new home warranty.

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  • why not each couple save they own money for six years and then all buy their own homes?

    Why 12 homes for 6 couples?

    Liked by 1 person

  • Vincent Codrington

    @ John2 at 9:34 AM
    Many of us like to complicate life and design things that do not fit into our cultural norm. The old ways were:
    Save and then build.
    Save and start build from kitchen and bath at the back and come forward.
    Alternatively start at the front with patio and drawing room and build towards the back..
    These days we want to spend more than we can afford. That is OK, if we have a steady job and do not mind paying the costs of credit risks. That is the current trend for the middle and upper classes.And it works. One need to choose carefully the length of the mortgage and the ability to pay the monthly installments.

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  • @Vincent

    That old time approach was fine when there was was a different kind terms and conditions around tenure. These days it is a more time related contract governing tenure which does not support contracting lengthy loan agreements.

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  • NO just addressing the workmanship, and a possible safety net
    I think this a well intentioned stupid idea doomed to failure, no different than other building a better mousetrap idea.

    Liked by 1 person

  • Northern: Retention on small projects is 6 months. On large, it can be one year. Therefore, it is not an issue.

    David: The houses are to be low maintenance. The major costs would be painting the eastern face, and termite treatment, every 5 years. The annual property insurance for a starter house is a few hundred dollars, which can be further reduced by only insuring for fire (since the house is designed for earthquakes and hurricanes).

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  • Vincent Codrington

    @ David BU at 12 :18 PM
    What you have keyboarded makes absolutely no sense to me. If it makes sense to you so be it. We must always design things that are easily understood and easily managed. I think you are catching at straws that may lead to utter chaos and further impoverishment of the masses. One should always focus on our ultimate objectives . In this case , the housing of the low income class.Has any one consulted them or are we dictating to underlings?. Oh, how things remain the same.

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  • That’s alright Vincent. The blogmaster had to accept change to operate in the space he does.

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  • David & Vincent

    You change for some better
    When I was less fortunate financially I built bit by bit. I agree with Vincent 100%

    I have a few more years to retirement and never had a mortgage or a contractor work on my house . And the local trades men got some help with extra income in their pockets – not the banks or contractors

    I must admit that I had a car note

    Liked by 1 person

  • What Vincent Codrington is saying is pure, unadulterated, nonsense!
    On the one hand, he seeks to argue for traditional house construction methods
    On the other, he has previously contended that modern approaches should be used.
    This while all the environments around and within Barbados have radically changed compared to when people built houses piecemeal.
    When the backward construction methods were popular we had NOT to deal with category five (5) and maybe higher hurricanes, for example. Is he arguing that his backward methods could have withstood these conditions.
    Further, stone houses (blocks) in Barbados were (are) traditionally built without filling all the blocks and are even to this day hot as shiiite, especially in the afternoon, increase cooling cost.
    With the emergence of modern construction materials which drastically reduce or maintain the internal temperature, as compared to the external, is Vincent Codrington suggesting that we should harken to the Dark Ages?
    Maybe no technological changes of the last 100 years should find Barbados!

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  • @Pacha

    We need to extend the argument to a national/macro level as well. There was a time deficit financing of national budget was not tolerated. Then the economists came along and validated metrics that support some credit is useful to escalate capacity building in the economy. Is the same approach useful at the household level as well?

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  • David
    That too would be a nonsense because national economy is no more than a collection of households.

    Maybe Vincent would want a slow boat to China as well.

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  • Pasha

    What increase cost of cooling you talking about? There is no ac in my house
    There is a fan that is used if I have visitors from a cold country

    It never experienced a cat 5 hurricane
    It started as wood and if now all wall and storied. Because I can now afford it
    Never owned a mortgage yet

    But Barbados got richer and this article wasn’t targeting the less fortunate.

    Liked by 1 person

  • U don’t think is sayin go back to the dark ages
    He is suggest to build what / when u can afford

    Instead of running to a bank or forming a so call company etc

    If you can afford the new material and construction methods with doing those things then more power to you

    Liked by 1 person

  • Check out the squatters for example

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  • John2
    If there is a singular issue on which Grenville Phillips has made a significant contribution to national development it must his work on the housing stock of Barbados some years ago.

    At that time, we seem to recall, that his estimation of buildings capable of withstanding even lower categories of storms or hurricanes was around 10 to 20 percent. Because we’ve not had a direct hit does not mean that will always be the case. Those buildings are constructed based on the traditional “code” which you seem to posit as being adequate.

    We can talk about all the risks, benefits, disadvantages of the traditional adhoc system but we have no brief for banks etc.

    On the issue of “hot houses” others can bring their experiences. By temperature is not the only issue. What about a house as a net seller of power into the grid or a catchment for water. And so on

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  • A house built for Eostre

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  • Pacha

    Now you are straying from the topic / from what Vincent said

    Liked by 1 person

  • No one is arguing against the standard of the housing

    Read what Vincent said and digest it properly.

    No one is against anyone building what they can afford even if that have to take a mortgage.

    Reread

    Liked by 1 person

  • I agree with John what is the matter with the old tried and true methods, move into the cheapest house on the street dont pay to have professionals to fix anything ( you might not even have to sell drugs out of it) let it run down even more, and when the neighbors are desperate to move and sell pick them up at a reduced price.

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  • Should somebody be able to build whatever and however they like once it’s affordable?

    Well, we have actual experience that low cost housing does not mean low quality housing.

    In fact, we have built low income housing, affordable housing, in the same development as very high cost housing, all done with the same main materials, same quality structural standards, etc. The only differences being square footage, finishes, amenities etc

    Then again we see the world differently. You may have the last word.

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  • @Pachamama April 4, 2021 9:32 AM “Maybe Vincent would want a slow boat to China as well.”

    Take note that the old small boats to China did not get stuck in the Suez Canal, because some modern smart Alek [or Alexis] decided to make a boat that was longer that the canal is wide…and then when Mother Nature decide to do she t’ing…wuhloss!!!

    Old methods are not necessarily backwards. Perhaps they are tried and true?

    Liked by 1 person

  • @John2 April 4, 2021 11:21 AM “What increase cost of cooling you talking about? There is no ac in my house. There is a fan that is used if I have visitors from a cold country.”

    I was just about to say the same thing.

    Three 50X25 windows in my bedroom, which I haven’t closed in more than 30 years. I enjoy the cool breezes off the Atlantic. Why should I pay for AC when I can get free “central air?”

    Aware though that we can be hit by a Cat 5, and we must do whatever we can to mitigate loss of property and of life.

    Liked by 1 person

  • Nobody–I think–is advocating for poor quality housing.

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  • I told my son last month about saving and building bit by bit, the old time way, the basic rooms first, sitting on cushions until you can buy good furniture from a joiner. Told him to always keep a kitchen garden going.

    Much less stressful than stupid mortgages and hire purchase and if you hit a lean patch you have fewer worries.

    Ole time ways made more sense.

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  • The Pyramids in Mexico,Egypt, Sudan, Nigeria and elsewhere, the Great Wall of China were all built in the construction industry dark ages.

    But many people believe that those old time guys knew a thing or two about engineering and architecture.

    Liked by 1 person

  • Thee article was about saving mortgage cost.

    Save and then build or build as you go is still the cheapest way of owning you home without paying a mortgage

    U are taking t in a different direction about standards

    You can save and build or build as you go and still keep up to ur standards

    My board house may have been flattened in a cat 5. Today my wall house may stand up with minimum damage
    Again. I never own a mortgage

    Liked by 1 person

  • Some of you like to compartmentalize the arguments. You live in a system that feeds on conspicuous consumption. You want high wages, boast of high per capita incomes, aspire to shiny vehicles, study at overseas universities and trips to Orlando. You cannot swing both ways. The system is designed for borrowing.

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  • Not me, David. Never was all-in for conspicuous consumption and keeping up with the Joneses.

    Nevertheless I still spent too freely, saved too little and used credit for stuff that could wait.

    I’ve have grown wiser with age. Trying to keep my son out of the financial traps. He is learning well.

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  • NorthernObserver

    That is quite the retention allowance period, must play havoc with contractors cash flow. Anyways the important thing is action, if it works then do it. Many ways to skin the housing cat.

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  • If Ac was Shakespeare
    Mia Mottley
    Friends, Bajans, countrymen, lend me your ears;
    I come to bury Mia, not to praise her.
    The evil that women do lives after them;
    The good is oft interred with their bones;
    So let it be with Mia. The noble HA
    Hath told you Caesar was ambitious:
    That she was not into details
    Was a publicity hound
    Had too many consultants
    …….

    Like

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