How do you pay for a log home?

[JohnW]

I've seen at least one estimate on this site where total costs were in excess of $150K. Suppose the cost of your home exceeds the size of your savings . . . can you get bank loans on these projects?

What if you need money to buy land . . . can you get loans to cover the cost of land and the building of your own home?

Suppose you decide you must have a Wood-Mizer LT-40 hydraulic saw mill or a 24" Cambio debarker . . . or any other toys you decide you need. Can tools be financed?

(I know very little about financing construction so any help greatly appreciated.)

John

[Shark]

You pay with cash :)
Well, in a perfect world.... Starting with a realistic budget, then add about 30% more as an "emergency plan" fund. I suggest reading a Dave Ramsey book as he can help with the budget ideas in general.

Yes you can get a loan for just the property (we did this, it's called a Lot Loan) as we couldn't afford both the land & building a house, so we financed the land, built the house with cash, & paid the land off once we were moved in.
Some members get a construction loan, be aware some might require additional things like special insurance, a licensed general contractor to oversee the project, and maybe even specific timelines. This is why we financed the land & paid for the house...not the other way around.

[loghousenut]

Cash is king. We bought our place and lived here, making double payments til it was paid off. At the time it seemed to take forever but it was really just the blink of an eye. Some folks sell out and move to the country, giving them a grubsteak to build with. More than one family has sold a modest house California and then bought a nice 50 acre chunk of heaven where they want to build. Once you have the land you'll find ways to build the log home.

There's no one answer as it all depends on how you want to live your life. You will come out of class knowing how you will do it and it will work. Personally I couldn't keep my head in the right place to build my home if I had the time constraints and worries of a construction loan. It would drive me nutso. Some people would go bonkers doing it slow and easy like I am. Too much money may make it easier or it may make it harder.

Speaking of money making it harder, when it was time to start building I borrowed $50,000 against my 401K plan. Most people would say don't do it but I don't think it was a disaster. We have no other debt so it is easy to repay and the monstrous interest I am paying goes back into my own 401K. No penalties as long as I stay employed and am repaying myself. There are no hoops to jump through. You just borrow the money to pay for a house and then the repayment is taken out of your paycheck. The downside for us was that it was easy to go hogwild while digging a spot for the house and I ended up spending an extra $25,000 on excavation. It solved a problem and it was a lot of fun but I'da probably found a cheaper way to do it if it weren't for all that darned money. The upside is knowing that a telehandler will only cost $7,000 and the money is just sitting there waiting to be spent. You won't HAVE to have a telehandler but it's more fun than a four wheeler and most wives can be fooled into thinking that it is a necessity.

Don't fret it much. It's all covered in class.

[JohnW]

This is why we financed the land & paid for the house...not the other way around.

That makes sense.

I'm starting to realize that the land is one of the trickiest factors in the whole deal. Not just because you have to have some to build on :-) but because the travel time to and from adds considerable cost in time and money - not to mention the issues of security, vandalism, etc..

Someone wrote about buying land with a small house and living in that while building their log home. That makes sense to us. Even a small trailer/mobile home would suffice.

[JohnW]

upside is knowing that a telehandler will only cost $7,000 and the money is just sitting there waiting to be spent. You won't HAVE to have a telehandler but it's more fun than a four wheeler and most wives can be fooled into thinking that it is a necessity.


I recently spoke to a guy who built a log mansion in Texas (now on sale for $4 million). He recommended a portable sawmill, espeicially with a debarker, but his solution to telehandlers and other gear was to rely on friends who own construction companies.

I don't have any of those but i suppose as we get near the time to start, I'll be reaching out to the construction folks in the area and making deals.

Again, where the land is will have a huge impact. If we choose to build in Kentucky (let's say) the situation would be much different than if i bought a lot down the street and started building there.

Thanks

[Shark]

That makes sense.

I'm starting to realize that the land is one of the trickiest factors in the whole deal. Not just because you have to have some to build on :-) but because the travel time to and from adds considerable cost in time and money - not to mention the issues of security, vandalism, etc..

Someone wrote about buying land with a small house and living in that while building their log home. That makes sense to us. Even a small trailer/mobile home would suffice.

Yep very true.
We lived an hour away when we started building, I'd hate to think of some folks that are 4+ hours....
We were lucky & had no theft/vandalism, but neighbors down the street had all their copper stolen shortly after rough-in. Insurance during the build is important as you just never know.

If/when we do #2, finding a place with a small existing house on the property would be a pretty good idea. When you start with vacant land, you need to factor in extra costs like driveway, electric, water line/well, septic etc etc. It all adds up.

[StewartK]

He recommended a portable sawmill, espeicially with a debarker

You've mentioned a "debarker" a couple of times. I just wanted to point out that you should probably get to the class first. Most of us use a different method of peeling logs compared to the kit builders. A debarking machine is likely to permanently damage all your logs.

It's perfectly fine to invest in a debarker if you want one, but at least you should be fully informed before you spend that cash...

Aloha,

Stew

[logsurfer]

You pay with cash :)
Well, in a perfect world.... Starting with a realistic budget, then add about 30% more as an "emergency plan" fund. I suggest reading a Dave Ramsey book as he can help with the budget ideas in general.

Yes you can get a loan for just the property (we did this, it's called a Lot Loan) as we couldn't afford both the land & building a house, so we financed the land, built the house with cash, & paid the land off once we were moved in.
Some members get a construction loan, be aware some might require additional things like special insurance, a licensed general contractor to oversee the project, and maybe even specific timelines. This is why we financed the land & paid for the house...not the other way around.

Hey Shark...question about your 'lot loan'...did you get the loan BEFORE the bubbled burst? Where there any outstanding stipulations the 'bank' made on you regarding the time-or any other such issues within the loan? We were planning this route as well with a lot of luck...what % did you have to put down?

[Timberwolf]

I recently spoke to a guy who built a log mansion in Texas (now on sale for $4 million). He recommended a portable sawmill, espeicially with a debarker, but his solution to telehandlers and other gear was to rely on friends who own construction companies.


If a log builder is recommending a LT40 mill, it's because he's likely not building log homes (though he, and a log of magazines may call them that) he's likely building timber houses (aka, big square chunks of wood).

A Woodmizer is handy for making all sorts of useful lumber for building a real log home ( know because I hired someone with one to cut ALL my dimensional lumber) but not necessary by a long shot.

[ivanshayka]

Just something to add from my prespective. LHN, Shark and Timberwolf are a lot further in the build than I am and I would take their advise before mine. But, here is what I did. When buble bursed the land prices went down, I thought it would be perfect time to buy, so my wife and I purchased 5 acres in Northern Michigan. We spent $17,500 for land. We purchased it with "land loan" or lot loan. It is a 5 year buble and we paid half of it off. Now I am slowly clearing the driveway and starting to build 10X10 log shed. The reason why we purchase this land is because it has plenty of trees for 1 loghome, they are small (14 inch at base and 8 inch at the top) but they should work for our need. I would recomend taking the class before you even purchase any land or in that case any thing. Good luck
Ivan.

[rreidnauer]

I don't know how this thread got by me for so long. Answering the original question of how I'm financing my build, this is what I did/doing.

1990 fresh out of school, I bought several things through loans. (truck, boat, ultralight aircraft) usually, I would sell one thing to acquire another. In the early to mid 90's, I bought a few RV's (also via loans) finally ending up with the 33' trailer I have now. Somehow back then, (well before I knew of LHBA) I knew I would end up having to live in one, at least for a while, so I bought one which would suit the purpose well. In the mid to late 90's, I had purchased an aircraft kit via cash I had saved and from selling off earlier items, (I was learning by this point to avoid loans) and continued to put money into that build as it became available. As time went on, the realization that I needed to get my own land and home was becoming prevalent, and I had put the 99% complete aircraft up for sale in the mid 00's. I took the LHBA class in '05. I sold the plane around '07 (for a loss, surprise, surprise) but I now had my land money. It took me three years to find land, but in the meantime I was still stockpiling cash, tools, and materials. I bought my land, (cash of course) and immediately had it select logged to turn back a 25% return. (nothing was usable for house logs, and I had the logger only take from a certain area that didn't affect the aesthetic qualities of the build site) I have moved my RV and materials to the property, which brings us to present day.

I'm about to start the septic system build with cash from the logging and general savings, and I want to move onto the property soon as possible thereafter. Naturally, to live there I need power, water, and septic. Since the septic will be done, it leaves power and water. I had managed to gather most of what I need for power via off-grid RE equipment, to avoid the high cost of bringing in commercial electric. Water will be handled via a rainwater catchment system, which will only cost hundreds, instead of thousands that a drilled well would cost, so I'm still just paying out of pocket.

Now for the future. The house build will be partly paid as cash comes in from my paycheck, but primarily, it will be funded via a 401k that I will dissolve. Many people say I'm crazy for doing that, a few think it's a pretty good plan. The way I see it is, I'll take the 10% penalty, as it's pretty small beans compared to the profits I turned during the last market crash. And I'm free to build without the pressure of any loan deadlines. (that piece-of-mind alone is worth the penalty in my opinion) In the end, I'll be free to rebuild my retirement savings without a mortgage hanging over my head henceforth.

[logsurfer]

Just something to add from my prespective. LHN, Shark and Timberwolf are a lot further in the build than I am and I would take their advise before mine. But, here is what I did. When buble bursed the land prices went down, I thought it would be perfect time to buy, so my wife and I purchased 5 acres in Northern Michigan. We spent $17,500 for land. We purchased it with "land loan" or lot loan. It is a 5 year buble and we paid half of it off. Now I am slowly clearing the driveway and starting to build 10X10 log shed. The reason why we purchase this land is because it has plenty of trees for 1 loghome, they are small (14 inch at base and 8 inch at the top) but they should work for our need. I would recomend taking the class before you even purchase any land or in that case any thing. Good luck
Ivan.

Ivan, are you stating that you went with a 'balloon' loan that required you to pay off the balance in full at the 5 year mark??

[rkissinger]

Obviously cash is preferable to any type of loan, but in many areas land is still to expensive (for me at least) to pay cash. So I had to either find cheaper land father from where I live, or borrow. While searching for my land I focused on places where I could get "Owner Financing". I'm sure there are still bank loans available, but banks are a lot tighter about lending then they used to be. I had no trouble finding many properties, with owner financing available in my area. Sometimes they are not advertised as "Owner Financing", but you can always ask. I managed to finally secure a 5 acre lot with owner financing, about 30 minutes from where I live now, with enough trees for the house which saves the hassle and expense of searching for logs. I hope to do the rest of the build with cash, we'll see how it goes. Enjoy the class.

[dazedandconfused]

RR does your 401k offer a loan? Mine does with no penalty and you just pay it back each week in your check it happens automatically, you save the 10 percent and you dont lose the nest egg, just an FYI

[dazedandconfused]

I did a lot loan with Fulton Bank they were the only one in my area that would, I needed 20 percent down and after 3 years it will balloon, so I can roll it into a typical mortgage for just the lot, the rest will be savings for me, also it gives me extra incentive to have the build done in 3 years, I need a kick in the caboose sometimes

[rreidnauer]

Obviously cash is preferable to any type of loan, but in many areas land is still to expensive (for me at least) to pay cash. So I had to either find cheaper land father from where I live, or borrow.
It's easy for me to say, being single and all, but option two wasn't an option at all. I was going to have to find land inside my cash budget, no matter where I had to move. This was a main reason it took as long as it did to find my land, because I had high standards to meet along with a small budget.


RR does your 401k offer a loan? Mine does with no penalty and you just pay it back each week in your check it happens automatically, you save the 10 percent and you dont lose the nest egg, just an FYI
It use to, up to 50% of what you had in, but after going through an acquisition, that option was no longer available. Additionally, if I had that option, I believe I would run into a problem when I would quit my job (for a new one) and move onto the property. I believe you'd have to pay in the balance due immediately or pay the penalty. I guess there is some chance the new job may have a 401k that will allow loans, and I could roll my current 401k into theirs and take a loan. We'll see when I get to that bridge.

I know you can take $10k from your 401k to purchase a home without penalty, but I wondered if the same applies to building a home?

[loghousenut]

Obviously cash is preferable to any type of loan, but in many areas land is still to expensive (for me at least) to pay cash. So I had to either find cheaper land father from where I live, or borrow. While searching for my land I focused on places where I could get "Owner Financing". I'm sure there are still bank loans available, but banks are a lot tighter about lending then they used to be. I had no trouble finding many properties, with owner financing available in my area. Sometimes they are not advertised as "Owner Financing", but you can always ask. I managed to finally secure a 5 acre lot with owner financing, about 30 minutes from where I live now, with enough trees for the house which saves the hassle and expense of searching for logs. I hope to do the rest of the build with cash, we'll see how it goes. Enjoy the class.

Speaking of owner financed properties, most banks won't allow a mortgage on the properties that I think are most desireable for a LHBA build. Find that ugly trailer from the 70's on a 10 acre piece of ground with a good well and septic that is legal for a 3 bedroom house and you have a HHhhuuuuuge head start on your future home. There are lots of places that can be fixed up to the point of being liveable, even if sometimes embarrassing. Most anything is better than an apartment in town and folks do that all the time.

If you must still be a weekend builder and can't live on the property you could rent it out. Find the right old lady/man and let him/her pay for the place while still being charitable on her/his rent. All she/he needs is a phone and he/she becomes a night watchman/watchwoman. I think I'd want to be careful who I rented to but there are plenty of folks who are beyond the "drug dealing, partying, too many curious friends and kids" stage who just want a place out of town to watch dish TV and be left alone for the last 20 years of their lives.

Just a thought. That's how we did it. Paid the place off quickly and then got semi-comfy in the ugly trailer so it took forever to get started on the house. I wouldn't have it any other way but your experience may vary.

[loghousenut]

RR does your 401k offer a loan? Mine does with no penalty and you just pay it back each week in your check it happens automatically, you save the 10 percent and you dont lose the nest egg, just an FYI

Speaking of cashing on your 401K, you will also get hit with a tax burden at a time when it may not be any fun. A 10% penalty is child's play compared to bumping into a higher bracket for a year. Rod, I think you oughta scheme a way to borrow on it if you have to. If you become so out of work that you can't pay back the 401K loan, that would be the time to cash it out and take the tax hit.

[ChainsawGrandpa]

How do you pay for a log home? How do you pay the rent? With cash! Shark, LNH, et. al. are right, pay with cash. When the cash runs out, stop building. Get a trailer (I was told to buy a trailer and put it on site. I said I didn't feel like paying $15,000 for a trailer to which the answer was; "We were thinking of a $1,500 trailer!"). Now that you're on site you no longer need to pay for a mortgage or rent. You aren't paying for security fence (like that stuff actually works), or a long commute.

Watch the neighbors. Hire the neighbor who is the best catskinner (tractor driver). Around here people have big beautiful tractors in the garage or carport. The nice car is a beater and it sits out in the weather (the other cars sit on blocks). Get a good (Husqvarna, Stihl, Echo, Jonsered) chainsaw and start clearing the brush your neighbor piled with the tractor. BTW...Stihl produced an EXCELLENT chainsaw video. Memorize that video! It contains a wealth of information, and the safety tips may just well save your life.

You can pay as you go because if you "go" as taught, a log home can be very inexpensive.

Hire yourself out to the best installer. Work for free and learn all you can about installing septic systems. You should have that fine art mastered in a week or two.

If you don't have a lot of rocks, and you are drilling less than 200' then you may be able to install an A.Y. well (like mileage, your county inspector may vary). It may, or may not pass the inspectors critical eye but that's not the problem of the well, the problem lies with the county, and the inspector. An A.Y. well (something mentioned on the members side) can be installed for a few pennies on the dollar for what it may cost to have a driller come out.

There are ways to have a nice log home, and there is just no feeling in the world like building your own place for pennies on the dollar and not having a banker breathe down your neck.

G'pa

G'pa

[ivanshayka]

Ivan, are you stating that you went with a 'balloon' loan that required you to pay off the balance in full at the 5 year mark??

Yes, I will be done paying for it before that. Unfortunately I did not have a luxury of paying for it with chash while going through the nursing school. I thing that that buy was well worth it. I love that place. but that's just me. There are definetly better way to do this. I am planning to build the home with cash, or small loan against my IRA in the future. I am building a 10x10 log shed, which should cost me way below for what retailers charge for already made shed. Anyways, I am gathering materials and tools now, I am paying for it with cash, and will continue to pay for many things in cash.
Ivan

[blane]

I encourage anyone to stay out of debt period. Even if it means you move a little slower. The borrower is slave to the lender. Who wants to be a slave? This reality hit me about seven years ago and we made drastic lifestyle changes to become debt free paying off 150000 in debt in two years. Then at the peak of the real estate market we sold the home I paid 75k for and made enough money to pay cash for a forclosed home. Fixed it up then sold it for enough buy 3.6 acres and build our first log home. Being debt free has allowed me to pay for much of our building expences from my regular salarie. Sometimes it seems hard to swim against the stream but the reality is life becomes less complicated and less streasful. No need to rush into debt. If you get a loan to build you will have dead lines to meet that can cause you to loose sleep and add stress to your mariage. Keep your priorities straight.

Hope this is helpful to anyone reading this thread:)

[rocklock]

way to go Blane... Great advise!
Not much else to say, just take it slow. Pay as you go takes more time, but it also allow one to think about what you really want to do.
Example, I wanted cabinets that were a little darker. I worked Craig's list and got perfect cabinets for free, I just needed to disassemble them...

[Kerntrans]

Debt = Bondage. Period. Kudos to Rod for working the 401k to what he believes is his best advantage. Any time you let the govt' have a say in what you can do with YOUR money you are at a disadvantage. Disadvantages suck. The reality is that most americans are at a disadvantage. Deal with it and get debt free if you can. You will not regret being debt free. Build with no loans if at all possible.

[lifelinegrp]

Hello, all!

Here's another option to help pay for a spot. Buy a dilapidated HUD property, salvage what you can, demolish it, and build what you want. We're doing exactly that for our daughter who was in two hit-and-run car accidents and can't work. She's currently living in our basement. The property has a great well and septic already, and we can build inexpensively which is really needed since we're actually building a second home for our dependent. She's great with freecycle, and someone found us who was redoing their kitchen. She now has a whole kitchen (in our living room for the time being), but it was free! We definitely needed to build without a bunch of debt. Yes, it takes time, but so does earning money to support a bunch of debt, and the debt carries stress. I'm happy to spend the time as opposed to the money.