Across America the real estate market is crashing and homeowners are losing equity hand over fist. The market faces real, long term problems and home values will likely continue to fall for years to come. Fortunately there are several ways you can build a log home and not lose money due to this market crash. In fact, many people are managing to make a profit building log homes, despite the fact that the real estate values are falling.
Here are the problems hammering the real estate market: supply has outstripped demand, there’s been years of unsustainable price increases creating widespread overvaluation, for years banks and finance companies used questionable lending practices and suspect appraisal schemes, repo rates are approaching all time highs, realistic credit requirements have finally hit borrowers creating a credit crunch, mortgage costs skyrocketed while rental costs remained very low (which creates a disincentive to buy property), et cetera.
There’s no quick fix for any of these real estate market problems. To buy a house now simply means it will probably depreciate, and you’ll end up owing more than the home is worth. It seems that our country faces years of price declines in the real estate market, despite the slogans shouted by real estate agents.
The good news is that market needed a correction because many Americans faced the risk of being priced out forever from owning a home. The bad news is that people do not want to buy into a falling market. As the saying goes, “no one wants to try and catch a falling dagger.” That means many people who really want to be home owners are still locked out.
Despite all the doom and gloom, it is still possible to enter the real estate market right now and build your log home — without the high level of risk that most people face.
Here are some tips on how to accomplish that:
Your first job is to recognize that over the next three to five years property values will likely continue to decline. You simply cannot control the final sale price, appreciation rate, or depreciation rate of your home.
Your next job is to build a log home while controlling costs. If you can’t control the back end, then control the front end as much as possible. If it cost very little money to build your log home, then you won’t lose money if the market continues to crash and burn.
Luckily the butt and pass method is perfectly suited to keeping construction costs low.
- There’s no settling with our butt and pass method, so no need to cut keyways, use slip joints or screw jacks, etc. (no complicated carpentry work or finishing work).
- Building a Skip-style butt and pass log home is a very straight forward process, unlike every other style of log home construction.
- You can use almost all recycled building materials. It is possible to save over 50% on building your log home.
- As an Association member you can often get free labor for building your log home.
- You also have the option of using free logs to build your log home, that can really reduce the cost of your home.
Those are just a few of the reasons why building a butt and pass log home can be far less expensive than building a kit log home, or even a stick frame home.
We have members building awesome log homes for as little as $30K, $20K, and even as little as $10K. These homes have the same ‘fair market value’ as all the surrounding homes, and frankly it is very hard to lose money on a $10,000 log home.
If you build a $20,000 log home, or even a a $60,000 log home, you will be able to weather years of declining property values better than your neighbors — who have a $300K or $500K mortgage, or who spent $220K or $280K building their home.
Our members who buy all new materials from Home Depot, and subcontract out a lot of the labor, are still only spending about 130K. So if homes in your area currently sell for $200K+, then you still have a huge protective buffer against depreciation in this volatile market.
The idea is build an inexpensive home, and as the market continues to crash you won’t lose money. Worst case you might lose ‘potential profit,’ but that’s far better than actually losing money. Keep costs low. Build for cash out of pocket, or use a small construction loan. You can end up miles ahead of people who have taken out traditional 30 year mortgages — and who face being upside down in their mortgage for years and years to come.
There are some other concepts that can help a person survive the real estate crash, and even make good a profit while doing it.
- Build as small as you can afford. Mc Mansions are partly to blame for our current real estate problems, so don’t fall into that trap. Build a modest home for a real family.
- Build a butt and pass log home, sell it and carry the note. Charging interest is what helps people become wealthy and passive income is a good thing to have. So when you sell your inexpensively built butt and pass log home you might want to become your own bank (sell it under “owner contract”). Accept a modest down payment (enough to build your next home), and then have the person mail you their mortgage check every month and earn all the interest that the bank would normally get.
- Don’t be property rich and home poor. In other words, don’t buy 20 acres to build your log home on, instead buy one or two acres. It can be a compromise, but the goal is to get a log home built without being damaged by the real estate crash so keep costs low. Sometimes that takes sacrificing some items on your ‘dream list.’
- Design and build a very simple home, avoid too many corners, avoid a complicated roof, et cetera. A well-built log home of a simple design will generally sell for slightly less than a well built log home of a very complicated design — but it will cost far less to build. If your goal is to gain some socio-economic freedom, and avoid getting burned by the current crash, then you might want to start simple to keep costs low. You can always do a log addition later and add 8 more corners. Log additions are easy to do on a butt and pass log home.
- Don’t go crazy trying to keep up with the Jones’. Sometimes buying fancy stuff for a home, like stainless appliances or granite table tops, makes sense… but with this volatile real estate market it just doesn’t seem wise to ‘invest’ in a depreciating asset. So instead obtain a high-end effect through low-cost techniques. For example, look at doing stained concrete table tops, because they look awesome, hold up very well over time, and cost almost nothing to build.
- Be an ‘owner-builder.’ Build one log home for yourself, move into it and live there for at least 2 years and then sell it. It is possible to pay absolutely zero capital gains tax on up to $250,000 profit from the sale of your home ($500,000 for married couples). We have members who have made $200K to $400K profit, tax free, every few years by following that “build one, live in it and then sell it” philosophy.
- Don’t fall into the trap of thinking that low cost equals low quality. You can build a very nice log home for less than the cost of a mobile home or 5th wheel. Saving money is not a sin, and it’s nothing to be ashamed about.
It’s worth noting that recently we have seen many of our students selling their stick frame homes at a loss, immediately after taking our class. They want to sell before they lose more money due to continuing depreciation. Sometimes you just need to let go of the anchor before it drags you to the bottom of the ocean.
Then they build a beautiful, sturdy, inexpensive log home. The equity they create by building an inexpensive log home offsets the equity they lost in their stick frame home due to the real estate crash.
The bad news is that there’s no single magic bullet that will solve all the problems being created by the real estate bubble popping. The market will likely experience depreciation and people face continuing difficulties for years to come — just like a roller coaster heading down hill.
The good news is that it’s still possible to build your own log home and not lose any money, in fact it is still possible to make $160K profit. This is not a get rich quick scheme, like flipping run down houses while juggling a dozen exotic high risk mortgages after lying on loan applications. Instead this is a ‘get rich slow method,’ using hard work and the wonderful capital gains tax loophole. Or at the very least it is the ‘just get a good, solid log home without selling your soul to the bank’ method.
There are many techniques and strategies you can adapt in order to feel safe building a log home in the current climate. All it really takes are things like: frugality, hard work, self discipline, the right knowledge, a good plan, proper priorities, a good support network, and a can-do attitude.