Gentleman Builder Blog

Building a Home : Is a Building Lot a Sound Investment?

Tue, 13 Apr 2010 21:42:00 GMT

As prices drop for products its only natural that buyers want to take advantage of the perceived discount. The drop in real estate values has certainly been a motivating factor in some buying decisions. The mark down has influenced some to step into the market to purchase finished lots. This lot buying activity should provide a reason to pause and ask the question; is buying a building lot a sound investment?

Financial investments have a variety of goals; growth, income, tax shields, dividends in addition to risk factors and time horizons. Everyone has different investment goals and risk tolerances but understanding the factors that impact the purchase, ownership and sale of land is important for making an educated financial decision.

Several investors we surveyed consider only two numbers when evaluating the performance of a real estate acquisition and sale. The investor focuses on how much they paid for the property and their sale price when they exit the investment. Unfortunately this concentration on only the acquisition and disposition costs leaves out so many expenses that it provides an inaccurate view of the investment. It is particularly important for the owner to have an accurate accounting of their total investment, including all of the expenses of ownership, before they make the decision to buy or sell an investment property.

In addition to the initial purchase price of the lot the investor needs to consider both the one time and recurring costs associated with the investment. To evaluate the investment the owner needs to consider closing costs, maintenance, taxes, loan interest, capital improvements, association dues and assessments and selling expenses including commissions.

We have created several models for our own investments and the real estate situation of others to assist in the strategic analysis of land and lot holdings. You may be surprised to learn what we have discovered. Let us know if you are interested.

Michael Stein, The Gentleman Builder, is a home building and remodeling expert located in Bonita Springs, Florida. Michael has over twenty-seven years experience in the home building and real estate development business and has built thousands of home throughout the United States.

Get the facts about MOLD from a Naples Home Builder

Fri, 19 Feb 2010 21:06:00 GMT

We recently received a call from a customer that purchased a condominium from us a few years ago. The condo was purchased as an investment property and after his tenant moved out, visible mold was discovered growing on the drywall adjacent to the bedroom windows. We inspected the property to determine the cause of the mold. After we ruled out any water infiltration or plumbing leaks we learned that the tenant did not like air condition and did not run the A.C. system during his occupancy of the condo. That is not a good idea in a tightly constructed building in Florida. The A.C. in addition to cooling the air de-humidifies the property. Humidity in excess of 60% will support the growth of mold. Following is a short description of some basic regarding mold.

Mold is a natural substance in the environment.

Where Does Mold Come From?

Mold is a form of fungus. Other examples of a fungus are yeast and mushrooms. Molds have an important role in ecosystems by decomposing dead organic material like fallen logs. However, we want to avoid allowing mold to grow indoors. Mold can grow indoors when their reproductive component, microscopic spores, land on wet surfaces. Moisture is a necessary ingredient to allow the spores to grow.

When and Where Should We Be Concerned about Mold?

Molds are all around us and they are not usually a problem. Molds have the potential to be problematic when they land on moist surfaces and begin to grow. Molds produce substances that can cause irritation and allergic reactions in people and animals. In some cases molds produce potentially toxic products. Any of these irritants can cause responses such as cough, sneezing, red eyes, skin rashes, even asthma. Some people experience severe allergic reactions to mold.

Is It Important to Get Rid of Mold that is Growing?

You can not get rid of all the mold and mold spores that exist inside a building. But you can control mold. Mold will not grow without moisture. So if there is a mold problem there is a moisture problem. If you discover mold in a home and clean it up but do not fix the moisture the mold will grow back.

Are There Statutes That Govern Mold Remediation?

There are no state or federal statutes or regulations regarding mold. Therefore, test sampling for mold does not provide a measurable value that is useful. If visible mold is present, clean it up and fix the moisture problem.
There are several publications and websites provided by public agencies regarding mold. One of these papers is “Mold, Toxic Molds and Indoor Air Quality” by Pamela J. Davis (www.library.ca.gov/crb/01/notes/v8n1.pdf)
provides relevant information about this topic. The U.S. EPA Indoor Air Quality website states “Standards or Threshold Limit Values (TLVs) for airborne concentrations of mold or mold spores have not been set. Currently there are no EPA regulations or standards for airborne mold contaminants.” See www.epa.gov/mold/moldresources.html )

Is Testing To Determine Toxicity Worthwhile & How Is Mold Cleaned up?

Not according to the government agencies. Testing is expensive and regardless of the type and concentration of the mold this information is not necessary for clean up.

It is important that proper measures are taken when removing mold to avoid creating adverse health issues for the clean up personnel. Also efforts should be taken to minimize the spread of the mold spores to other parts of the building. Large mold infestations are probably best left to professionals for clean up. Refer to the EPA website listed above for directions on how to clean concentrated areas of mold.

What About Insurance for Mold?

Many insurance policies exclude coverage for mold. However, if the mold growth is the result of an insurable act such as a broken pipe or weather event the mold remediation may be covered by the policy. You may want to read your policy and ask your agent for an interpretation of the coverage.

Make sure you protect your property by keeping mold in check. This includes keeping your mechanical systems in good working order and making sure they are utilized. If you have a rental property, you may want to specify in your lease that the tenant is obligated to use the A.C.

Mold is a source of debate and disputes. Do you have any controversies related to mold?

Here's a Way To Stimulate Economic Growth in Naples Florida

Mon, 01 Feb 2010 19:37:00 GMT

We have been evaluating new home building opportunities over the past few months. A realtor we have known for many years suggested we look at waterfront property in Marco Island, Florida. Marco Island is a residential resort and retirement community that began development in the 1960s. The developers concept was to create affordable waterfront living. A highly successful marketing campaign enabled the developer, Deltona Corporation to sell thousands of lots. Half a century later, over l5% of the lots still remain vacant.

In order to build a new home one has the cost of acquiring the land along with the construction costs of the new home, pool and other special items such as a boat dock. It probably comes as no surprise that the building permit too requires a fee. However, most people are surprised to learn that in addition to the permit fees the city and county tack on “impact fees” to the building permit. The fees to build a new home of approximately 2500 square feet run a little more than $53,000. The median price for a 2500 s.f. home in Marco Island is $358,000. Therefore the fees paid to local government to build a new home represent l5% of the median home price. The impact fee costs exceed the cost of
the structural shell of the building.

In my opinion in addition to putting the stop to our potential venture, the impact fee is a significant impediment to future economic growth for the entire region. Lots of jobs are created when building a new home. The current governmental fee structure discourages building. Here’s a suggestion; cut impact fees, create jobs and stimulate economic growth.

In President Obama's January 27, 2010 State of The Union address he stated that job growth is the highest priority for our country. Do you agree?

Michael Stein, The Gentleman Builder, is a 28-year veteran of the residential construction industry.

His Certified to Sell Home Analysis is used by Collierand Lee County's top producing agents to realize the highest possible sales price for their buyers. Learn More »

Impact Fees... What Do They Mean for Homebuilders and Homebuyers?

Mon, 25 Jan 2010 18:12:00 GMT

Impact fees are a major source of how local governments finance their infrastructure. Impact fees first appeared in the 1950s as a way to recover the capital costs of building water and sewer treatment facilities. During the anti-tax movement characterized during Ronald Reagan’s term as governor of California impact fees were expanded to a wider range of municipal facilities.

As an example, the list of impact fees charged for a new residence in Marco Island, Collier County Florida include: regional parks, community parks, library, schools, EMS, correctional facilities, roads, police, government buildings, water and sewer. Commercial buildings have additional fees added depending on the type of use.

The intent of the impact fees is that “growth should pay growth.” Therefore, impact fees are typically charged along with the building permit fees for new construction projects. Following through on the Marco Island example, the sum of the fees for a new 2500s.f. home is $53,135. This fee must be paid to receive a permit to construct a new home.

There is some controversy regarding impact fees. Opponents believe that impact fees hinder the development of local economies. This, in turn hurts job growth. In addition, impact fees increase the cost of a new home. Another argument is that impact fees serve as a defacto tax which can also slow development and growth and shift investment to areas devoid of these fees.

In spite of these criticisms, along with legal challenges over the years, impact fees are a fixture in local governments that are likely to remain for the foreseeable future.

Home Renovation Bids Need Definition

Fri, 18 Dec 2009 22:19:00 GMT

Realtors call us to help sell properties by having us evaluate and budget repairs and improvements to their listings and purchases. These evaluations sometimes lead to work for our construction company. We are not in the home inspection business but having built and remodeled thousands of homes, we usually can provide useful information for the realtor and their client.

Recently a call came in on a Friday afternoon from a real estate agent that we did not know but were very familiar with her brokerage company. The agent’s company has done lots of business with our firm and we have a lot of respect for the owners and management team. So when an agent from this real estate company calls we give them top priority.

My Friday afternoon phone conversation with the new agent revealed that the agent’s buyer had made an offer on a home and the offer expired at the end of the next day. The agent went on to explain that she had knowledge that the house had termite damage and her buyer needed to know the cost of repairing the termite damage. The realtor emphasized the need to have this termite repair bid by Saturday at 4pm. I explained that I would do my best to accommodate the short notice but I needed some information to proceed. Some of my questions were: What is the extent of the termite damage? Where is the termite damage? Is there structural damage? What is the scope of the repair?

The realtor did not have an answer to any of my questions. However, she insisted she still needed me to come to the property the next day so my “bid” could be presented to the potential buyer for evaluation. When I asked the realtor how she and the buyer would be able to evaluate a bid with no defined scope of work she became annoyed with me and stated “my client does not know anything about construction and I can not let him make his decision based on one bid.” I explained to the realtor that 30 bids provided without a qualified description of the scope of work would be no more useful to her or the client than one bid. I went on to let the realtor know that we would need to decline from providing one of the several bids that she felt compelled to obtain.

I tried to explain to the realtor that multiple bids without a defined project is a waste of everyone’s time. Moreover, there is no way to accurately assess and compare bids provided without a scope of work. While the realtor did not disagree with me she was determined that by obtaining “bids” she was going to make sure her client was protected from making an uninformed and potentially bad purchase. I did not have the time or influence with this realtor to dispel her erroneous logic.

Project Coordination in New Home Construction

Fri, 11 Dec 2009 22:12:00 GMT

I am working on developing a budget to contract a proposed four unit apartment building on a waterfront site. The owner called me after he had already commissioned the architectural design. In fact, the plans provided were already signed and sealed by the designer’s engineer. Not surprisingly, the owner thought he had plans that were ready to go. Working on building a new home construction project involves the coordination of multiple experts.

The owner was a little perturbed when, after spending a few hours reviewing the plans, I informed him that the project was far from ready to build. “I thought that is what I paid the architect for” was the response from the owner when I asked him to clarify some of the missing plan items. The lack of a fire sprinkler design, finish selections or window manufacturer never occurred to the owner when he made the final payment to the architect.

Particularly vexing was the note by the designer disclaiming any responsibility for structural bearing capacity of the soil in spite of the fact that the owner had paid for and received a geotechnical investigation. Perhaps the fact that the plans were completed before the geotechnical report was drafted is an indication of the lack of coordination. Apparently it did not occur to the designer that the building foundation he was designing needed to rest on some type of soil.

At least the missing gaps of information and project coordination can be fixed before the building has started. I have explained to the owner that a qualified person needs to coordinate the planning and preconstruction activity or the proposed apartments units will not be built with compliance to any timetable or budget. I am still waiting for the answer to decide if he sees the value of my suggestions. We shall see.

Michael Stein , The Gentleman Builder, is a home building and remodeling expert located in Bonita Springs , Florida . Michael has over twenty-seven years experience in the home building and real estate development business and has built thousands of home throughout the United States.

Tale of Two Properties in Naples Florida

Fri, 04 Dec 2009 22:09:00 GMT

For those that do not know Naples, Florida it is a resort community located in Southwest Florida bordering the Gulf of Mexico. The weather and beaches are a big attraction but a lot of high end homes exist in country club communities as you head east of the coast.

Recently two different properties located in my hometown of Naples Florida, sold that are hard to make sense of the transactions.. Both of those sales were vacant home sites.

The first property is a 6750 square foot home site (approximately 1/8 acre) in an older neighborhood. This ungated community consists of smaller older homes occupied by working families and retirees. Be assured that while this location is desirable this is not a fancy neighborhood and some of the blocks have homes that are now ready for demolition. The run up in home prices that occurred until 2006 drove some homes in the 6750 square foot home site location to above $500,000. But as prices have fallen, average prices are now in the 250,000 to $350,000 range.

The second property is a 49,222 square foot home site (approximately 1.12 acres… 9 times larger than the first property) in a gated community some might say (certainly the developer) is one of the finest country club location in Naples. There are no working class heros receiving their mail there. 10,000 square foot homes are by no means the largest and several homes in this country club sold above $7,000,000.

The point of this comparison is that in November 2009, both these lots closed for $86,400 and $75,000 respectively. What this says about real estate is more perplexing than instructive. The only conclusion I can offer is what we already know… real estate values are as much out of whack on the downside as they were on the upside. As bad as the automotive sector is, you still can’t buy a Rolls Royce for the same price as a Kia.

Home Improvement - the Devil is in the Details

Wed, 18 Nov 2009 20:50:00 GMT

People involved in a profession for a long time sometimes forget that their clients and customers don’t know the vocabulary of their field. Even those aware of this tendency are sometimes guilty of this oversight. The language of the occupation is part of the badge of the expert. However, an expert who is unclear or misleading loses effectiveness.

What separates a great consultant is the ability to explain complex issues in a manner that relates to the client and their needs. An excellent doctor, accountant or attorney will spend the time and have the ability to inform you about your case in terms you understand. This communication is just as important for a builder and his client. The vocabulary of building is filled with words and phrases than may mean nothing to the customer but everything to the builder. If the builder does not make sure that his client understands, in their own terms, the terminology referred to on plans and in specifications, there is a risk of a misunderstanding or dispute. Misunderstandings can lead to unhappy consequences.

The best way to avoid potential misunderstandings on a building project is clear written communications. Written descriptions are good, drawings and pictures are better. It is possible that a customer thinks they understand what they are getting but they do not. Sometimes the client does not even know to ask the right questions. That is why a drawing with details helps to avoid a lot of uncertainty. Even a small project can benefit from clear diagrams that are labeled with details. The builder should review the drawings with the customer to make sure that the job description matches the customers’ expectations. The extra time and effort it takes up front to describe, clarify and explain the building project will go a long way towards a successful conclusion.

Bank Improvement or Home Improvement

Tue, 03 Nov 2009 22:12:00 GMT

Finally, after many months (actually 2 years) we sold a home we were carrying as unwanted inventory. All it took was discounting the property to half its original price; which meant the sale could be classified as subsidized housing…. Uncle Sam isn’t the only party passing out money. Anyway, it’s gone so lets be thankful.

But there is a subplot; with the protagonist as the bank. Closing day arrived and everyone had done their job. The realtors lined up the buyer, the punch list was completed, the buyer had wired their funds and the title company had all the documents ready and had made sure all the right parties had the documents well in advance.

The economists at the Federal Reserve are telling us that the seeds of a recovery are underway and the banks are on solid ground ready to service the public. Maybe so, but we haven’t seen it. The home we sold had a mortgage that needed to be released to convey the property. The title company obtained the payoff from the bank and placed this number on the closing statement. Unfortunately, the bank could not wait for the closing to occur to receive the funds that it rightfully deserved. The bank took the extraordinary steps to deduct the interest it was due, and calculated in the closing statement in advance from the borrower’s (us) account. Why not get paid twice when you can? After all, consuming the TARP money did not seem to cause too much indigestion. At least not for the ones that took the money, but what about those that foot the bills like bank customers, taxpayers, etc.

The story has a satisfactory ending. After lots of phone calls and countless bank approvals the bank put the money back in our account and waited for closing to occur (later that day) to be paid

Happy Thanksgiving.

Seasonal Home Maintenance Reduces Home Improvement Costs

Wed, 28 Oct 2009 21:32:00 GMT

The clocks changing Saturday night (Halloween) is a good reminder to perform the following maintenance items at home to keep your property in great condition. You will even have an extra hour to get the work done.

Change batteries in all smoke detectors and while you are changing batteries remove any dust or cobwebs. Dust and dirt can interfere with proper operation of smoke detectors and older homes without hard wired smoke detectors rely on batteries to provide the warning.

Make sure you have a fully charged fire extinguisher in close proximity to your kitchen. It is a good idea to review the location and operation of fire extinguishers with everyone in the household.

Change the filters for the air handler. Your HVAC system will operate more efficiently when it gets clean air.

Adjust programmable thermostats for the time change. If you do not have a programmable thermostat this is a simple upgrade that will save you $$$.

Inspect all the doors and windows. Check for proper operation, obstructions and cleanliness. Adjust, clean and lubricate as needed.

Check gutters and downspouts for clear flow and inspect roof for broken tiles or shingles. Gutters should be cleared from a ladder not the roof. The gutters and roof should be inspected before the onset of winter weather.

Test the GFIC outlets. The test consists of pushing the test button and resetting the outlet.

Inspect the landscaping. Trim trees and bushes that are overgrown and too close to eaves, walls and roofs. Look for any dead or diseased plant material and treat or remove as required. Dead tree limbs can damage the building and branches touching the home provide access for unwanted critters.

Clean the windows and glass doors.

Think about home safety:

Make sure emergency contact information is accessible
Keep a first aid kit stocked
Make sure grab bars are in place and secure
Reduce clutter
Check exterior lighting for security and an illuminated path of entry.

Test all the plumbing fixtures for proper flow and drainage.

Some of these items can be inspected and serviced by a homeowner. If you are not qualified or inclined to address these issues yourself hire a licensed contractor to assist you. Neglecting routine maintenance often leads to bigger problems later.

Happy Halloween!

Michael Stein, The Gentleman Builder, is a home building and remodeling expert located in BonitaSprings, <Florida. Michael has over twenty-seven years experience in the home building and real estate development business and has built thousands of home throughout the United States.

Collaboration Between Builders & Architects is Critical

Fri, 16 Oct 2009 21:27:00 GMT

We recently completed a bid to an organization for whom we have previously built several new homes. Our client instructed us to bid the job exactly to the plans and specifications as provided. We were told to keep in mind that this particular home, unlike the previous homes we have completed for the client was under strict budget constraints. While a quality home was of the utmost importance, there was no room in the budget for frills or unnecessary details. After a few hours reviewing the plan I was certain the budget speech was apparently not important enough to relate to the architect.

The conflict between the budget and the drawings became more clear at a pre-bid meeting the client conducted for the benefit (frustration?) of the bidders. The architect saw no problem with specifying 54” tall wall cabinets or providing insulation detail that required a foil radiant barrier to be attached to the underside of the top truss chord. (Neither of these specifications is close to ordinary). We have been building for many years and have assembled all sorts of odd details. We always figured out a way to get the job done but with the knowledge that there was a less expensive alternative if allowed.

Experience building thousands of construction projects has taught us that to control your budget the builder must have input with the initial design. The role of the architect/designer will be enhanced and the project more likely will be built with a happy client if the team is cooperating early in the process.

Is it Mold or is it Creme Brulee? Ask a Home Renovation Expert

Thu, 08 Oct 2009 18:34:00 GMT

A realtor I have known and done business with called me earlier in the week to help with a problem. Chris (the realtor) had an opportunity for a new listing and described to me on the phone her concern about a black substance oozing from the wall next to a built-in vacuum outlet. Chris was concerned the house had mold and this disclosure would interfere with selling the property. I agreed to meet Chris at the house (maybe if the black ooze was oil, I would purchase the house and recover in petroleum what I’ve lost in real estate).

At the appointed time I met Christ at the house (which by the way was beautiful and seemed a bargain at the asking price). I was led straight to the suspicious wall and outlet. The wall was certainly black but definitely not a fossil fuel. After some looking, poking and scraping I announced the need to tour the house. I think Chris was happy to show me the house and wasn’t wise to my stalling tactics, necessary because I had no idea what could make a vacuum cleaner outlet ooze a thick black substance that was definitely not mold.

As I was running out of time the tour took me through the kitchen and around the corner back to the wall that Chris was confident I was going to diagnose. Another closer inspection and I realized the black substance was hard and crystallized. Peering up inside the pipe the mysterious black ooze was stuck to the pipe walls. It appeared as if someone had prepared crème brulee inside the vacuum. As much as I wanted to help Chris, tasting the stuff was out of the question. Nevertheless, I do not recommend using a central vacuum to clean up a sugary, syrupy mess in your kitchen.

Credit Issues Continue to Hinder Building and Remodeling

Fri, 02 Oct 2009 18:20:00 GMT

Ken Lewis’ announced departure from his position as of Chief Executive of banking giant Bank of America yesterday is a high profile sign that the financial system in the U.S. has a long way to go to heal.

The scarcity of credit is hindering the ability of small businesses to operate. Credit is much more than bank and consumer loans. In the building and remodeling arena it is customary to extend financial resources in the way of labor and materials and wait for the General Contractor or customer to pay the vendor. Obviously the General Contractor is dependent on ultimately being paid by its customer, either directly or through the customer’s source.

But the small subcontractors, who may be supplying for example, shower doors or carpentry, needs to have the financial resources to supply the labor and materials while waiting to be paid. We are pointing out this obvious scenario because we are finding during our construction projects that due to the damaged economy the smaller subcontractors are hard pressed to carry on with business as usual.

Several of our subcontractors explain to us that their companies diminished liquidity or the disappearance of their credit lines makes it impossible for them to extend short term credit to the General Contractor.

Several of our subcontractors tell us that they lack the cash to carry inventory while they wait to be paid. This group represents established businesses we have known for years that never before had this problem. We often are asked by our subcontractors to pay in advance, for the materials they need. Of course, our customers do not pay us until the work is completed, inspected and approved. The world of credit led us into this economic mess and the world of credit needs to lead us out.

Purchase or Renovate?

Fri, 18 Sep 2009 14:35:00 GMT

Presently in the Naples, Florida area you can buy an existing home for a lot less than the cost of building a new home. In some cases, even if you had a free lot there are used homes that could better the cost of a home built on free land. Not much motivation to build a new home, is it? So if you were looking to change your living situation by buying a new home be prepared to spend more than you would for a used home of a similar size and location. So what do you do if you need or want to improve your living situation? It’s probably time to evaluate your existing home and make sure you are getting the most out of its features, efficiency and comfort. It’s a great time to maintain or improve your existing residence. Qualified trades people are available and the best value you can probably achieve in a home is by improving and staying put.

Consequently we have been able to help a lot of home owners by inspecting, analyzing and evaluation their present homes and creating a list of improvements from small to large that can add the most value in this topsy turvey real estate environment. We conduct a careful inspection and evaluate the building for a wide variety of issues. Perhaps we can help you too.