T Nation

Calling All Investing Gurus

Guys, I’m saving cash to build a house possibly next year if everything goes smoothly with planning.

I’m not sure what to do with the cash I’m saving. Lumber and building material prices are climbing faster than I thought possible, meanwhile my money is liquidated and only making me 0.5%. At this rate I won’t be able to afford the house I designed last year because I just can’t keep up with the INSANE price increases.

What would you guys do? How about getting some extra income on the weekends without getting a second job? Ideas?

Look around for old barns and garages to pull down, then salvage building materials like beams and joists. You might even be able to charge people to remove their old buildings.

You might need some of that cash to rent equipment.

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Are you dead set on building? You could look at a fixer upper. Housing right now is insane. Materials are also insane. I think the fixed upper is a way to get around that a little bit, plus you get to do some design.

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A good question, there are a lot of options, but none sound as appealing to me a building the exact design I want. The land I have is a waterfront that I already own, which was hard enough to find, I would hate to sell it.

I think my priority would be to cut out any expensive finishes or leaving a bathroom unfinished before having to switch from building. Man, I wish I was locked into a building contract a year ago!

Times are crazy right now, everyone is making money off of crypto, stocks, and real estate, but I’m stuck with a low risk profile. I feel like I’ve been missing out on the best investments of my life just because of poor timing. This building project has been in the works for 3 years, so I’m pretty attached to it.

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Yeah, I wouldn’t give that up either. Does the home have a basement planned? You can skip on finishing that if so.

I think go lower end finishes. Many times those really don’t make much difference. I have low end granite (it is much thinner, and uses granite end caps to make it look thicker), and it is much less money than the high end stuff. I don’t think most notice.

The thing you can’t change is location.

Given you plan to buy a home next year, your investment horizon is approximately 12 months. A timeframe so short would mean a cash/near cash portfolio is optimal.

At a push, you could look at a Timber ETF or an ETF that has a high correlation to building materials prices for where you are - which depending where you live, may be possible. That being said, extremely unlikely you will find something that perfectly correlates with your local prices and you will be taken on some form of market risk which, with your investment horizon, is risky.

I would just be looking at savings account that offer an introductory special rates for a certain amount of time e.g. 2% for 4 months. Once the introductory rates finishes, move to another financial institution offering a ‘special’ rate. Given your liquidity requirement and timeframe, you do not want to be placing your capital in high risk investments (crypto, stocks) - despite the potential gain that may arise over the next 12 months.

Good idea. I’ll see what I can find.

Wait out labor and material prices. All time highs right now that are unsustainable.

Invest it all in a well balanced portfolio and in <5years construction costs will have dropped dramatically and your nest egg will have grown considerably.

Don’t build now off emotion.

The other option is to subdivide your land if zoning allows and sell a portion of it off after building your house and stubbing utilities to the new lot.

I’ve thought about this in depth. It might be a good option. I do have a couple permits that will expire in a couple years that would need extensions if things stay high that long. I think he big question is will things actually come down?! I know Warren Buffet expects this whole pandemic to be inflation rather than a temporary blip, and that is worrying for a lot of reasons.

Zoning wouldn’t allow this unfortunately. My lot is already grandfathered in as a subdivision that would not be permitted in currently.

If things don’t come back down, your nest egg has still increased considerably. Labor and raw construction materials are not this high because of inflation… OSB has tripled in 2 years, skilled trades and GCs are booked out a year or more at all time high wages. Expect prices higher than 2018, but the current prices are a combo of tarrifs and covid, not inflation. IMO.

I’d wait it out, and in the meantime grade/pad out the lot, install landscaping away from the pad and lay down areas, install a composting toilet and put up a sweet $10k yurt to glamp in or rent out on AirBnB. YMMV.

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