If you’re budgeting the construction of your dream home, then you need to keep in mind a quirky aspect of construction financing. Loans for home construction are a bit a line of credit, you have a set limit on what you can spend and so you’ll need to budget carefully. You might be staring at a blank excel spreadsheet right now; try to get your budget started. Well relax; this article will give you some basic tips on where you can begin when it comes to budgeting Arizona construction loans.
Common pitfalls with Arizona construction loans and how to avoid them
The cursor in that row may be taunting you, blinking and blinking, a fresh document may be open ambitiously titled, “construction budget,” and of course your mind is spinning.
First take a deep breath, you don’t need firm numbers now because you need to get,
• Get contractor estimates: Please don’t use the numbers at the back of “Home Building for Idiots,” to plan your construction budget, because an idiot is what you’ll be if you don’t get estimates from contractors. You have no idea how much materials will cost, or how long work will take, so before budgeting proper even really begins, you need to get a contractor on board.
While you may not be able to plug in firm numbers now, you can at least brainstorm different line items for your budget based on the features that you’ll want in your house. While doing so you need to,
• Budget around your loan amount: You need to account for your loan amount when planning the features, you might want in your dream home. Your imagination might drenched in glimmering crystal chandeliers, as you might think it’s alright at this early stage to dream big and scale back later, well don’t. Like we said, this exercise is provisional at this point but still, be realistic.
At this early stage you’ll also need to:
• Account for the cost of land: Here’s a firm number you can plug into your budget at this point, the cost of buying land. If your loan covers the purchase price for the lot you intend to build on, then you need to subtract that number, while also subtracting another number because you need to,
• Budget around potential disasters: A lot can go wrong in a construction project, uncanny floods can erode freshly poured foundations, constructions sites can catch fire, or thieves might steal copper pipes for drug money.
But quite often, S simply happens. So another firm number you can incorporate into your budget is a few thousand dollars to account for unexpected expenses in case something goes wrong, which I can guarantee you, it will.
Budgeting Arizona construction loansis pretty easy if you follow these 4 steps
1. Don’t worry about numbers right now, get input from a contractor
2. List features you’ll want in your house while keeping your loan amount in mind
3. Subtract the cost of land
4. Set aside a few grand for potential problems
See easy right? Now that you know some simple tips you can stop watching cat videos and get to work.
If you’re in the Phoenix area and you don’t yet have a loan with which to budget you should contact Level 4 Funding for all your construction needs.
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.