Updated almost 5 years ago on . Most recent reply
Thinking through options...
Hey there! I bought a great little home at a great price and great interest rate last Fall in Washington, DC, where I live and plan on staying indefinitely. The plan is to build an ADU for my mom, and live in the primary unit myself while renting out 2-3 rooms to help cover the mortgage. So a buy, renovate/expand, hold, and rent, house-hacking kind of deal. However, as you all know, lumber prices are ridiculous and appear slated to remain high for the foreseeable future (at least according to futures markets). Other building materials prices have gone up as well. So naturally my bids are coming in much higher than I anticipated when I first got quotes, and I'm worried that building at peak prices will result in a potentially significant loss once building costs and corresponding home values in the neighborhood normalize. One noteworthy fact is that I've already dropped about 8K on architectural drawings, though I'm trying not to succumb to the sunken cost fallacy here.
Options I'm considering below, but curious if anyone thinks I should be thinking of other options or thinking about this problem in a different way.
1. Reduce scope/size of the project, in particular as it relates to framing and other aspects of the build that rely on lumber.
2. Lock in a contract now under the theory that prices are likely to continue to go up and complete the project as quickly as possible to start getting renters in earlier.
3. Keep scope/size as-is, but focus on only completing what is necessary to make the place "livable" while doing other aspects DIY or in phases later when prices come down.
4. Explore alternative framing techniques/materials to the traditional stick framing that may be cheaper or provide better value over time given the high lumber costs (ICFs?, Steel?, etc.)
If there is any analysis from experts who have thought about this problem that you're aware of, I'd love to check it out as well.
Thank you!
-Raha
Most Popular Reply
Hi Raha, I would try to complete the project as soon as possible to start making money from the rentals. You never know what is going to happen to commodity prices. The only sure thing getting your rentals going.