Post Frame Home Construction

[David Beard]

I was curious if anyone out there has had experience with both the construction and/or economics of building new pole barn homes in rural areas that are within commuting distance of a sizable metro area.

I have been approached with a JV business proposition from a trustworthy and experienced channel. The idea is to build 1500-2000 sf pole barn homes on 2-3 acre parcels. These can be constructed for about $40/sf (including environmentally friendly septic), with the lot purchase/prep running about $20k. So we would be all-in on a 1500sf home for around $85k, with exit price of $125k. This area is within easy commuting range (via interstate) of metro employment areas, while being very appealing to those favoring rural living, and there is very little housing available in this price range in the area.

They tell me that this type of home can be financed conventionally (still need to verify this), and we'd create our own comps after it got rolling. Lot costs could potentially be pushed down if land acquired in larger parcels, with homes constructed on contiguous lots. The homes are built with high energy efficiency (I'm going to look at a model tomorrow) and radiant flooring. The homes can be constructed in 45 days, and buyers pre-qualified preferably, so the turnaround time would be theoretically very swift.

Anyone done this type of thing, or can poke holes in it? The model home will be on the market soon, so I'll hopefully get some proof of concept based on how much demand they get from buyers.

[David Beard]

We're getting into all kinds of non-traditional construction, which is great. Post frame homes are not "barn style", however, particularly when done as one-level ranches, and are not steel buildings, and are not "post and beam" structures.

I was just able to finally check this out. I met with the framer for these homes, and he can erect the structures in less than a week, which includes all windows and doors, so basically the home looks finished on the outside at that point. The interior can be done in 4-6 weeks, depending on floor plan and finishes, etc. So there is an extremely quick build time with these.

The preferred method appears to be to set pre-cast concrete posts in the ground, then attach wood posts to these above ground level. These posts support the trusses and frame. The slab can actually be poured after the structure is in place.

Incidentally, I would have preferred to have named the post Post Frame Home Construction.

Financial:

* Targeted profit margin = 18-20% of sales (about average profit margin for new residential construction)

* Time to build = 45-60 days (hard to believe, I know, but the builder has done it multiple times); this velocity is how ROI is maximized

* Thus investment capital can be turned 4 times per year.

* Buyers are pre-screened, so 2-3 mths from start of build to final close (2 mths for FHA or Fannie financing, 3 mths for USDA financing, which has an extra underwriting step)

* Many buyers can utilize zero down USDA financing in targeted rural areas, and can have household income up to 82k for families up to 4, and 100k for families of 5 (income limits for our area)

* Targeted sales prices for various models will be $135-170k.

* Material costs can be driven down substantially when building at volume (such as 20-35% savings, per builder), so achieving scale is critical to maximizing overall profit margins

* Build for 20-30% less than traditional stick-built

* Scarcity of homes in the $135-170k range are expected to lead to high demand, per numerous realtors, particularly for new construction on 2 acres of land

* These rural counties typically require at least 1 acre when building. Septic installation is a considerable expense, running $9-14k depending on need for a pump, etc. Each site needs an appropriate secondary backup area as well for septic.

Building advantages:

• Substantial savings vs continuously poured foundation
• Much less framing material needed due to post frame design
• Large wall cavities permit insulation of R30-R40 in the walls and R50-R60 in the ceiling
• Radiant flooring can be economically installed
• Leads to very high energy efficiency with utility savings of 20-40%
• Conservation of building material, reduced energy usage, and minimized disturbance of soil all contribute to "green" aspect
• Very rapid build time of 45-60 days
• Can build through winter with no issues (slab can readily be poured inside framed home)
• Metal roofs are highly resistant to hail damage, and insurance cost is normally less
• Exterior is 100% maintenance free and will last for decades
• Structure design has very high resistance to damage from wind, seismic, and snow loads (superior to stick-built)
• Free-span structure facilitates open interior spaces, cathedral ceilings, and stylish lofts
• Exterior can be accented with stone, brick, and other materials
• Stylistic external use of masonry accents, dormers, gables, and waitscoting provides attractive appearance
• Maintenance free aspects and one-level living could be very appealing to seniors who are downsizing, particularly in structured communities with some common walking areas or other inexpensive amenities.

So there's some more color. I'll update as things progress.