Second homes | Build a chalet without breaking the bank

When the pandemic hit, many townspeople wanted to flee the city. They saw each other on the shore of a lake or in a mountain valley. When cottages have taken off, many people have instead bought land to build the estate of their dreams. But with rising material costs and a tight labor force, some have postponed the project and are now wondering how to get there.

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Martine Letarte

Martine Letarte
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France Gagnon liked to walk to have a drink on a terrace, to have dinner in a restaurant or to see a show at a festival. “But with the pandemic, we couldn’t do that anymore, and there were just the inconveniences of living in the city, like being stuck in a traffic jam to ride a motorcycle or ski,” she says at his Montreal apartment.

She and her spouse therefore bought a piece of land in the Estrie countryside to build a house there to spend their forthcoming retirement.

“We had a budget in mind, and when we made the plans we realized we wanted something big enough to let our kids sleep when they came to visit,” she explains.

They planned to build just a garage with a loft at first and then add the other parts of the house at their own leisure. “But the city doesn’t allow it, so it will cost more to build everything at once,” says France.

You decide on a prefabricated house in shell construction and then take care of the interior design yourself and hire professionals, especially for plumbing and electrics.

We estimate that the overall project will still cost us almost $250,000 more than we originally intended.

France Gagnon

“But at least the contractor we chose for the shell construction was highly recommended, which reassures us,” says France.

France is also considering delaying his retirement after his employer made him an attractive part-time offer until 2025.

Although the land has not yet been cleared and it lacks the service infrastructure, the members of the couple are aware that there are many stages to traverse and many possible unforeseen events to traverse before they can relax by the fireplace. They also look around for country houses for sale in the area and if they find one they will sell their land on.

Elements make it difficult to finance the project

France and her spouse are not the only ones in this situation. “During the pandemic, there was a real sense of urgency to get out of the city that’s less there now, the market has gone down slightly so we’re not in the same madness of one-upmanship and multiple offers,” says Marie -Piers Barsalou, Certified Real Estate Agent with Sotheby’s International Realty Quebec in the Eastern Townships.

However, she points out that prices in the region have risen by 35% during the pandemic. She now expects people who rushed to buy before they had a good estimate of construction costs to put their land up for sale.

Hadi Ajab, an independent financial planner and mutual fund representative at PEAK Investment Services, is already seeing people in his clientele reassess their construction project. “Their reasons depend on how they need to fund their project,” he says.

He points out that those funding it with their savings have generally seen the value of their investments fall. And those looking to get a mortgage have seen rates rise. After all, those who want to sell their current property in order to build the new one have to live with the falling prices on the market.

“All this while the prices for construction projects have been rising in recent years,” says Hadi Ajab. Regardless of the type of funding, a funding plan must be drawn up to ensure it is still feasible and desirable. »

Estimate that is as fair as possible

Although there will always be an element of the unexpected, according to Hadi Ajab, making a detailed assessment of costs is essential. He indicates that there are important phases to consider during construction. First, plans, specifications, permits, deforestation, excavations and foundations. “The foundation walls and concrete floor account for about 30% of the total project cost,” he says.

He then states that the cost of plumbing, electricity, walls, ceilings, windows, roofing and siding accounts for about 40% of the cost. And another 30% for external stairs, sanitary facilities, counters, cupboards, etc.

“You must plan the cost of each item and sub-item as carefully as possible, taking into account materials and labor, you must obtain two or three firm quotes that include dates of delivery and terms of payment, and you must have written contracts that leave the least room for interpretation. »

He also recommends doing a little research to ensure the contractors you choose are well registered and have the necessary permits to remedy the situation should a problem arise.

Finally, he insists that you must respect your budget. “If we’ve budgeted $400,000 and end up moving toward a project that’s going to cost $500,000, we have to go back to the drawing board and reconsider certain decisions,” he says. Money doesn’t grow on trees. The construction of your country house must not become a nightmare. It must be a dream come true. »

Development of material prices

Contrary to what many people might think, the prices of many materials at major stores have fallen recently, notes Richard Darveau, president of the Quebec Association of Hardware and Building Materials (AQMAT). “And that while the consumer price index [IPC]i.e. inflation, has risen sharply,” he says.

He cites the example of the 2 x 4. “It hit $12 or $13 at some point during the pandemic,” he says. At the end of July it was $5. Prices have come down a lot, but I don’t think we’ll go back to what we were before the pandemic, like $2 or $3. »


Four financial elements to consider

Apart from the cost of building a chalet, there are several elements to consider when carrying out your project.

Do you meet the requirements for a loan?

Financial institutions use two formulas to estimate how much the household can borrow. First, there is the gross debt amortization ratio. “It is highly recommended that you spend no more than 32% of your gross income on expenses related to buying property, such as mortgage payments, city and school taxes, heating and electricity, to be able to pay for other expenses. says Hadi Ajab, independent financial planner and mutual fund representative at PEAK Investment Services. Then there is the total debt amortization ratio, which adds up other debts like the car loan, credit card balances, and so on. “It’s strongly recommended to stick to a maximum of 40%, although institutions can go beyond that,” he says.

Do you know how financing for home construction works?

“This is by no means a classic mortgage loan with the property as collateral,” the financial planner specifies. Since the property doesn’t exist yet, the financial institution doesn’t give all the money at once. “It will be done in stages, asking for details of the work done, sending inspectors and notarizing each disbursement,” he adds, specifying that not all financial institutions grant this type of loan.

Have you accumulated 10% more?

“You must always have at least 10% more cash than the cost of the project, including the land price, in addition to the down payment,” says Hadi Ajab. This is used to initially purchase materials, make deposits, etc. Most financial institutions require it and real life requires it too. »

Have you assessed what this project will take away from you?

Building a house in the country is a big life project. And it’s expensive. “Deciding to use your savings to carry out this project is a big decision,” says Hadi Ajab. You have to look at what this choice will force you to leave out. Will you still be able to travel to afford good restaurants? You have to be sure that this is really what you want. Because inevitably this choice means that you give up certain things. »

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