Sometimes, you can turn a cost into a negative cost. A former architecture student of mine, Dominique Tonetti and her husband, Frank Dutton, are managing to do that on their new project, Solisterra in Québec.
Dominique and Frank are building wonderful straw bale structures on a 150-acre property they own in West Québec. The lands are beautiful—abundant wildlife, several lakes plus a huge variety of trees.
They are going to build off-grid cottages on their lands that will be rented by the week to people who want to de-stress and live a simpler life. (Where do I sign up?) Some of the things they are working on include straw bale construction, solar electricity, solar heating (for hot water (which I really like)), solar ovens and green roofs.
They are determined to retain ownership of their property, not go into a mountain of debt (and thus run the not insignificant risk that the bank or finance company will one day own the cottages and the lands) and yet produce seven or eight cottages and a rec hall and a retreat to compete with the best in Eastern Ontario or West Québec. How will they do that?
First, they turned down ruinous interest rates from some predatory financiers who were going to advance construction funds. Not only were their interest rates punishing, they also required large fees—fees when they originate the loans, fees when they provide a draw, even fees when you pay the thing off with a permanent mortgage. And on top of that, Dom and Frank would have to pay legal fees and appraisal fees. Every time they want a draw, they would have to beg the appraiser to come out, then beg him or her for a decent appraisal, then beg the loan company and lawyer for a draw that was enough to pay all the darned fees plus their costs of construction less the 10% holdback.
A friend of mine (another former student, Matt Nesrallah, who runs his own financial advisor shop at Primerica) told me that the most powerful force in economics is compound interest. This is not a new idea, but it needs to be said again here. If your repayments to a Bank or a credit card company or the IRS or CRA compounds at a high rate of interest, you’re doomed.
So, Dominique and Frank decided to:
a) build the homes themselves thus reducing the cost of construction;
b) build only one unit at a time thus reducing their cash requirements further;
c) take a low interest rate mortgage on their existing home to fund what out of pocket costs they do have;
d) lastly, Dominique has offered to train and teach people straw bale construction.
In effect, she is running a school and can charge people for coming out and working on her project. They learn design from Dom, they learn construction techniques, they work with their hands which can be therapeutic, they work in a lovely setting with great people, they have fun, they feel like they are a part of something bigger than themselves and they gladly pay for the privilege.
THIS IS NEGATIVE COST LABOR.
Now how about that?
Here is a comment from Dominique—
It is a good story, it makes us sound more business savvy than we feel, but it is indeed how we operate. A small correction however, Solisterra is 350 acres, 150 of which is the two lakes. The workshops go beyond straw bale construction. Since we needed extra arms and many people wanted to learn how to build their own dream homes, we discovered that we could “sell” knowledge of: a) timber framing (which is very easy to build when you know how), b) masonry ovens, as well as c) installation of solar electric systems.
For next year’s unit, we are putting together a 10-workshop package (some people really want to know every step from the foundation up) in a one price deal. The great thing for us is that people become much handier by participating in our workshops…
I almost feel guilty charging them when they become very useful…but not quite! I have to remind myself that knowledge has a price. I learned all these construction techniques the hard way. I had to perform many tests before I could write specs (with a good conscience) to accompany my plans on previous projects.
Thank you for thinking of us for this story.
FOR REAL ESTATE INVESTMENT AND BUSINESS COACHING THAT’LL HELP YOU PROVIDE FOR YOURSELF AND YOUR FAMILY FOR 3-GENERATIONS, PLEASE CONTACT:
Bruce M Firestone, B Eng (civil), M Eng-Sci, PhD
Real Estate Investment and Business coach
ROYAL LePAGE Performance Realty broker
Ottawa Senators founder
• MAKING IMPOSSIBLE POSSIBLE
• FREEDOM VIA REAL ESTATE INVESTMENT AND PB4L, PERSONAL BUSINESS FOR LIFE
• FEHAJ, FOR EVERY HOME A JOB
• MAKE YOUR HOME WORK FOR YOU, INSTEAD OF YOU WORKING FOR IT
• HIGHER ROI NOT JUST FOR OWNERS AND INVESTORS, BUT FOR TENANTS, GUESTS, VISITORS, NEIGHBORHOODS, COMMUNITIES, TOWNS, VILLAGES, CITIES AND THE ENVIRONMENT TOO
Image source: By JonathanCross at English Wikipedia – Transferred from en.wikipedia to Commons by Manuguf using CommonsHelper., Public Domain, https://commons.wikimedia.org/w/index.php?curid=8992852
Image source: By Rrechtschaffen at English Wikipedia, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=8992834