Barefoot Investor Scott Pape: How to choose a builder that won’t go bust

If you’re choosing a builder for your home you should be worried about them going bust, says Scott Pape. But there are some practical steps you can take to significantly reduce the risk.

One of my earliest memories was tagging along with Dad as he volunteered for Meals on Wheels.

“Perhaps that’s where I got my social conscience from,” I wondered.

“Ha!” he laughed.

“Huh?” I said.

“Well, I hate to break it to you, but you never went to Meals on Wheels with me,” he replied.

“I did, however, occasionally help out the local mortician. I’d basically just comb the stiff’s hair and spruce them up a bit before they got put in the casket. That’s what you probably remember. They weren’t old, mate – they were DEAD!” he roared.

That story explains a lot about my childhood … and the man who raised me!

Now, we have a Father’s Day tradition here at Barefoot that’s been going for almost a decade. It’s called the Ultimate Father’s Day Present: a chance to open up to you. So, if you’re lucky enough to have your father still with you, whip out your phone, hit ‘record’, and ask your dad the following five questions:

How did you meet Mum?

What advice can you share with me about money, life and happiness?

What does being a dad mean to you?

What are you most proud of?

How would you like to be remembered?

Video your dad answering Barefoot’s five questions for the Ultimate Father’s Day Present.

Chances are this video will one day be much more valuable to you than anything you’ve purchased from a store. I know that because throughout the year people send me emails like this one from Jude:

“Hi Scott, I just lost my dad and I’m devastated. Although he lived to the ripe old age of 94 it is still an enormous void that has been created in my life as we were very close. Years ago you suggested we interview our dads and record it. I actually did it. I just watched the video and although I bawled my eyes out, it will be one of the most beautiful memories I will have of my dad”.

Happy Father’s Day!

Tread Your Own Path!

Build or bust?

Hi Scott

I’m considering building in Victoria with Hotondo homes. I know their Tasmanian franchise went under. I’m 50, have a block of land with $92,000 left to pay on it and the town house may cost about $200,000 to build. My question is should I be worried about building a house considering the current coverage of building companies going bust? I’m worried and I’d hate to be left out of pocket.

Mandy

You should do your research before you choose a builder.

Hi Mandy,

Yes, you should be worried about building companies going bust.

However, in most States (except Tassie, who are looking into it), you’ll be covered by government-run home warranty insurance which protects you if your builder dies, disappears, or goes bust.

So why should you worry?

Because the process of making a claim is stressful and long-winded, and it can easily put you back. And if the builder goes into an arrangement, rather than bankruptcy you may not be covered.

Rising costs of materials and labour has absolutely smashed builders who entered into fixed price building contracts. Expect more builders to bite the dust in the coming months as inflation takes hold, interest rates rise, and the housing market slows.

The media will play on that fear of course (it keeps you looking at their OMO ads).

Yet here are a couple of practical thing to do besides doom scrolling:

First, ask the builder for five former clients.

Call all of them, and if you can, go to their homes and ask them about their experience, and if they had any concerns or red flags. This is the biggest transaction of your life, so take a few Sundays to review it.

Second, get legal advice before you pay any deposit.

Third, understand that the best builders are open and honest about things outside of their control – like future prices of materials and labour – and they manage their client’s expectations accordingly.

Exploiting Kids for Profit

Hi Scott,

I read the paper this week and thought of you. At the government’s job summit this week big business is pushing to lower the age kids can work. They want children as young as 13 to work part-time jobs to plug their ‘labour shortages’. Let me decode that for you. It’s just another way for big businesses to screw workers. Everyone knows that the younger you are, the more shifts you get at places like Maccas. As you get older and more expensive you get less work. That brings down their overheads, and exploits young workers. This is not the Australia I grew up in.

Tom

A teenage worker at McDonald's Australia.

Hi Tom,

I’ll let you in on a little secret: I employ my four year old daughter to scoop up sheep poo from our shearing shed, and then spread it around our chestnut orchard. It’s dirty, smelly work – and I only pay her $2 a week for that job. It’s a total BARGAIN (for me).

Now the Retailers Association is calling for a national uniform age for beginning work, arguing that “an ideal model would allow 13 to 15 year olds to work, with sensible regulations in place around not working during school hours or at times that would impact a young person’s education”.

TICK!

My view is that a part-time job acts as a financial gateway drug for a teenager. After all, you’re never more interested in money than on your first pay day. It makes you interested in getting a bank account (and in paying bank fees), in understanding taxes, and later, in superannuation.

Yet these are all fries, compared to the Big Mac:

Creating a strong work ethic in your kids is one of the most important things we parents can do (and my soon-to-be released book teaches this directly). Besides, all the brains in the world don’t amount to diddly-squat if your precious snowflake won’t get up, get going, and get their hands dirty!

So I’m all in favour of scrapping arcane legislation and allowing all teenagers to work. After all, it’s not like parents are going to push their kids into doing degrading work where they are being blatantly ripped off … right?

My Wife Made a Financial Plan … Without Me In the Picture

Hi Scott,

According to my wife, you are an angel. Almost two years ago I was given a very bad cancer diagnosis and for two weeks we were told that my cancer was inoperable and I had two years to live. My wife couldn’t sleep, so she read your book instead (I had read it before and was asking her to read it). We worked out our finances with me in the picture and me out of the picture. Almost two years on, after a horrendous operation, a lot of radiation therapy and heaps of chemo today I got a good cancer result which allowed me to start back at work and get on with life. Thank you from my wife and the bottom of my heart.

Simon

Hi Simon,

That is awesome news!

And you’ve just taught everyone reading this a very important lesson:

You and your wife chose to channel your energy and focus towards the things you could control. And having that control is often enough to pull you through the darkest hours.

Well done to both of you. Here’s to your continued health!

DISCLAIMER: Information and opinions provided in this column are general in nature and have been prepared for educational purposes only. Always seek personal financial advice tailored to your specific needs before making financial and investment decisions.

Ends.

The Barefoot Investor for Families: The Only Kids’ Money Guide You’ll Ever Need

(HarperCollins)RRP $29.99

If you have a money question, email [e-mail] .

Originally published as Barefoot Investor Scott Pape: How to choose a builder that won’t go bust