Building—1st floor finish hard wood, 2d floor finish poplar,$3,000Privy and Vault$35Cistern and Connections50Well, Connections, and Pump35Walks, 40 yards at 70 cents28Fences—Tight board, 160 feet at 25 cents, Picket none,40Illuminating-Gas Pipe30Plumbing—Cellar sink 1, Kitchen sink 1, Bath-tub 1, W. C. 1, W. S. 1, St. Washer 1, City and Cistern Water,275Natural-Gas Pipe, without burners or burner fittings35Gas Fixtures50Mantels and Grates 3, Average cost $40120Furnace250Plate Glass50Cathedral Glass25Electric Work—Door bell 2, Kitchen bell 1251,128Without Architect’s fee$4,128
Everything that goes into a house should be fully represented to the owner. Thus the costs may be fixed and the aggregate understood. If this were universally done, there would be less said about the unreliability of architects’ estimates. If thearchitect is very careful to make known to the owner the quality of everything that he is to have, and, as well, the general quantities and costs, he is doing his full duty in this matter. Anything less than this is a neglect of duty. Furthermore, this should be made a matter of record, so that if changes are made and the cost altered, a basis for comparison may be at hand. It is the practice of the writer to use a specification which describes everything which may be a part of a brick or a frame house, and to stamp out the parts omitted. For example, in that specification there are specified brick and cemented floors for cellar. It is the custom to stamp the word “No” before the words brick floor, so that it reads “No brick floor in cellar.” In other cases it may be “No lattice work in side yard,” etc. Thus the owner of the house knows not only what he is to get, but what he is not to get, and the exact quality of that which is included as well as that which is omitted. He has positive and negative information with respect to his house. This form of specification has been in use three years, and has been uniformly satisfactory.
The schedule filled out for Mr. Smith is a printed form, which is handed to the owner as soon as the building cost is determined. It is in addition to the detailed specification. In the schedule the cost of the building is put down at three thousand dollars. The appurtenances are the items mentioned below the line which gives the price of the building proper, and in this instance are estimated at $1,128. The house estimate is $3,000. This makes a total cost of $4,128. The house was a well-finished building of nine rooms. The parlor and hall were finished in quartered oak, the dining and sitting rooms in quartered sycamore, the rear hall in quartered oak, the china-room in sycamore, kitchen and pantry in plain oak. It would have cost about $125 less to finish the first floor of this house in softwood. It is not possible to give general statements as to the difference in cost of finishing between hard and soft wood. Twenty to thirty-five dollars a room is generally ample, though the difference may be greater.
The privy building was figured at twenty dollars, and the vault at a dollar a foot. The cistern and connections at fifty cents a barrel. Thus a hundred-barrel cistern costs fifty dollars. The well pump, which was located in the kitchen, was a cheap form of horizontal force-pump fastened to the floor, with the handle coming up near the kitchen table. It supplied water to the kitchen sink. It, as well as the cistern pump, was included in the plumbing contract. The walks were ordinary brick walks laid in sand. Tight-board fence was figured, as shown, at twenty-five cents a lineal foot. The illuminating-gas pipe was figured at a little less than the price given on schedule “B,” but was ample. The same may be said of the plumbing work. The gas fixtures were neat brass goods that looked plain in the store surrounded with very elaborate ones, but were entirely satisfactory when in the house. The mantels and grates, as may be judged by their cost, were not very elaborate. However, they were of wood, the same style and finish as the room. There were bevelled-glass mirrors above the shelves. The hearth and facing were of unglazed tile, the grate-frame of brass, the grate itself club pattern, and altogether it was simple but pleasing. The furnace was of wrought-iron, riveted joints, with galvanized iron jacket. It would have cost about fifteen or twenty dollars more to set it in brick. This price included registers, pipes in the wall, and all connections. If the building had cost a thousand dollars more, or even two thousand, the appurtenances need not have cost more than a hundred to a hundred and fifty dollars additional. There would probably have been alittle more gas pipe, a few more fixtures, and the furnace would have been somewhat more expensive; or, if the house had cost five hundred dollars less, the appurtenances would not have represented in all more than seventy-five dollars difference, providing the general requirements had been the same.
The following schedule was prepared for Mr. Brown. His was an eight-room house; smaller, less elaborate, but just as well built, as the one for Mr. Smith. He did not have quite as much plumbing, and reduced the other appurtenances somewhat. Altogether they represent $801. If his had been a fifteen-hundred-dollar house, and the same general conditions had been met, the appurtenances would not have cost any less. Likewise, if it had been a two-thousand-dollar house, they would have cost no more. Additions to size of rooms or a more elaborate finish would not have appreciably affected the cost of the appurtenances. It is well to bear this in mind when building.
William Brown,—As I understand your wants, would estimate the cost of improvements contemplated on No. Alabama Street as follows:—
William Brown,—As I understand your wants, would estimate the cost of improvements contemplated on No. Alabama Street as follows:—
Building—1st floor finish hard wood, 2d floor finish poplar,$1,700Privy and Vault$40Cistern and Connections40No Well, Connections, and Pump Walks, 30 yards at 70 cents21Fences—Tight board, 100 at 25 cents, Picket none25Illuminating-Gas Pipe25Plumbing—Cellar sink none, Kitchen sink 1, Bath-tub 1, W. C. 1, W. S. 1,St. Washer 1, City Water200Natural-Gas Pipe, without burners or burner fittings30Gas Fixtures35Mantels and Grates 3, Average cost $40120Furnace240Plate Glass20Cathedral Glass noneElectric Work—Door bell 1, Kitchen bell none5801Without Architect’s fee$2,501
The two examples given show the method of filling out a cost schedule, which, by the way, is seldom presented in this form to the owner of a house by his architect. It now remains to indicate, in general terms, the basis of values as before given. It is not intended to form this book on the “every-man-his-own-architect” principle, but it is constructed on the idea that every one should know as much about the business in hand as is possible, before calling for other assistance. For this purpose certain prices are given which are a little in advance of those charged in the section of country to which they apply. This is done so that the errors, if any, may be on the side of safety. Generally speaking, there will not be any great difference in the cost of the appurtenances mentioned. It is the cost of the building proper which varies. The cost of the buildings illustrated is given, unless otherwise mentioned, on a basis of hard-wood finish for the first floor excepting kitchen, and soft wood above, all finished in oil.
Below is the schedule “B,” so frequently referred to in the description of house plans.
SCHEDULE “B.”Building.—First floor finish hard wood; second floor, soft wood.Where estimates are given in the book on the basis of schedule “B,” they include only the building, as mentioned above, and do not include the following items:—Privy building, $20; vault, $1 per foot for each foot in depth.Cistern and connections, $0.50 per barrel; pump, $5 to $35; well, $0.75 per lineal foot; pump and connections, $5 to $35. (Force pump included in plumbing contract.)Walks of brick, $0.70 per square yard; cement, $1.80 per square yard.Fences: tight-board, $0.25 per lineal foot; picket, $0.50 per lineal foot, painted three coats.Illuminating-gas pipe, $1.50 to $2 per connection.Plumbing—Cellar sink, plain ironset$10Hot-water boiler and back“25Kitchen sink, city and hot and cold cistern water“30Force pump and tank“50Bath-tub, 14 oz. copper“30Wash-stand“25Water-closet “washout”“40Street-washer“12City service, $0.35 a foot, lineal,laid.Drain connection, $0.30 a foot, lineal,laid.[For other piping and connections add twenty per cent of above aggregate.]Natural-gas piping, without burners, $4 a fire.Gas fixtures, about $1.50 per burner.Mantels and grates, average cost, $40.Furnace, for all pipes and connections, nine registers, $240; add $16 for each additional second-story connection; $8 for first-story connection.Plate glass, $0.50 to $0.75 a square foot, according to size.Cathedral glass, plain, $0.30 a foot; leaded, from $1 upward.Electric work—door bells, each $6; kitchen bell, $6.
SCHEDULE “B.”
Building.—First floor finish hard wood; second floor, soft wood.
Where estimates are given in the book on the basis of schedule “B,” they include only the building, as mentioned above, and do not include the following items:—
Privy building, $20; vault, $1 per foot for each foot in depth.
Cistern and connections, $0.50 per barrel; pump, $5 to $35; well, $0.75 per lineal foot; pump and connections, $5 to $35. (Force pump included in plumbing contract.)
Walks of brick, $0.70 per square yard; cement, $1.80 per square yard.
Fences: tight-board, $0.25 per lineal foot; picket, $0.50 per lineal foot, painted three coats.
Illuminating-gas pipe, $1.50 to $2 per connection.
Plumbing—
Cellar sink, plain ironset$10Hot-water boiler and back“25Kitchen sink, city and hot and cold cistern water“30Force pump and tank“50Bath-tub, 14 oz. copper“30Wash-stand“25Water-closet “washout”“40Street-washer“12City service, $0.35 a foot, lineal,laid.Drain connection, $0.30 a foot, lineal,laid.
[For other piping and connections add twenty per cent of above aggregate.]
Natural-gas piping, without burners, $4 a fire.
Gas fixtures, about $1.50 per burner.
Mantels and grates, average cost, $40.
Furnace, for all pipes and connections, nine registers, $240; add $16 for each additional second-story connection; $8 for first-story connection.
Plate glass, $0.50 to $0.75 a square foot, according to size.
Cathedral glass, plain, $0.30 a foot; leaded, from $1 upward.
Electric work—door bells, each $6; kitchen bell, $6.
VARYING BUILDING VALUES.—COST OF APPURTENANCES.—PRICES OF LABOR AND MATERIAL ON WHICH ESTIMATES ARE BASED.
VARYING BUILDING VALUES.—COST OF APPURTENANCES.—PRICES OF LABOR AND MATERIAL ON WHICH ESTIMATES ARE BASED.
The cost of building varies in different sections. At the end of this chapter will be found a list of prices upon which the building estimates of this book are based.
The plumbing schedule is formed so that one may see about what the different items of a completed plumbing outfit cost. Figuring sixty feet of service and seventy feet of drain, the plumbing outfit would cost, as indicated, $328. It has been furnished for less. The figures given in connection with plumbing work are not necessarily accurate. They are approximately so in detail. As no two plumbers or other mechanics will figure exactly the same on the same fixtures, or the same material and labor, it is not to be expected that an architect could form a thumb-rule schedule which would be satisfactory to plumbers and all others. In the class of work contemplated in this specification, the tendency of these figures is in the right direction. They are as nearly correct as general statements can be. It is known that a single bath-tub can be fitted up to cost more than the entire plumbing outfit here mentioned. It would afford no more conveniences to the occupant of the house, and would be no safer from a sanitary standpoint; and it probably would require more labor to care for than the one contemplated. The estimates are on the basis of a specification which would meet with the approval of the public sanitary inspectors in any of the large cities.
Where there is a material reduction in the number of fixtures and connections from the list given, the percentage for other piping and connections will have to be increased.
There are various ways of reducing the cost of the outfit. The best way is to have less of it; for instance, only city water may be used, or, possibly, only the cistern water. The completed plumbing outfit mentioned in schedule “B,” with the exception of cistern-water connections, including hot and cold city water for sink, wash-stand, and bath-tub, has been put in, in planNo. 30, for $245.
The natural-gas-piping figure, like the others, is liable to vary. Piping for five fires has been put in for $20, for $15, and for $30. The burners, the burner valves and mixers, usually cost from four to five dollars a fire.
The gas-fixture schedule is priced by the burner, not by the connection. Each burner of each fixture is counted. Of course one may get a single fixture which will cost as much as the above rule would figure on a whole outfit, but that is unusual in moderate-cost houses. Some of the second-story brackets will cost from ninety cents to one dollar and a quarter apiece. This will increase the price of burner margin for the first floor, and allow more elaborate fixtures.
The mantels are priced to include grate, hearth, facings, and everything that may go there, excepting fender and blower. One may get a mantel for $25 or $30, or he may use a grate setting without a mantel, or may go as far into the hundreds as his inclination and means will lead him. Very expensive mantels in moderate-cost houses are not in good taste. A $100 or $150 mantel in a room all of the other wood-work of which did not cost over half that sum, is in exceedingly bad form. The mantel appears like a monument; everything around it isinsignificant. In buying mantels from stock in mantel stores, the cheaper ones are generally the best designed from an artistic standpoint.
The furnace price is necessarily arbitrary. The owner of a house will be told that the price here given is too high and too low. A moderate-sized, two-story, eight-room house, which, counting the bath-room, would have nine connections, could be provided with a furnace of wrought-iron or steel, riveted joints, double galvanized-iron jacket, for $240. The same furnace brick-set will cost from fifteen to twenty dollars more. The owner of such a house can get a cheaper furnace, or he can get one which will be much more expensive. Oftentimes when an architect estimates the price of a furnace to the owner, the latter will respond with the statement that he has been offered a furnace complete for ninety dollars. Upon investigation it generally proves that the furnace is in some one’s store ready for delivery; that it will cost extra to set it, and for all connections, fittings, registers, etc.; and that the furnace itself is of such a kind that ninety dollars is a high price for it. There is no doubt that the statement as to furnace prices will meet with general disapproval from manufacturers. Many will say that the prices given are ridiculously high, and others, ridiculously low. Other general statements as to heating apparatus may be found in a chapter given to that subject in that section of the book devoted to the Journey through the House.
The estimates given on plate and cathedral glass are about as unsatisfactory as anything can be. They merely give the owner a general idea as to what to expect.
Electric-work prices are approximately correct for localities where the facilities for doing this kind of work are at hand. Door and table bell outfits are now sold and arranged ready tobe set up. The methods of their adjustment are so simple that any one who can read can put them in.
The general statement may be made that these prices are approximately correct in all the larger markets; and that in cases where the building is far removed therefrom, there must necessarily be additions for travel of workmen, and other incidental expenses in the transportation of material and labor.
The following is the list of prices of material and labor upon which the building estimates are based:—
Excavating, $0.25 a yard.Brick in the wall, $9 per M.Mason work, $5.50 a yard, laid up.Cement floors, $0.70 a square yard.Timber, joist, and scantling, less than eighteen feet long, $17 per M.No. 1 common boards, $18 per M.Select common pine flooring, count measure, $26 per M.Common flooring, count measure, $22.50 per M.First quality yellow pine flooring, face measure, $37.50 per M.Standard yellow pine flooring, face measure, $30 per M.No. 1 poplar flooring, face measure, $28.50 per M.No. 2 poplar flooring, face measure, $23.50 per M.No. 1 stock boards, $20 per M.No. 1 poplar siding or weather-boarding, $18 per M.No. 2, $16 per M.No. 1 pine siding, $22 per M.No. 2, $20 per M.Shingles, 16 inches clear butts, best, per M, $3.75.Shingles, 16 inches extra, 10 inches clear butts, $3.25.Pine lath, per M, $2.50.Poplar and pine finishing lumber, $3.75 to $6 per 100 feet.Oak or maple flooring, first class, $4 to $6 per 100 feet.Oak finishing lumber, $4 to $6 per 100 feet.
Excavating, $0.25 a yard.
Brick in the wall, $9 per M.
Mason work, $5.50 a yard, laid up.
Cement floors, $0.70 a square yard.
Timber, joist, and scantling, less than eighteen feet long, $17 per M.
No. 1 common boards, $18 per M.
Select common pine flooring, count measure, $26 per M.
Common flooring, count measure, $22.50 per M.
First quality yellow pine flooring, face measure, $37.50 per M.
Standard yellow pine flooring, face measure, $30 per M.
No. 1 poplar flooring, face measure, $28.50 per M.
No. 2 poplar flooring, face measure, $23.50 per M.
No. 1 stock boards, $20 per M.
No. 1 poplar siding or weather-boarding, $18 per M.
No. 2, $16 per M.
No. 1 pine siding, $22 per M.
No. 2, $20 per M.
Shingles, 16 inches clear butts, best, per M, $3.75.
Shingles, 16 inches extra, 10 inches clear butts, $3.25.
Pine lath, per M, $2.50.
Poplar and pine finishing lumber, $3.75 to $6 per 100 feet.
Oak or maple flooring, first class, $4 to $6 per 100 feet.
Oak finishing lumber, $4 to $6 per 100 feet.
Under certain conditions the above prices are subject to discounts.
Plastering: three-coat work, plaster-of-Paris finish, $0.25 a yard; two-coat work, plaster-of-Paris finish, $0.20; gray floated sand finish, three cents extra on above prices.Painting, $0.06 per yard a coat.Labor: common labor, $0.15 an hour; bricklayers and masons, $0.35 to $0.45 an hour; carpenters, $0.20 to $0.30 an hour; tinners, $0.30 an hour; painters, $0.20 to $0.30 an hour; plumber and helper, $0.50 an hour.
Plastering: three-coat work, plaster-of-Paris finish, $0.25 a yard; two-coat work, plaster-of-Paris finish, $0.20; gray floated sand finish, three cents extra on above prices.
Painting, $0.06 per yard a coat.
Labor: common labor, $0.15 an hour; bricklayers and masons, $0.35 to $0.45 an hour; carpenters, $0.20 to $0.30 an hour; tinners, $0.30 an hour; painters, $0.20 to $0.30 an hour; plumber and helper, $0.50 an hour.
The above labor prices are those paid by the contractors. Rarely, however, are the maximum prices reached.
There are few subjects on which ideas vary so greatly as values. This fact may be made apparent when we call to mind that bids on a house let for $3,000 frequently range $1,000 higher than this figure.
LOW-COST HOUSES.—METHODS OF MAKING CONTRACTS.—ARCHITECTS’ ESTIMATES.—BUILDING BY THE DAY.—THE SAFEST PLAN.—GUARDING AGAINST LIENS.
LOW-COST HOUSES.—METHODS OF MAKING CONTRACTS.—ARCHITECTS’ ESTIMATES.—BUILDING BY THE DAY.—THE SAFEST PLAN.—GUARDING AGAINST LIENS.
A low-cost, well-built house is sought by all. The cost of a house is largely a question of business management,—one of knowledge. Before considering the details of contracting for the building of a house, there are a few general points which should be mentioned. First, it never pays to make a contract to have a house built for less than it is worth. In order to get a good house, it is necessary that there be a margin of profit for the builder. Second, a good house from a constructive standpoint can only be built by competent mechanics. One may contract for the building of a house for less than it is worth with parties who are incapable of doing first-class work, and require a bond to secure the faithful execution of the contract. A contract or a bond cannot make a man do good work if he does not know how to do it. It will not save anxiety or trouble. It may indemnify against actual damages, but never against trouble and vexation; nor can it compensate for poor work done in building a home. This matter is mentioned because it is the fault of a great many people, who are inexperienced in building, that they are disposed to have work done for less than it is worth. It does not pay.
It may be remembered, however, that one builder may be able to build for less than another. One may have more energy,tact, or general ability than another. He may have better credit; may be a better buyer. The result is larger accomplishments.
In speaking of low-cost houses or cheap buildings, it is not to be understood that they are cheap or low-cost in the sense of being common or frail. I mean first-class houses at a relatively low cost; low cost in a business sense, the best for the money.
We often hear the statement made that one can tell nothing definite about the cost of a house until it is finished. One can come as near knowing what a house will cost, as he can to knowing what he wants before he begins. One can get prices on what he has in mind, if his ideas be expressed. He cannot get prices on the unknown. The expression of one’s ideas of a house is through plans and specifications. The fact that architects’ estimates are often too low is because the owner is not sufficiently informed in house-building to know what he wants until after the estimate is made. The owner usually expresses a price that he wishes to pay for his house before he expresses his idea. It may be well to illustrate this.
One who wishes to build goes to an architect with some sketches or prints, which he has been collecting, lays them down and says,—
“We’re thinking about building a house. We want something like this. Here are four rooms and a hall downstairs, and four rooms and a bath-room above. We want to build of wood, and wish to have the house warm and substantial. Can it be built for three thousand dollars? It’s all we have to put in it.”
“Oh, yes,” says the architect; and so it can. A good, comfortable, substantial house, from the plans indicated, can be built for three thousand dollars. The architect knows this, andsays that the work can be done for that price. He is ordered to make the plans. In a day or two the owner comes into his office and says,—
“My wife and I were talking over the house last night, and concluded that we would like to have a bay window from the dining-room,—a place where we can sit in summer, and put flowers in the winter.”
“All right.”
“And she told me to ask where you were going to put a wash-stand downstairs. You know we will want some kind of a wash-room.”
“I hadn’t thought anything about that,” said the architect. “Nothing was said about it. I supposed that in a house of this size the bath-room was the only place where you would put a stationary wash-stand.”
“We have to have a place downstairs. We can’t go upstairs every time we want to wash our hands.”
Another two or three days pass. The owner visits the architect again. It is the old story. He and his wife have been studying the house question in earnest. They are educating themselves in house-building. The more they think about it, the more they want, all of which is perfectly natural and right. It is in the natural order of things. It is the way the world moves.
“We were talking about the house, and have about concluded that we will finish two front rooms upstairs in oak. What do you think it will cost?”
“If you use oak for all the wood-work, it will cost between forty and fifty dollars.”
“That isn’t much. We’ll have it.”
And so the house grows as the owners grow, a little everyday. The next day it is a little more plate glass at a cost of fifteen dollars. Again, it is bronze hardware at an extra cost of twenty dollars. Then it is bevelled-glass doors in the china-closet, plastering in the attic, a tile vestibule, a porch off from the dining-room, and so on.
The three thousand dollars is exceeded, though probably by something less than the amount represented by the growth of the owner’s ideas. The architect had made a certain allowance for this development, though it was not possible for him entirely to foresee it. Of those who build, the ones who take the greatest interest in the house, those who think the most about it, are usually the ones who exceed their original calculations by the largest amount.
In building, it is important that the architect and the owner thoroughly understand each other before contracts with the builders are signed. The wants of the owner must be thoroughly understood, and carefully and accurately set forth. From the plans and specifications estimates for all parts of the work should be received, and the cost of everything known, before obligations are created. The process of making the plans and specifications, and taking the bids, is educational in its tendency. It brings to the owner’s attention nearly everything that he may want. Frequently he will find that the first estimates which he gets are higher than the amount he cared to expend. This is on account of his growth. He can frequently reduce the cost without positive injury to the original scheme.
We will consider how contracts are usually made. Sometimes it is by making plans and specifications for the entire house, and then asking for bids on the building as a whole. A general contractor makes his figures on the various parts of the work, then adds them together and makes a lump bid. If he isawarded the contract under such a system, he does part of the work himself and sublets the rest. Possibly he may be a carpenter; then he sublets the brick work, plastering, tinning, painting, etc., and, if possible, he makes a profit on all of these sub-contracts. It does not always happen that he makes figures on these various divisions of the contract himself when forming his original bid. He gets sub-bids from various mechanics and adds these to his own in making up a lump bid. It is known that there is a very wide range of difference between bids which come in this way. In a house to cost three thousand dollars the bids not infrequently vary twenty-five to thirty per cent. The highest bid may be over four thousand dollars.
Another way of contracting is for the architect or owner, as the case may be, to take bids on the various details of excavating, stone work, brick work, carpenter work, painting, plastering, galvanized iron and tin, glass, plumbing, gas-fitting, etc.; in fact, to detail the work as much as possible and receive detailed bids. If the work costs too much, if the bids run too high, one can locate the excess.
At times one can get a cheaper house by pursuing this plan. Another plan of building is by the day. Usually this means to employ carpenters and a foreman, take bids on the material that the carpenters use, and to sublet the mason work, excavating, painting, plastering, tin-work, plumbing, etc. Sometimes the mason-work is also done by the day.
Each plan has its merits. The first mentioned, of letting most of the work in one contract, is the one in most general use. It is common practice in this connection to let excavating, mason work, carpenter work, plastering, tinning, painting, and hardware in one general contract; then the mantels, gas-fixtures, furnace, plumbing, electric work, and ornamental glass work arelet in separate contracts. It is difficult for one to specify gas-fixtures, mantels, and similar fittings, excepting by price. There is no satisfaction in this, for the reason that the owner or his architect may be able to make quite as good or even a better bargain than the contractor. Then there is no opportunity for the builder to arrange for a relatively high price with those who furnish this class of goods. It is fair for the builder to assume that he is entitled to a certain percentage for selecting and negotiating for such articles. The owner may save this for himself by making his own purchases.
Plumbing work is frequently separated from the general contract in order that the owner may exercise his discretion as to the workmen employed to do this important work. In such circumstances it is not altogether a matter of cost. It is of the utmost importance that the best of workmen be employed.
The articles which cannot be directly specified should be secured outside the general contract. Altogether, the plan of letting most of the work in one contract, as outlined, is the best and safest for those to pursue who are not thoroughly familiar with building operations.
The plan of subletting the separate contracts to the lowest bidders is not to be recommended to those without large experience. The difficulty in locating responsibility for delays is great. There is apt to be contention, annoyance, and sometimes loss, by this confusion. The plan of building by the day is more satisfactory for experienced builders than the one just mentioned, but it has the disadvantage of not fully representing to the owner before it is finished the cost of his structure.
In nearly every city or town there are a number of good builders, not well supplied with means, who will take a contract for building a house, work on it themselves until it is finished,and then take another, never having more than one or two houses on hand. One can frequently get good work from such builders at a much less cost than from large contractors. The larger contractors employ a foreman at about the same price a day that the small contractors expect to get per day out of their entire contract. Then, in addition to that, they receive their profits of ten, fifteen, or other per cent for their time and attention. Any one building with the help of the smaller contractors must be very careful, or he will get into trouble on account of the small margin of profit.
To recur to the method first mentioned. It is well that suggestions be made as to the course to be pursued in receiving bids on work, as classified in that suggestion. In the first place, there should be accurate plans and specifications made by an architect capable of doing that kind of work. Everything should be fully represented to the owner in both a positive and negative way; that is, not only as to what is to go into his house, but as to what is not to go into it. As soon as the architect or those in charge of the work begin to take bids, the owner should be provided with a complete copy of the plans and specifications, in order that he may be fully conversant with what is to be done. It was said that everything should be represented to the owner in both a positive and negative way. Not only should it be stated to him that the first floor of the house is to be plastered, but, if such is the case, that the cellar is not to be plastered. If the cellar floor is not to be cemented, it should be stated definitely to him in that way before beginning to take bids. If fly-screens are not included in the building contract, it should be so stated. Everything should be fully represented, and a record thereof placed before the owner, so that there can be not the slightest opportunity for misunderstanding or disagreement.Thus, if everything is presented to the owner, he will know what he is to have and what he is not to have, and his business will be done for him in a way satisfactory to all. When this is done, it is time to begin taking bids.
In doing this there should be no favoritism. The builder should be allowed to take a copy of the plans and specifications with him to his office or place of business, and keep them a day or more, in order to take off his quantities and become thoroughly conversant with everything connected with them. Then he can return the plans, and, while others are doing the same thing, he can compile his figures. Generally it takes about a day for each contractor to get through with a set of plans; that is, if five bids are received, it generally takes five or six days, assuming that only one set of plans is in use. No one should be asked to figure on a building unless the owner is willing to award him the contract, providing his bid is the lowest. Anything else is unfair. When all the bids have been received in sealed envelopes, the architect and owner may open them. After selecting the lowest, they may add to that figure the cost of everything not included in that proposition,—the furnace, mantels, gas fixtures, ornamental glass, and anything else that has not been included in the bid. This may be readily done, if the architect provide a schedule, similar to schedule “B,” of everything which may go into the house.
In the matter of closing the contract, only general statements can be made. Where an architect is employed, he will give proper directions; but, as many houses are built without such assistance, it is proper to make general statements which will assist in this work. There are forms of building-contracts, or articles of agreement, which may be secured from various regular sources. It is proper to fix the time of the completion ofthe work, which will vary in different parts of the country according to general customs. A house to cost from fifteen hundred to four thousand dollars may be very easily finished, under favorable circumstances, in ninety to a hundred days. Such houses can be built in less time, but it is best to give the builder at least three months. He will do better work in that time than in less. For the higher figure named, or for those which approach it, it may be better to allow even a little more rather than less time. As a price for liquidated damages in event of delay in completion, the rental value of the property is the usual sum specified.
There are various plans pursued in the matter of payments. Where there is an architect or superintendent, he usually issues orders on the owner for payment of material and labor furnished by a contractor less ten or fifteen per cent. Sometimes it is stated that two-fifths of the money will be paid when the building is enclosed and under roof; one-fifth additional when building is plastered, painted on exterior, all exterior appurtenances finished, the floors laid, and the house ready for other interior wood-work; and the remaining two-fifths when all work is finished. At times this apportionment is correct, and at other times not. However, it is a very good general rule. It is a good plan to add the ten per cent discount to it when possible. Sometimes an indemnifying bond is required of the contractor in order to secure the owner the proper execution of the contract. Otherwise the ten or fifteen per cent discount is relied upon to secure that end.
The lien laws in the various States make it very important that the owner, or his agent in the matter of building, should be very careful to see that the contractor pays all his bills, or secures releases from those who have furnished material andlabor on account of the building contract, before money is paid by owner.
The law is different in various States, and renders the owner liable, under varying conditions, for material and labor furnished to contractor by others as employees or sub-contractor, even though payment has been made by owner to general contractor. Where a bond is not required, it is proper for the owner or his agent to exact releases in proper form from those who have furnished material and labor to contractor. The following form is in use by the writer:—
Work locatedThe undersigned, in consideration of the personal credit extended by to , Contractor, hereby consent that may pay to said contractor any sum that may be now owing to, or may hereafter become due, said contractor, on account of contract for the construction of the above works, and we hereby waive all rights to Mechanics’ Liens or other claims which we have, or may have, against said property, or owner, on account of labor or material furnished by us.Indianapolis,1889.
Work located
The undersigned, in consideration of the personal credit extended by to , Contractor, hereby consent that may pay to said contractor any sum that may be now owing to, or may hereafter become due, said contractor, on account of contract for the construction of the above works, and we hereby waive all rights to Mechanics’ Liens or other claims which we have, or may have, against said property, or owner, on account of labor or material furnished by us.
Indianapolis,1889.
It is the custom to furnish the builder with a number of copies of the above release before it is time for him to secure an order on the owner for money. As the architect is in a position to know from whom material or labor is secured, it is possible for him to know if the list of releases is complete. If not complete, the party refusing to give a release is required to make statement as to the amount of the indebtedness for material and labor furnished on the contract. The general contractor is charged with the amount represented as being due until the matter is fully adjusted. As an additional safeguard, the contractor is at times required to fill out and make affidavit to the following:—
Indianapolis,1889.The undersigned, for the purpose of securing payment on account of contract with ——, for the construction of a —— house, known as No. —— on —— Street, situated on Lot ——, Out-lot ——, —— Division to City of Indianapolis, Marion County, State of Indiana, represents hereby that he has paid for all labor and material of every kind and nature had and procured therefor, excepting, however, that he is now owing the following sums to the respective parties hereinafter named for labor and materials for said building, and owes therefor no other amounts, to wit:—
Indianapolis,1889.
The undersigned, for the purpose of securing payment on account of contract with ——, for the construction of a —— house, known as No. —— on —— Street, situated on Lot ——, Out-lot ——, —— Division to City of Indianapolis, Marion County, State of Indiana, represents hereby that he has paid for all labor and material of every kind and nature had and procured therefor, excepting, however, that he is now owing the following sums to the respective parties hereinafter named for labor and materials for said building, and owes therefor no other amounts, to wit:—
In this connection it is not possible to consider all of the ramifications of the lien law. It is important to understand, however, that it is entirely possible for an owner to have to pay for part of or all of his house twice, if he is not careful in matters of this kind.
MONTHLY PAYMENTS.—CALCULATIONS ON A LONG-TIME PLAN.—PURCHASE ON A RENTAL BASIS.—HOW IT MAY BE WORKED OUT.
MONTHLY PAYMENTS.—CALCULATIONS ON A LONG-TIME PLAN.—PURCHASE ON A RENTAL BASIS.—HOW IT MAY BE WORKED OUT.
It is a pleasant thought that every one can own a home of his own. With only a moderate salary, and little or nothing ahead, a thought of this kind may appear more pleasant than real. It may be affirmed, however, that, with few exceptions, any one who can pay rent may own his home. This will require certain sacrifices and at first great economy, but in the end the result justifies the means. There is no reason why any one should pay rent. Building associations are instrumental in securing more homes for people on a long-time plan than any other scheme. In the large towns, however, houses are sold on various kinds of instalment plans. By way of illustration, the writer calls to mind a five-room house, pleasantly situated, which was built about three years ago. This house is being paid for in instalments of $15 a month. An arrangement of this kind is good for all concerned. It is an easy way for one to get a home. It is a good use of money, from a business standpoint, for the one who has the money to invest. A little demonstration will make this plain. The lot on which the house was situated was valued at $400. The house, with walks, well, cistern, and outbuildings, cost $900. Here is a total investment of $1,300. The purchaser paid $300 in cash. There remained $1,000 unpaid. The interest on $1,000 for a year at six per cent is $60; but as the volume of interest isreduced as the payments are made, the actual interest for the full period averages about one-half of $60, or $30, per year. To make this point clear, I will state it in another way. The principal is being reduced as the monthly payments are made. As the payments advance, the amount of interest necessarily decreases, as there is not so much principal on which to pay interest. As a matter of fact, one pays six per cent interest on just one-half of $1,000 for the full period, or, what amounts to the same thing, the average interest on the full period is three per cent. Thus, one is paying an average interest of $30 per year; and, as he pays $15 a month, this would be $180 a year for principal and interest, $150 of which would apply to the principal. Thus it is that in six years and eight months the one paying $15 a month will own the house and lot. I know of other cases where less each month is paid and a longer time is taken. It would take $10.83[1]per month to pay for a house of this kind in ten years, with a cash payment of $300.
It may be said that nobody but a philanthropist would sell property in this way. In the case of which I speak, the philanthropist is the manager of the property of a life-insurance company which owns quite a large amount of unimproved real estate in a Western city, and had a surplus capital on which it desired to realize. It is a good thing for the company. By this means it is enabled to dispose of its real estate, and to use its money profitably.
This is not strictly architectural, but it may result in showing some one how to get a home, or others how to make use of idle capital in a safe and profitable way. It is better for one who has money to invest to sell houses in this way than it is to rent them. He gets profit on the sale, and interest on his money, whichlatter is all he expects under other circumstances, and disposes of the houses before they need repairs. This is the view which the capitalist takes of the situation. By looking into it a little further, he may see that he will not be troubled by insurance, a vacant house, or repairs. The cash payment is sufficient to protect the expense of foreclosing the mortgage and the rental of the house during the time of the redemption. In some instances the property is leased on the payment of a small cash bonus, with the stipulation that when one-third, one-fourth, or other agreed portion of selling price is paid in, that a deed will be given; further payment being secured by mortgage.
Building associations are not common in all sections of the country. Those who are ambitious to build, and are not provided with facilities which a building association offers, may ask what to do. The answer is short: form an association. This can be done in a small community. Two hundred shares paid in, say, by fifty people, would represent a hundred dollars a week. Any one who wishes to do this can provide himself with text-books and other information on the subject, which are now published in different parts of the country. Any bookseller with a good catalogue can give the necessary information.
It is sometimes assumed by those unfamiliar with building-association methods, that they only provide means for building small, low-cost houses. This is an error. It is not at all unusual that complete houses, costing from three to five thousand dollars, are built by men of large means, who secure their money from a building association. One has, say, forty or fifty thousand dollars profitably occupied in a regular business; he may not care to disturb this money except to buy a lot with which to establish a basis of credit with the building association. The price of the lot may vary from one-fourth to one-half the totalinvestment. One wishes to borrow three thousand dollars from an association on the plan which is subsequently fully described. He would have to take out fifteen shares on a payment of fifty cents a share a week. This would represent seven dollars and a half weekly, or about thirty dollars a month. On the plan where the interest and premium are charged in addition to the regular weekly dues, a little over fifty dollars a month would be required to keep up the building-association charges. This would be less than house rent. These calculations are made assuming that the premium is not more than ten cents and the interest six per cent.
BUILDING ASSOCIATIONS.—WHY DIVIDENDS ARE LARGE AND INTEREST LOW.—BUILDING ASSOCIATIONS AND SAVINGS BANKS.—ASSOCIATION SECURITIES.—BUILDING-ASSOCIATION METHODS.—DIFFERENT PLANS.—BORROWING FROM A BUILDING ASSOCIATION.—A BUILDING-ASSOCIATION REPORT.
BUILDING ASSOCIATIONS.—WHY DIVIDENDS ARE LARGE AND INTEREST LOW.—BUILDING ASSOCIATIONS AND SAVINGS BANKS.—ASSOCIATION SECURITIES.—BUILDING-ASSOCIATION METHODS.—DIFFERENT PLANS.—BORROWING FROM A BUILDING ASSOCIATION.—A BUILDING-ASSOCIATION REPORT.
Building-association methods become more popular as they are better understood. Savings banks are unnecessary in communities where building associations are common. The savings bank will give place to the building association, for the reason that the latter affords greater security and more profit to the depositors at the same time that it affords greater conveniences to the borrowers. It is often asked by those not fully acquainted with building-association methods, “How is it that the association pays such large dividends, and the borrower such a small rate of interest? The profit is made by the loaning of money; and, consequently, the borrower must pay a high price for his money, or the association does not make large dividends.”
This appears to be a logical argument. However, it is not true that the borrower pays a high price for his money. The dividends declared are made from the borrowers, by the rapid compounding of interest and other sources of profit. Money paid in as interest is immediately re-invested as a loan, and thus pays interest the next week. The interest on this is at once put to use, and so on. It is compounded. The premium paid for money is another source of profit. This comes fromthe borrower, and represents a part of the cost of the money to him; but, unless the premium is excessive, the earnings on his stock counterbalance the amount paid as premium, so that in the end a borrower does not pay in excess of the regular rate for his money at the same time that the stockholder is more largely benefited.
A building association has only a tithe of the expenses of a bank. The cost of doing business is very small. An association has a very great advantage over a bank in its earning capacity in that it does not have to carry a surplus. All of its money is invested at all times. Frequently it is receiving interest upon money that is not a part of its assets. This happens when an application for a loan has been accepted, a building is under way, and the money not all paid out.
The percentage of loss in a building association is necessarily smaller than in the best-conducted bank. Its securities are all first mortgages on productive real estate, and loans are made to members only, and under the condition that the immediate repayment of the loan be commenced. The security begins to improve at once, by the repayment of a part of the principal each week. It is usual for each member of a family to become interested in the immediate repayment of a loan. The payment of building-association dues is constantly in mind; as they become due from week to week, they cannot be overlooked. The fact that the debt is growing less, and, as well, the incentive to avoid small fines in case of failure to make payment, contribute to the value of the security. A loan on an ordinary basis, secured from a savings bank, insurance or trust company for a long period, is not thought of in this way. The usual thought in such a case is to pay the debt in a large sum at a time in the future. The time of the repayment of anassociation loan is always present. The security afforded to building associations is much better than to savings banks and loan companies, even where the margin above the amount of loan is less because of this difference in plan of repayment. Again, the margin of security from the first is always sufficient to protect a mortgage and the payment of all foreclosure costs and charges. Furthermore, the rentals in case of foreclosure are, or should be, sufficient to pay all dues and other fixed charges. This will prevent loss, and in the end pay for the property.
Another element of safety in building associations is the small risk of loss from the duplicity of the officers. This risk is unusually light, for the reason that in a well-managed building association there is little in sight to lose. The money is usually all invested. Any small amount in the hands of the officers is there for only a short time. There are demands in all well-managed building associations for all the money in hand. While this is true, it is always required that the officers who handle the association money give bond for a much larger sum than it is possible for them ever to have in charge. This makes the loss, if any, readily collectible.
It may be well to illustrate building-association methods, and thus call attention intelligently to the points of superiority which one plan may have over another.
The idea which first gave rise to associations is that of enabling persons belonging to a class whose earnings are small, to place themselves in a position where the process of gradual accumulation is, in a certain sense, compulsory. The method of operation is simple enough when it is understood. Say that a number of stockholders agree to form an association with a thousand shares, each share to represent $200. This wouldmake a full capital stock of $200,000 when all paid in. The various individuals forming the association subscribe for as many shares as they feel competent to pay upon, it being agreed that for each share of stock subscribed, fifty cents per week shall be paid until the sum-total of the payments shall aggregate $200; at the end of which time a division shall be made according to the original subscription and subsequent payment. It is clear that if all are prompt in their payments, the treasury will be ready for distribution at the end of four hundred weeks. The period of four hundred weeks will, however, be shortened if all the money paid in is at once invested at interest upon safe securities, with the addition of interests compounded weekly, as is the case with these associations. For instance, it may appear that at the end of three hundred and twelve weeks, with a payment of fifty cents a week, and the accrued earnings that are credited to the shares, they are worth $200, the amount fixed for the value of the stock when it is paid up. At such a time the depositing members withdraw their funds, and those who are borrowers pay off their obligations to the association with stock, and the mortgages are released.
Money in building associations is generally sold to the highest bidder; that is, those who want to borrow bid a premium for the money. For instance, a sale of money is advertised. Bids are then received on the money to be loaned, and it is given to the highest bidder after the security has been approved. Suppose one wishes to borrow a thousand dollars. If each paid-up share is to represent two hundred dollars, five shares must be taken out to represent the payment of principal on a thousand-dollar loan. It may appear that the premium bid was ten cents on each share. This means that the borrower must pay ten cents premium each week, on each share, during the courseof the loan, or until the principal is paid out. Thus he would pay fifty cents a week as principal, and ten cents a week as premium, and the interest on two hundred dollars at six per cent, which would be twenty-four cents a week. Thus he would pay eighty-four cents a week on each share; or on five shares, four dollars and twenty cents a week. This would pay out in about five years, depending upon the average rate of premium, the cost of doing business, and other conditions which may be readily understood. When the principal paid in, together with the accrued earnings, represents two hundred dollars, the obligation to the building association is released.
There are various plans of starting and arranging building and savings associations, which differ one from another only in matters of detail. The price of the share may be two, three, or four hundred dollars, or any other sum. The amounts paid in a week vary from ten cents to any larger sum. In the past, most associations have been started on the series plan, which is defined as follows by Henry S. Rosenthal of Cincinnati in his “Manual for Building Associations:”—
“In an association, organized on the terminating plan, all the stock is issued as of one date. A terminating association is organized on the presumption that all the stock will be subscribed for at the open meetings. This, however, is seldom done. The consequence is, that shares sold after the first meetings must be sold at such prices as to make them equal in value to those already issued. To do this a sum must be charged equal to the amount already paid in in instalments by the subscribers to the original shares. If the regular dues on shares should be one dollar per week, a person subscribing for a share after the association has been running ten weeks must pay ten dollars for the share. In like manner, if the association has been running for a longer period, he must pay an additional dollar for each additional week. Moreover, if he does not subscribe until after the profits have been declared, he must pay such an additional amount on his share as will correspond to theearnings of the original shares up to that time. The same rule holds through the entire existence of the association, each year making it more difficult to enter. After an association, organized on this plan, has run for a time, it is impossible for many persons, who would gladly become members, to raise a sufficient sum of money to pay up the back instalments, the initiation fees, the accrued profits, and other incidental expenses. In its practical workings, therefore, an association organized on this plan is not well adapted to meet the conditions of that particular class of persons who most need such an organization, and are most likely to be benefited by it.“In a terminating association all the shares are, of course, at all times of equal value. Whenever the total amounts of the dues paid in and of accumulated profits equal the par value of all the shares, the association terminates and its affairs must be wound up. Each stockholder who has not borrowed his money in advance receives the full value of his shares. To those who have secured their money in advance, their mortgages, cancelled and receipted in full, are returned.“PERMANENT ASSOCIATION.“Building associations were established originally on the terminating plan. It is obvious that working on this plan they cannot, in some respects, reach their greatest degree of popularity and usefulness. On this account there has been a gradual departure from this plan. The first departure from the terminating plan consisted in an arrangement for issuing the stock in series instead of all from the same date. Associations were chartered for a certain number of years, as before, and with a specified amount of capital stock. But instead of selling all the stock as of the same date, it was divided into series; one series being sold as of the date of the beginning of the first year, the second series as of the date of the beginning of the second year, and so on until all the shares were sold. The issuing of a new series does not necessarily occur annually, but at such periods as are made necessary or desirable by the business of the association. The serial issue may be monthly, quarterly, semi-annually, or otherwise, as the directors may determine. By the time the last series is issued and the stock is exhausted, the first one or two or more series of shares, if the business of the association has been prosperous, have usually reached their full value, and are paid back and cancelled. Associations conducted on this plan usually have the right to issue new stockto take the place of that which is cancelled from time to time, and thus their perpetuity is insured. A successful association working on this plan can usually secure the issue of a new charter, and can thus continue its existence. But there are manifest disadvantages and risks under which an association operating on this plan must labor.“Another plan of operation has been inaugurated which has proved very popular, and which is being generally adopted by the associations in the different States. Associations are granted perpetual charters, the amount of the capital stock being fixed at a certain sum. They are allowed to begin operations as soon as a certain amount of stock is subscribed. After the association is in operation, new subscribers are allowed to enter at any time on an equality with the original subscribers, the stock of each member dating from the time of his entry. Thus the business of the association runs along from year to year, until finally all of the stock is subscribed. After a time the shares first issued begin to reach their full value. As they thus mature, the owners draw out their money,—if they have not borrowed it in advance,—and their shares are cancelled, and their membership ceases. If they have borrowed their money in advance, their bonds and mortgages are returned to them receipted in full. If a member, whose stock has thus matured, has not borrowed his money in advance, and does not wish to draw it out, a certificate of paid-up stock is issued to him, and he leaves his money in the association as a matter of investment. An association operating on this plan may, after a time, when its original stock has all been subscribed through application to the incorporating authorities, secure the right to increase its stock. If, in the course of time, this increased stock becomes exhausted, another increase may be secured in a like manner, and so on indefinitely.”
“In an association, organized on the terminating plan, all the stock is issued as of one date. A terminating association is organized on the presumption that all the stock will be subscribed for at the open meetings. This, however, is seldom done. The consequence is, that shares sold after the first meetings must be sold at such prices as to make them equal in value to those already issued. To do this a sum must be charged equal to the amount already paid in in instalments by the subscribers to the original shares. If the regular dues on shares should be one dollar per week, a person subscribing for a share after the association has been running ten weeks must pay ten dollars for the share. In like manner, if the association has been running for a longer period, he must pay an additional dollar for each additional week. Moreover, if he does not subscribe until after the profits have been declared, he must pay such an additional amount on his share as will correspond to theearnings of the original shares up to that time. The same rule holds through the entire existence of the association, each year making it more difficult to enter. After an association, organized on this plan, has run for a time, it is impossible for many persons, who would gladly become members, to raise a sufficient sum of money to pay up the back instalments, the initiation fees, the accrued profits, and other incidental expenses. In its practical workings, therefore, an association organized on this plan is not well adapted to meet the conditions of that particular class of persons who most need such an organization, and are most likely to be benefited by it.
“In a terminating association all the shares are, of course, at all times of equal value. Whenever the total amounts of the dues paid in and of accumulated profits equal the par value of all the shares, the association terminates and its affairs must be wound up. Each stockholder who has not borrowed his money in advance receives the full value of his shares. To those who have secured their money in advance, their mortgages, cancelled and receipted in full, are returned.
“PERMANENT ASSOCIATION.
“Building associations were established originally on the terminating plan. It is obvious that working on this plan they cannot, in some respects, reach their greatest degree of popularity and usefulness. On this account there has been a gradual departure from this plan. The first departure from the terminating plan consisted in an arrangement for issuing the stock in series instead of all from the same date. Associations were chartered for a certain number of years, as before, and with a specified amount of capital stock. But instead of selling all the stock as of the same date, it was divided into series; one series being sold as of the date of the beginning of the first year, the second series as of the date of the beginning of the second year, and so on until all the shares were sold. The issuing of a new series does not necessarily occur annually, but at such periods as are made necessary or desirable by the business of the association. The serial issue may be monthly, quarterly, semi-annually, or otherwise, as the directors may determine. By the time the last series is issued and the stock is exhausted, the first one or two or more series of shares, if the business of the association has been prosperous, have usually reached their full value, and are paid back and cancelled. Associations conducted on this plan usually have the right to issue new stockto take the place of that which is cancelled from time to time, and thus their perpetuity is insured. A successful association working on this plan can usually secure the issue of a new charter, and can thus continue its existence. But there are manifest disadvantages and risks under which an association operating on this plan must labor.
“Another plan of operation has been inaugurated which has proved very popular, and which is being generally adopted by the associations in the different States. Associations are granted perpetual charters, the amount of the capital stock being fixed at a certain sum. They are allowed to begin operations as soon as a certain amount of stock is subscribed. After the association is in operation, new subscribers are allowed to enter at any time on an equality with the original subscribers, the stock of each member dating from the time of his entry. Thus the business of the association runs along from year to year, until finally all of the stock is subscribed. After a time the shares first issued begin to reach their full value. As they thus mature, the owners draw out their money,—if they have not borrowed it in advance,—and their shares are cancelled, and their membership ceases. If they have borrowed their money in advance, their bonds and mortgages are returned to them receipted in full. If a member, whose stock has thus matured, has not borrowed his money in advance, and does not wish to draw it out, a certificate of paid-up stock is issued to him, and he leaves his money in the association as a matter of investment. An association operating on this plan may, after a time, when its original stock has all been subscribed through application to the incorporating authorities, secure the right to increase its stock. If, in the course of time, this increased stock becomes exhausted, another increase may be secured in a like manner, and so on indefinitely.”
Herewith is given an extract from the yearly report of a successful savings and loan association on the perpetual plan. It will illustrate more fully the method and results of this method than could a less formal description. It may be explained in this connection that in this society the payments are uniform for depositing and borrowing members; that is, instead of having the premium and interest added to the weekly dues, the amount of premium and interest is charged against the weekly paymentof fifty cents. Ten cents is the limit of premium, the officers and stockholders believing that to be as much as any one should pay.
OBJECT.
The Plymouth Savings and Loan Association, No. 2, is organized with two main objects in view:—First.—To furnish a convenient, safe, and profitable method of investing the savings of working people.Members can come in and go out at will.Subscriptions can commence at any time without having to pay back dues or wait for new series.Withdrawing members obtain their money without loss (fines excepted), and are paid as promptly as the finances of the Association will admit, without having to wait ninety days. In the history of the Association there have been no delays.Second.—To furnish persons who wish to borrow for any purpose the means for doing so at a reasonable rate of interest. In other words, it is an association composed of borrowers and lenders, and established for their mutual convenience. It gathers together the savings of the people, which, scattered and in small sums, could not be invested to advantage, and loans the money thus obtained on first mortgage security, and in sums to suit, to those who wish to build, to pay off mortgages, or for other purposes.All members of the Association are, therefore, divided into two classes:—First.—Those who desire to use the society as a means of saving or investing money. These are calleddepositing members.Second.—Those who wish to make use of the organization as a means of borrowing money. These are calledborrowing members.MANAGEMENT.The Plymouth Savings and Loan Associationis a strictly co-operative or mutual organization. All the shareholders arepro rataowners of all the assets of the society. Every member is a partner in the enterprise in proportion to the amount paid in by him. He is entitled to his share of all the earnings of the Association, and he must also stand his share of the losses, if there be any.The By-laws contain the rules and regulations under which money is received and loaned, or otherwise disposed of, and the business of the society is carried on by a Board of Directors, elected annually by the members.SHARES AND SHAREHOLDERS.The amount of interest which each member has in the Association is indicated by the number of his shares.Shares are $200 each, and no member can hold more than twenty-five shares. The weekly payment required is fifty cents on each share of stock.When a member joins the Association he indicates the amount of weekly payment he desires to make by the number of shares for which he subscribes. He may, however, if he wishes, pay more than his shares call for, and such over-payments will receive dividends the same as the regular weekly instalments.Each member is supposed to keep up his payments until what he has paid in, together with the dividends declared thereon, shall amount to the face value of his shares, at which time he must cease payments, and either take his money out, or, if the society be willing, allow it to remain and draw dividends.DIVIDENDS.On the 1st of January and July of each year the net earnings of the Association are dividedpro rataamong all the members, and the amount due each member is credited on his pass-book.Persons joining the association between January and July must continue payments until the following January before the dividend will be credited, and those joining between July and January must likewise pay until the following July; and if the money be withdrawn before that time, the dividend will be forfeited.The right to dividend also ceases from the date of the notice to withdraw the stock.When dividends are credited on the pass-books they are just like money paid, and are themselves entitled to draw dividends the same as cash payments. Thus it will be seen that all dividends compound semi-annually.The following table will show how long it takes to pay up a share to face value by paying the regular dues only, supposing the society to earn six percent dividends per annum.[1]It also shows the value of each share at the close of each year:—First yearDues$26 00“Dividends78$26 78Value at close of first year$26 78Second yearDues$26 00“Dividends2 4128 41Value at close of second year$55 19Third yearDues$26 00“Dividends4 5330 53Value at close of third year$85 72Fourth yearDues$26 00“Dividends6 1032 10Value at close of fourth year$117 82Fifth yearDues$26 00“Dividends8 3434 34Value at close of fifth year$152 16Sixth yearDues$26 00“Dividends10 4136 41Value at close of sixth year$188 60Seventh year (16 weeks)Dues$8 00“Dividends3 4011 40$200 00Time, 6 years and 16 weeks.Total dues paid$164 00Total dividends36 00$200 00[1]The present rate of dividend is nine per cent, with an added surplus.METHOD OF LOANING MONEY.The society loans money only to members. For each $200 share held by a member he may borrow $200, secured by first mortgage on real estate, interest on which is twenty-four cents per week.The right to precedence in borrowing is sold at auction at stated times at the office of the Association (notice of which is given beforehand) to the member who bids or agrees to pay the highest weekly premium in addition tothe twenty-four cents per week interest. Ten cents per week is the average rate at which money was sold during the year 1887, and is now selling.Members not desiring or not able to attend the sale of money in person may have some one else bid for them, or they may leave a written bid with the Secretary, on blanks prepared for that purpose, who will make it for them at the sale.The society also loans to depositing members in sums equal to ninety per cent of the dues paid in. Security is had by the member pledging his stock for the payment of the loan and interest due (if any) on notes prepared for that purpose. Interest on such loans has for the present been placed at the rate of eight per cent per annum.PAYMENTS.The depositing and borrowing members alike pay fifty cents per week per share. There are no additions for expenses, interest, premiums, or fines. These are charged up at the close of each dividend period, or at the closing up of an account.Each borrower is required to pay at least fifty cents per week on each $200 of loan made to him, which is credited as follows:—First the premium and interest are taken out, the interest being twenty-four cents. When the premium bid is ten cents, both together would amount to thirty-four cents. Then the balance, which in this case would be sixteen cents, is credited as a payment on the share on which the loan is taken. These payments are continued until the amount credited on the shares, together with the dividends thereon, will equal the amount loaned. For instance, suppose the loan to be $200, and the premium bid to be ten cents per week,—The payment each week would be50 centsThe premium each week would be10 centsThe interest each week would be24 cents34 centsThe credit on the share each week would be16 centsThese credits of sixteen cents per week begin to draw dividends on the succeeding dividend period, which are compounded semi-annually, and the weekly payments must be continued until the weekly credits of sixteen cents and the dividends thereon amount to $200.Members are at liberty to pay every two weeks or monthly, and as muchbeyond the required weekly payment as they may desire to. The overpayments are credited like any regular payment and share in the dividends.This enables borrowers to pay their loans off as fast as their circumstances will admit. This method is very helpful, as the interest and premium will be stopped on as many full shares as are paid off, and the cost of a loan is materially reduced thereby.The minimum payment only is fixed. The borrower may at any time pay the whole balance due on the loan and have it cancelled at once.It is always good policy for a borrower to pay more than the weekly dues if he can, in order that in case of sickness, loss of work, or other unforeseen hindrance, he may be paid ahead, and hence suspend payment for a time without being fined or in danger of losing his property.By the following table it is shown that with the premium at twenty-four cents on each $200, and that the society is able to earn six per cent per annum dividends (both of which are being done now[2]), and the required weekly dues only being paid, a loan will be paid up in fifteen years and six months. This time, as already mentioned, can be shortened at the will and ability of the borrower, and may be paid off at any time without any penalty whatever. This is a great advantage, and the society can do this only because of the great demand for loans, and the money does not have to lie idle if a loan is paid off, but is immediately loaned again. Here is a loan which you may take fifteen years to pay if you wish, or you may pay it off at any time.TABLE.SHOWING COURSE OF LOAN OF $1,000.Premium 50 cents per week.Interest $1.20 per week.Six per cent dividends compounded semi-annually.First Year:Loan$1,000 00Payments for year$130 00Interest and premium$88 40Less dividends62Net cost of loan87 78Principal reduced42 22Second Year:Balance due at end of first year$957 78Payments for year130 00Premium and interest88 40Less dividends3 18Net cost of loan85 22Principal reduced44 78Third Year:Balance due at end of second year$913 00Payments for year130 00Interest and premium88 40Less dividends5 91Net cost of loan82 49Principal reduced47 51Fourth Year:Balance due at end of third year$865 49Payments for year130 00Interest and premium88 40Less dividends8 79Net cost of loan79 61Principal reduced50 39Fifth Year:Balance due at end of fourth year$815 10Payments for year130 00Interest and premium88 40Less dividends11 88Net cost of loan76 52Principal reduced53 48Sixth Year:Balance due at end of fifth year$761 62Payments for year130 00Interest and premium88 40Less dividends15 12Net cost of loan73 28Principal reduced56 72Seventh Year:Balance due at end of sixth year$704 90Payments for year130 00Interest and premium88 40Less dividends18 60Net cost of loan69 80Principal reduced60 20Eighth Year:Balance due at end of seventh year$644 70Payments for year130 00Interest and premium88 40Less dividends22 26Net cost of loan66 14Principal reduced63 86Ninth Year:Balance due at end of eighth year$580 84Payments for year130 00Interest and premium88 40Less dividends26 13Net cost of loan62 27Principal reduced67 73Tenth Year:Balance due at end of ninth year$513 11Payments for year130 00Interest and premium88 40Less dividends30 27Net cost of loan58 13Principal reduced71 87Eleventh Year:Balance due at end of tenth year$441 24Payments for year130 00Interest and premium88 40Less dividends34 65Net cost of loan53 75Principal reduced76 25Twelfth Year:Balance due at end of eleventh year$364 99Payments for year130 00Interest and premium88 40Less dividends39 30Net cost of loan49 10Principal reduced80 90Thirteenth Year:Balance due at end of twelfth year$284 09Payments for year130 00Interest and premium88 40Less dividends44 22Net cost of loan44 18Principal reduced85 82Fourteenth Year:Balance due at end of thirteenth year$198 27Payments for year130 00Interest and premium88 40Less dividends49 41Net cost of loan38 99Principal reduced91 01Fifteenth Year:Balance due at end of fourteenth year$107 26Payments for year130 00Interest and premium88 40Less dividends54 99Net cost of loan33 41Principal reduced96 59Six Weeks:Balance due at end of fifteenth year$10 67Payments for six weeks15 00Interest and premium10 20Less dividends5 87Net cost of loan4 33Principal reduced10 67Time, fifteen years and six weeks.Total amount of payments$1,965 00Total interest and premium1,336 20Total dividends371 20Net cost of loan965 00[2]Since this report was made the earnings have been nine per cent, with an added surplus.With the reasonable prospect in view that the Association will be able to pay larger dividends at some future time, it will be easy to understand that the cost and the time of payment of a loan will thereby be correspondingly reduced.MORTGAGES.All loans must be secured by first mortgage on real estate in Marion County, Ind. An appraising committee, consisting of three members of the Association, appraise the value of all real estate offered as security for loans and report to the board. No loan can be made until the security has been approved by the Board of Directors.This Association is now paying four per cent semi-annual dividends, and adding largely to its surplus.
The Plymouth Savings and Loan Association, No. 2, is organized with two main objects in view:—
First.—To furnish a convenient, safe, and profitable method of investing the savings of working people.
Members can come in and go out at will.
Subscriptions can commence at any time without having to pay back dues or wait for new series.
Withdrawing members obtain their money without loss (fines excepted), and are paid as promptly as the finances of the Association will admit, without having to wait ninety days. In the history of the Association there have been no delays.
Second.—To furnish persons who wish to borrow for any purpose the means for doing so at a reasonable rate of interest. In other words, it is an association composed of borrowers and lenders, and established for their mutual convenience. It gathers together the savings of the people, which, scattered and in small sums, could not be invested to advantage, and loans the money thus obtained on first mortgage security, and in sums to suit, to those who wish to build, to pay off mortgages, or for other purposes.
All members of the Association are, therefore, divided into two classes:—
First.—Those who desire to use the society as a means of saving or investing money. These are calleddepositing members.
Second.—Those who wish to make use of the organization as a means of borrowing money. These are calledborrowing members.
MANAGEMENT.
The Plymouth Savings and Loan Associationis a strictly co-operative or mutual organization. All the shareholders arepro rataowners of all the assets of the society. Every member is a partner in the enterprise in proportion to the amount paid in by him. He is entitled to his share of all the earnings of the Association, and he must also stand his share of the losses, if there be any.
The By-laws contain the rules and regulations under which money is received and loaned, or otherwise disposed of, and the business of the society is carried on by a Board of Directors, elected annually by the members.
SHARES AND SHAREHOLDERS.
The amount of interest which each member has in the Association is indicated by the number of his shares.
Shares are $200 each, and no member can hold more than twenty-five shares. The weekly payment required is fifty cents on each share of stock.
When a member joins the Association he indicates the amount of weekly payment he desires to make by the number of shares for which he subscribes. He may, however, if he wishes, pay more than his shares call for, and such over-payments will receive dividends the same as the regular weekly instalments.
Each member is supposed to keep up his payments until what he has paid in, together with the dividends declared thereon, shall amount to the face value of his shares, at which time he must cease payments, and either take his money out, or, if the society be willing, allow it to remain and draw dividends.
DIVIDENDS.
On the 1st of January and July of each year the net earnings of the Association are dividedpro rataamong all the members, and the amount due each member is credited on his pass-book.
Persons joining the association between January and July must continue payments until the following January before the dividend will be credited, and those joining between July and January must likewise pay until the following July; and if the money be withdrawn before that time, the dividend will be forfeited.
The right to dividend also ceases from the date of the notice to withdraw the stock.
When dividends are credited on the pass-books they are just like money paid, and are themselves entitled to draw dividends the same as cash payments. Thus it will be seen that all dividends compound semi-annually.
The following table will show how long it takes to pay up a share to face value by paying the regular dues only, supposing the society to earn six percent dividends per annum.[1]It also shows the value of each share at the close of each year:—
First yearDues$26 00“Dividends78$26 78Value at close of first year$26 78Second yearDues$26 00“Dividends2 4128 41Value at close of second year$55 19Third yearDues$26 00“Dividends4 5330 53Value at close of third year$85 72Fourth yearDues$26 00“Dividends6 1032 10Value at close of fourth year$117 82Fifth yearDues$26 00“Dividends8 3434 34Value at close of fifth year$152 16Sixth yearDues$26 00“Dividends10 4136 41Value at close of sixth year$188 60Seventh year (16 weeks)Dues$8 00“Dividends3 4011 40$200 00Time, 6 years and 16 weeks.Total dues paid$164 00Total dividends36 00$200 00
[1]The present rate of dividend is nine per cent, with an added surplus.
[1]The present rate of dividend is nine per cent, with an added surplus.
[1]The present rate of dividend is nine per cent, with an added surplus.
METHOD OF LOANING MONEY.
The society loans money only to members. For each $200 share held by a member he may borrow $200, secured by first mortgage on real estate, interest on which is twenty-four cents per week.
The right to precedence in borrowing is sold at auction at stated times at the office of the Association (notice of which is given beforehand) to the member who bids or agrees to pay the highest weekly premium in addition tothe twenty-four cents per week interest. Ten cents per week is the average rate at which money was sold during the year 1887, and is now selling.
Members not desiring or not able to attend the sale of money in person may have some one else bid for them, or they may leave a written bid with the Secretary, on blanks prepared for that purpose, who will make it for them at the sale.
The society also loans to depositing members in sums equal to ninety per cent of the dues paid in. Security is had by the member pledging his stock for the payment of the loan and interest due (if any) on notes prepared for that purpose. Interest on such loans has for the present been placed at the rate of eight per cent per annum.
PAYMENTS.
The depositing and borrowing members alike pay fifty cents per week per share. There are no additions for expenses, interest, premiums, or fines. These are charged up at the close of each dividend period, or at the closing up of an account.
Each borrower is required to pay at least fifty cents per week on each $200 of loan made to him, which is credited as follows:—
First the premium and interest are taken out, the interest being twenty-four cents. When the premium bid is ten cents, both together would amount to thirty-four cents. Then the balance, which in this case would be sixteen cents, is credited as a payment on the share on which the loan is taken. These payments are continued until the amount credited on the shares, together with the dividends thereon, will equal the amount loaned. For instance, suppose the loan to be $200, and the premium bid to be ten cents per week,—
The payment each week would be50 centsThe premium each week would be10 centsThe interest each week would be24 cents34 centsThe credit on the share each week would be16 cents
These credits of sixteen cents per week begin to draw dividends on the succeeding dividend period, which are compounded semi-annually, and the weekly payments must be continued until the weekly credits of sixteen cents and the dividends thereon amount to $200.
Members are at liberty to pay every two weeks or monthly, and as muchbeyond the required weekly payment as they may desire to. The overpayments are credited like any regular payment and share in the dividends.
This enables borrowers to pay their loans off as fast as their circumstances will admit. This method is very helpful, as the interest and premium will be stopped on as many full shares as are paid off, and the cost of a loan is materially reduced thereby.
The minimum payment only is fixed. The borrower may at any time pay the whole balance due on the loan and have it cancelled at once.
It is always good policy for a borrower to pay more than the weekly dues if he can, in order that in case of sickness, loss of work, or other unforeseen hindrance, he may be paid ahead, and hence suspend payment for a time without being fined or in danger of losing his property.
By the following table it is shown that with the premium at twenty-four cents on each $200, and that the society is able to earn six per cent per annum dividends (both of which are being done now[2]), and the required weekly dues only being paid, a loan will be paid up in fifteen years and six months. This time, as already mentioned, can be shortened at the will and ability of the borrower, and may be paid off at any time without any penalty whatever. This is a great advantage, and the society can do this only because of the great demand for loans, and the money does not have to lie idle if a loan is paid off, but is immediately loaned again. Here is a loan which you may take fifteen years to pay if you wish, or you may pay it off at any time.
TABLE.
SHOWING COURSE OF LOAN OF $1,000.
Premium 50 cents per week.Interest $1.20 per week.Six per cent dividends compounded semi-annually.First Year:Loan$1,000 00Payments for year$130 00Interest and premium$88 40Less dividends62Net cost of loan87 78Principal reduced42 22Second Year:Balance due at end of first year$957 78Payments for year130 00Premium and interest88 40Less dividends3 18Net cost of loan85 22Principal reduced44 78Third Year:Balance due at end of second year$913 00Payments for year130 00Interest and premium88 40Less dividends5 91Net cost of loan82 49Principal reduced47 51Fourth Year:Balance due at end of third year$865 49Payments for year130 00Interest and premium88 40Less dividends8 79Net cost of loan79 61Principal reduced50 39Fifth Year:Balance due at end of fourth year$815 10Payments for year130 00Interest and premium88 40Less dividends11 88Net cost of loan76 52Principal reduced53 48Sixth Year:Balance due at end of fifth year$761 62Payments for year130 00Interest and premium88 40Less dividends15 12Net cost of loan73 28Principal reduced56 72Seventh Year:Balance due at end of sixth year$704 90Payments for year130 00Interest and premium88 40Less dividends18 60Net cost of loan69 80Principal reduced60 20Eighth Year:Balance due at end of seventh year$644 70Payments for year130 00Interest and premium88 40Less dividends22 26Net cost of loan66 14Principal reduced63 86Ninth Year:Balance due at end of eighth year$580 84Payments for year130 00Interest and premium88 40Less dividends26 13Net cost of loan62 27Principal reduced67 73Tenth Year:Balance due at end of ninth year$513 11Payments for year130 00Interest and premium88 40Less dividends30 27Net cost of loan58 13Principal reduced71 87Eleventh Year:Balance due at end of tenth year$441 24Payments for year130 00Interest and premium88 40Less dividends34 65Net cost of loan53 75Principal reduced76 25Twelfth Year:Balance due at end of eleventh year$364 99Payments for year130 00Interest and premium88 40Less dividends39 30Net cost of loan49 10Principal reduced80 90Thirteenth Year:Balance due at end of twelfth year$284 09Payments for year130 00Interest and premium88 40Less dividends44 22Net cost of loan44 18Principal reduced85 82Fourteenth Year:Balance due at end of thirteenth year$198 27Payments for year130 00Interest and premium88 40Less dividends49 41Net cost of loan38 99Principal reduced91 01Fifteenth Year:Balance due at end of fourteenth year$107 26Payments for year130 00Interest and premium88 40Less dividends54 99Net cost of loan33 41Principal reduced96 59Six Weeks:Balance due at end of fifteenth year$10 67Payments for six weeks15 00Interest and premium10 20Less dividends5 87Net cost of loan4 33Principal reduced10 67Time, fifteen years and six weeks.Total amount of payments$1,965 00Total interest and premium1,336 20Total dividends371 20Net cost of loan965 00
[2]Since this report was made the earnings have been nine per cent, with an added surplus.
[2]Since this report was made the earnings have been nine per cent, with an added surplus.
[2]Since this report was made the earnings have been nine per cent, with an added surplus.
With the reasonable prospect in view that the Association will be able to pay larger dividends at some future time, it will be easy to understand that the cost and the time of payment of a loan will thereby be correspondingly reduced.
MORTGAGES.
All loans must be secured by first mortgage on real estate in Marion County, Ind. An appraising committee, consisting of three members of the Association, appraise the value of all real estate offered as security for loans and report to the board. No loan can be made until the security has been approved by the Board of Directors.
This Association is now paying four per cent semi-annual dividends, and adding largely to its surplus.