The Financial Costs of Being Your Own Contractor
There are a lot of benefits to being your own contractor. There are also some costs. Don’t be fooled by the books that tell you that you can save 50% of the costs by contracting the home yourself. There are some major caveats to that statement. Let’s take a closer look.
Perhaps the most obvious and yet the most overlooked aspect of this equation is time off of work. If you are retired, then you don’t need to worry about this piece; however, for the rest of us time away from our day job is money lost. So what’s the cost? If you have to take 6 months off to build your house, how much is that in lost wages? Add it up. You may find that building your own house is not that cheap after all. I might add that assuming you can build, from start to finish, an entire house in six months might be a little over reaching. Most professional contractors take six to nine months to build a high quality home, and they do it for a living, not as a onetime deal.
So, getting back to the actual cost. If you make $30 per hour and work an average 40 hour week, that means you would take home $28,800 in the six months you are off of work while working on your construction project. Let’s assume that you don’t actually make the minimum six month window. Let’s call it a year, which is a much more honest assessment. That would mean you would lose $57,600 in wages. How expensive is your house? If you figure that the lost wages as a 15% contractor’s profit and overhead figure (what you’re saving by contracting the house yourself) then your house would need to be worth a little more than $375,000 for this to be worth contracting yourself. In other words, you could pay $375,000 to a contractor and have him or her build your entire house for you and still save roughly $1350! In this scenario I’d suggest you stay at work and hire the contractor.












