Back in October, I was asked to give some input and support to people who want to build their own house. The main question is “how to get started.” There is a lot to consider and a lot more to actually do, so often the jumping in point becomes the freeze point. In other words, right when you should jump, you freeze and question whether or not you are crazy to even consider building your own place. This may not be a bad question to ponder. Let’s start there.
One question you can ask yourself is: “why?” Why do you want to build your own house? Many people tell me it is because they want to save money. Others say it is for the experience. Others say it is for both of those reasons plus the pride of knowing they did it themselves. These are all reasonable answers; however, it is important to make sure you can actually achieve the intended results before you jump in. Saving money is a great idea; however, it is easy to miss the real cost of building for yourself. Here’s why. When you are building a house, you need to be focused on that job, not any other work you might otherwise have. You cannot go to work at the office 5 days a week and build your house on the weekend and expect to save money. In some cases it may be possible, but in most, you will end up losing money as the project will drag on forever and delays always manage to increase costs. That said, if you quit your “real job” or take significant time off, you won’t have your income anymore while you build. That is a cost that must be considered.
Don’t get me wrong, I truly believe that one can save money by acting as their own contractor; however, I believe they must know fully what they are getting into before the leap. By knowing what lies ahead, you will know what to expect and how to respond to situations in a way that keeps you on track and on budget. Consider that for the average house that I built over the last few years the owners paid $50,000 in profit and overhead. That sounds like a lot, but believe me, it is hard earned money. If you are willing to deal with all of the headaches and frustrations of being then general contractor and are willing to do the homework to give you the skills to manage the job, then that money can stay in your pocket. That is worth it, no?
There is not much I can say about having pride in yourself for having built your own home. That is something only you can really know about. The same is true for having the experience of building your own home. What you learn is yours alone. What I do know for myself, is that I am my hardest critic. When I work on my own projects, I am able to see the most minute mistakes or blemishes that the average person would never know exists. So prepare for that. If you are like me, you will need to cut yourself some slack. After all, you will be living in the home, so hopefully you don’t nit pick the house the rest of your life. If only I had used a thinner bead of caulk right there. If only that tile layout was a little different. I really should have used the other faucet in the master bathroom. These types of mind chatter can drive you crazy if you let them. So as James Taylor said “so don’t you let them.”
Nuts and bolts: getting started. If you plan to work on your own home and you plan on getting bank financing, the first obstacle will be you. Weird huh? Banks don’t like owner builders. For whatever reason, perhaps historical data or perhaps unbalanced fear, they believe that an owner builder is a flight risk and as such they make lending to such builders much harder and or more expensive. In today’s tight markets, the last thing you need is a harder and more expensive loan package. One way to deal with this is to work with a contractor as a consultant and have him or her listed on your loan application as the general contractor. They will use their license number and they will oversee the project as a consultant, not as the GC. They will charge for this, but much less than the average 15% currently charged by many builders for overhead and profit. having their name on the contract will save you cash out of pocket in terms of the loan down payment AND you will have trained eyes on the job site to help you when things get tricky. Be sure to have a very clear contract so that the job description is laid out and both parties agree to what will happen as the job progresses.
Now the plans. Any bank will require a set of construction plans, along with a budget and perhaps even material specifications. These need to be accurate as the bank will fund according to them. If the plans are only a rough sketch of what you intend to build, your project will likely go over budget by the end as much will change during construction. Therefore, make sure your plans are detailed and complete. Skimping here will cost you money in the end. having a good set will save you time and money and is well worth the cost. Hire a professional, yet not necessarily the most expensive one you can find!
The architect or designer can help you with the material specifications. The GC you hired as a consultant can help you create a budget for the job based on the plans and the material specifications. The critical path, the schedule of how the house will be built and when, is the next crucial piece of information you will need. Review my posts on this blog for more on how to build one of those. Again, the consultant GC can help with this as can your subcontractors.
From here, once you have the loan, you will have to go to the building department and get the permit. In fact, you may want to go there before you get the loan to see what the fees will be for the permits. In some cases, those fees can be upwards of $20,000 so forgetting to include them is a bad way to start the process. Working with the City or County office is important and building a solid relationship with them is even more important. Again, read through my blog for advise on how to achieve a healthy relationship with these departments.
That’s a primer. Of course, there is a lot more to know and a lot more to master before you should jump in. This is a starting point. I suggest you study any information you can get your hands on. Saving $50,000 is a great concept but not being prepared and losing $100,000 is a real drag.