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Housebuilding tips, Issue #003 -What if I can’t build my own house?
February 24, 2007

What if I can’t build my own house?

February 2007

Hi Friend,

The snow is still flying in most parts of the country, but there are some truly dedicated homeowners that are making construction plans for the springtime.

I have talked with several homeowners recently who have completed their house construction projects. I wanted to get a good mix of people that have done the work completely by themselves, and some that have hired out the labor, assuming the role of general contractor.

The results are the same as always, but I like to stay current on the trends in the housing construction market. The homeowners that do all the work themselves finish off with an average of about 60% equity in their homes.

The homeowners that hired out labor have all had such poor experiences and have only saved about 5%. The reason for this is because the subcontractors or the ones actually doing all the work usually take advantage of the homeowner and overcharge in every area.

I have only seen just a few homeowners that saved a lot by being their own general contractors. In these cases, they usually save about 20% the cost of the home, which is about what professional general contractors make.

What is a person to do that can’t do all of his or her own work, but doesn’t want to be taken advantage of by subs? The answer is research. A homeowner needs to know exactly how much homes are costing to build in their neighborhoods.

If a 2,000 sq ft home that is built by professionals costs $180,000, then you as a general contractor should be able to build your home for about 20% less or $36,000 less because you are taking the profits of the general contractor. But knowing how much the house costs to build isn’t enough to keep from getting taken advantage of.

You will need to do more research and find out how much each subcontractor charges for work done. You can find this out by talking to other new homeowners who still have a job-costing list from their new homes. The general contractor usually makes a job-costing list and it usually has each amount paid to each sub for the work done. Most general contractors omit their profit margin, but you can usually figure in around 20% profit depending on the level of competition in the area.

With this knowledge, you will also have to be headstrong when hiring subs. Most subcontractors rely on the fact that homeowners don’t know anything at all about house building. They will act surprised when you tell them their prices are about 10-20% too high compared to other jobs in the area. They may even walk off, but you will be treating them the same way that professional general contractors treat them.

Here are a few areas where subcontractors really gouge homeowners. You might think the long drawn out jobs would be one of those areas, but they really aren’t. The short jobs are where the equity is stolen from self-general contractors who are the homeowner. Cabinets—is an area foreign to even the most hardcore builders because we don’t know how much exotic types of hardwood costs. We know that it takes a lot of work because they look so nice. Cabinets are probably the most important part of the house that determines value and sell ability. We need to do a lot of research on local cabinetmakers and past projects to get an accurate idea of a fair price.

Electrical— is another area, because we all want the electrician to do a good job so we can be safe. Most electricians over-charge for residential installations. There are many electricians and they all have to follow code requirements. Don’t assume they will all be fair.

Drywall— is an area where subs can really gouge homeowners. Most drywall companies have an owner that does nothing but job-costing and makes most of the money. He or she usually hires out drywall hangers and tapers to do the really hard work. Try to find a drywall company where the owner does the actual work.

Tile— has become so popular recently that most homeowners don’t even question the high cost of labor performed. Do a fair amount of research on tile setters and you should be able to get a good deal.

HVAC—the area of heating, venting, and air conditioning is where many homeowners get overcharged. Once again, research can save a lot of money or equity.

Well, that’s it for tips on saving equity by doing the entire general contracting by yourself. Not everybody can build their own homes without the help of contractors. Those of us that can will reap the benefits over and over, but there is still hope for those that just want to do the general contracting.

Well, that’s it for the February newsletter. May god bless each and every one of you as you try to improve your circumstances in life.

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