Owner Building: What Are the Savings Really?

Owner Building Project

So you’re tossing around the idea of owner building your new project. Whether you are wanting to build a new home from the ground up or just re-work your existing place, it is a huge decision to make. Should you hire a full service general contractor? Recently we posted about the risks and rewards of owner building.  We mentioned one of the biggest reasons for taking on the responsibility is for the savings.  But what are the actual savings really?  Here we will discuss this and take a look at the latest numbers professional builders are making in the U.S. so we can see what the potential savings are for you when owner building.

It’s no surprise that real estate in the U.S. has had a rocky road over the past four years.  From builders/general contractors to remodelers, the residential construction industry has felt the pain.  Countless subcontractors and building companies have closed their doors.  So, what has all this turmoil done to the profit made by the home builders left in the game?

The National Association of Home Builders (NAHB) puts out a survey of professional builders on a regular basis.  This study surveys builders to find out more about their financials so that builders can benchmark their company against the results.  The most relevant number to look at from the study when it comes to owner building is gross profit.  This number tells you how much money a professional builder makes after paying all the costs associated with a particular home building project.

Looking at the NAHB’s survey results, we see that professional builders earned an average gross profit of 15.3% per project.  It’s important to stress that this is the average of the survey results.  So, some were better and some were worse.  And if we look back at the pre-real estate bust survey results, we see that professional builders were making 20.8% gross margins.

So is 15.3% a realistic savings number when owner building today?  Sure it is…if you do the work necessary.  Not only will you save on the typical general contractor’s profit, but you will also save by doing some work yourself and by taking advantage of contacts with friends and family.  Don’t underestimate the value of these additional cost savings.  Here are a few labor activity savings examples for the average home in the U.S. if you do it yourself…

Interior Trim Carpentry: $1-$2 per square foot

Interior Painting:  $1.5-$2.5 per square foot

Cleaning:  $300-$500

Trash Removal:  $1500-$2000 (sorting and recycling can take time and effort but will yield some big savings to both you and the planet)

By owner building and taking on the responsibility of the general contractor for your project, you can save some serious money.  And if you decide to use your contacts and do some of the work yourself, you can save even more.  Have you ever thought about building your own home?  Be sure to stop by the Armchair Builder How to Build Your Own Home resource page.

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