Armchair Builder

How Much Can I Save Building My Own House

Updated May 2020

“Exactly how much can I save building my own house?”  As a builder, I get this question a lot…and no, it doesn’t bother me.  I’ve never been a fan of keeping people in the dark.  If you’re trying to decide whether you want to build your own home or have someone else do it for you, it’s important to understand the costs upfront.  So here’s a breakdown showing how much you can possibly save if you take on this project yourself.

The Savings When Building Your Own Home

How much can I save building my own house?

Management:  Performing the General Contractor Role

The first major way you can save by building your own home is in the fee that general contractor’s charge.  This is the cost the builder passes on to you for taking on the project.  Keep in mind, this is a management task in most cases.  Most home builder/general contractors don’t do physical labor.  Instead, they subcontract out the activities to professional trades people who do the work.  Your tasks as the general contractor include budgeting, planning, bidding, hiring trades and suppliers, scheduling, quality checks…etc.  So how much do you save by taking on this role yourself as an owner builder?  Based on the financials being reported by the public home builders, the current savings to date (as of May 2020) is about twenty three percent (source D.R. Horton’s 1st quarter financials, gross profit margin).  This number continues to increase as the housing recovery continues and the supply of homes shrinks…in other words, builders charge more as the demand for their product increases.

Physical Labor

Some of you asking the question, “How much can I save building my own house”, are referring to the actual savings from doing the physical labor yourself.  If you performed all of the labor to build the average home of today, you would save about fifty percent off of the cost to build.  And according to the latest cost to build survey from the National Association of Home Builders, the average home costs just under $300k to build.  So using those numbers, you could save about $150k by taking on all the labor to build your new home.  But in reality, most of you won’t have the time, the skills, or the desire to do all of that work.

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Most owner builders choose to take on some of the more common tasks that they have performed in the past.  If you choose to do some of these less difficult activities for building a new home, like cleaning, painting, trim carpentry, landscaping…etc., you can reasonably expect to save another five to ten percent.

How Much Can I Save Building My Own House?

So we know you can save money by managing the process as the general contractor and by doing some of the physical labor yourself.  But let’s take a closer look at how these savings add up.  Assuming you take on the general contractor role, you can reasonably expect to save twenty percent if you do the job right.  Now let’s say you do some of the physical labor (i.e. cleaning, painting, trim carpentry,…etc.) and you save another five percent.  If your new home costs $250k to build, your savings will be $62,500.  That may not sound like a lot, but you also need to consider the tax consequences.

Taxes Increase Your Savings to $90K

Remember, just like everything else we buy, you will use after tax dollars to pay for your new home.  Meaning, you will pay federal, state, and all other taxes on your income from your regular job before applying it toward your new home.  So let’s assume your tax rate is thirty percent.  You will need to make almost $90k at your day job to net the $62,500 to pay for the management and physical labor savings noted above.  So to look at it another way, by taking on the general contractor role and doing some of the physical labor yourself, you could make an additional $90,000 in income.

Building a new home isn’t easy.  It takes hard work and dedication to build a quality home at a great price.  But for those who are willing to learn and do the job right, there is a significant pay back in it for them.  If you would like to get your hands on some of the resources pros use to save time and money building new homes, check out the Armchair Builder e-Store.  Be sure to look around as we have some great video, articles and digital resources to help make your dream home a reality.

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