General Contract Your Own Home: Money Saved
0 Comments | Posted by armchairbuilder in Build Your Own Home
Most people know that in order to general contract your own home a serious commitment in both time and resources must be made. But for those that are willing to make that commitment there are some huge potential savings to be realized. Approximately how much one can save is best determined by analyzing the financials from actual professional builders.
Pro Builder P&L
There’s no way pro builders are going to give us all of their sensitive information are they? Actually, yes. The National Association of Home Builders (NAHB) regularly conducts surveys of professional home builders on their costs for constructing new homes. This survey captures construction costs for materials and labor, along with the specific profit and overhead costs that each company experienced per home.
The table below shows average costs as a percentage of new single-family home sales prices.
General Contract Your Own Home to Save Money
So if you’re contemplating becoming the general contractor for your own home, what exactly do these numbers mean to you? Well as an owner builder you won’t have any marketing costs or sales commissions to pay as long as you’re building the home for yourself. If you purchased a new home from a builder/developer you would pay these costs…to the tune of about 4.7 percent of the sales price. What exactly are marketing costs? This is what a professional builder pays to place ads in new home publications, newspapers or other online real estate listings. The sales commission is a combination of the builders own sales staff and the buyer’s representative.
When you buy a new home you will also pay the builder profit. This number, similar to the rest of the business world, is based on supply and demand for the given area. If the market is hot, expect to pay a higher profit to the builder. Notice in the table above, builder profits have gone up since the bottom of the real estate market in 2011.
The overhead and general expense cost has even more potential to save those that want to general contract your own home. Things like construction office leases and employee benefits and wages can be eliminated to a large degree. However, you will need some of this money to pay the team members (i.e. architects, builder consultants, inspectors…etc.) that help with the more difficult items.
By looking at the NAHB survey, we see the savings can be significant for owner builders. When you add in the other potential savings from providing your own labor to having your friends with connections help, the dollar amounts really start to add up. Do you think you might want to general contract your own home? Stop by our E-store for some pro builder tools to help you save time and money. You’ll also want to stop by the Armchair Builder resources page for free video and articles sharing builder secrets to build a quality home at a reduced price.
