Owner Builder Savings Potential
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- Опубліковано 12 чер 2024
- What is the potential owner builder savings that can be achieved by people taking on the general contractor role for their new home today? In this video we discuss the methods for to create savings as well look at the specific markup home builders are charging today. The idea being, if an owner builder can eliminate the markup or fee charged by the home builder, they can pocket this as savings for managing the process themselves. This video is brought to you by ownerbuilderclass.com/
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I think price/profit is different by the area that your building in and could range for 20-40 %.The cost for an owner builder can vary by the sweat equity of the owner builder, family and friends help in the labor of the build. Also the newbie can blow the budget with constant changes, upgrades,and mistakes. I have built several houses over the years and will build my next home because of the cost savings. I love your videos and I think it is great for owner builder’s!
It all depends on where you are building. In our metro area, market is 35%, but near the mountains the markup is 75%. We can build for $200 a sq foot in Charlotte, and the cheapest you can find near Boone, NC is $235/ sq foot. I've priced it out, and it is 30% cheaper to truck in a drywall crew from Charlotte, drive them 2.5 hours to the mountains, get 5 motel rooms, and food for M-Th in two consecutive weeks than it is to have the local contractor do the work.
Drywall crew? You can put in drywall yourself. Ain't rocket surgery.
I can verify that this is roughly the markup %, or higher. There's a reason builders and contractors are ridiculously rich and retire early. You're paying for that. My neighbour built three houses on his own and flipped them. He wiped out his mortgage and put $175K in the bank. Insane. I took on the GC for my build in 2009. I was being gouged by almost every contractor. Some even admitted it and seemed to enjoy bragging about how much money they were making each year. I hired supposed 'expert' framers that had framed a bunch of houses in Calgary and had to make them re-do almost every door and closet in the house. Apparently 3/4" out in the corners is 'acceptable' to the experts!? Note to self...never buy a house in Calgary. I will be doing MOST of my next build on my own with my sons, except some of the finishing stuff that I hate doing. Also, simplify your design, check your ego at the door, and shrink the square footage. Makes the job a lot easier, and reduces a lifetime property tax bill.
@Karl Hungus thks that been my problem after reading your comment I'm shrink my square footage My ego been in the way for yrs
@@robertadams7256 lol yeah fix your ego. Your only spending several hundreds of thousands of dollars. You better settle for whatever barn they want to build you. You should just feel lucky your house is still standing.
Yep. I'm saving up cash to build my next home. Live in it while building the next one. Qualify for capital gains tax exemption for selling your primary residence if you live in it 2 years in the last 5 years before selling. 250k-500k (single-married)
I want to do this at least 3 or 4 times bank up a million without needing to pay any Federal taxes.
Should be fun. Probably get audited but who cares I'll document everything.
@@christopherbeddoe406 Ha, it won't be 'fun'...discard that phrase completely. More like 'extremely stressful and annoying' 😉. Depending on where you live, you don't need to build that many to be mortgage free. Also, what is 'single-married'? Those are two different concepts I'm afraid...
@@karlhungus545 He is saying the capital gains exemption is $250,000 for singles and $500,000 for married couples.
We originally were going to build our own home (owner builder) because my dad is a retired contractor and can help us. We picked out our house plan, paid to have cost to build estimate done thru the plan company. It was $255,000 and that included a general contractor for $40k-we found that odd because dad was making $90k per house in 2008. Since it was so cheap we decided to just get it build because all the hassle of building would be eliminated and it would be worth $40k. We then got it priced thru a contractor and it was going to be almost $400k! So now we are back to the original plan of building it ourselves. It's weird the price was so off from the estimate because everyone talks about how it is normally cheaper than estimated. A third party estimated the estimate is within 10% of the actual cost so I'm hoping that just the contractor price was off as we live in north east Tennessee and tons of people from California are coming here and buying up everything. You used to get a new house for $120k, they are now $350k. You also could find a decent used home for $79k but that same house would now be $300k. It's crazy.
Some of that is because people keep wanting bigger homes. I sold a home I bought in 1980 in 2009. I lived in a remote cabin when not at my travel job and with not having a mortgage and proceeds from the home sale I built a duplex starting in 2013. I took a different position in the company so I could be home nights and weekends to work on the house. I retired a few years ago and looking for a snowbird place now that the prices are dropping. The rental income will pay the taxes on our places in Alaska along with utilities. I saved $15,000 just on the heating system and about the same on drywall. The only inspections here are done by the banks so no bank , no inspections. The local government just wants you to get a driveway permit to tie to the road. The power company gives plans for a meter base with all the necessary grounding instructions. The septic has to be done by a certified person, but the state will let a homeowner do their own after studying and passing a test on the requirements. We are lucky in that we live on a hill with the kind of pit run gravel people buy.
Im very interested in becoming an owner builder. I love the Den Outdoors designs.
I’m currently building my own house. I’m saving 30% on my house. That’s without the latest appraisal. However, it’s difficult to manage the trades but I’m getting it done.
@Armchair Builder. nice try. I see the difference in your name lol
Any updates on your experience? I'm looking to do the same
I am breaking ground next year. I have had quotes from 400 to 600k by builders. I decided to do it all myself except poring the slab. We will see how it goes.
any updates here? I'm looking to take the role of the GC for my own home
As a GC I think your notion is good. I do think Using DR Horton's markup as the model is fairly misleading. Additionally, it is probably prudent to mention that when you act as the GC you are in charge of sub selection and so could end up costing yourself significantly more money too. When you hire a GC they buffer that. And one with integrity, who stands behind their product, will take the mistakes of the subs on the chin and make it right as their "business" model to maintain their reputation and referral base. Additionally, the time and stress it takes to run a home build or large scale renovation is significant, and ultimately what the homeowner is trading their hard earned cash to avoid. It would probably be fair to position it this way in an initial or introductory video on the topic.
I agree with you that the time and energy an owner builder has to put into the build is not calculated in these savings.
What would you charge yourself per hour? Would be a good question and then calculate that by all the hours you’ll be guiding the build yourself.
Thanks so much for the info! I’ve recently bought an acre, hope to build soon. I’m a single parent and I need as much help as possible on a cheaper alternative.
Thank you for your videos they are the most helpful! I especially like to see the floor plans and houses that are actually affordable and you show the cost for everything. Can never get enough of those!
This is such great information. Thank you Mike. Keep up the great work.
Thanks for sharing it!
Unfortunately, if you have to have a contractor do some of the work, and you probably will, you're likely to get price gouged. Contractors are looking to make up for losses of the past couple years. I've been wanting to get started but it's still too expensive and product availability isn't back to normal yet if it ever will be. Buying lumber and other construction supplies here and there. What I don't want is to get the house framed then have another price explosion or product availability dry up leaving a wood structure not dried in for mother nature to do damage for who knows how long. Very frustrating.
Looking to build rural. What’s your thought on steel building homes? 30x40 steel building with lean-to’s for a carport and porch. In my area one comes delivered and installed in the 30-40k range.
as a homebuilder of 20 years, I've never made a 43% profit. 15-20% gross profit is industry standard, as with many other industries as well. and then a net profit of about 5-10%.
Yes I think he should have differentiated between a national production builder like Pulte and independent GC/Homebuilders. Production builders get the best prices on labor and materials and enjoy incredible economies of scale, for everything from excavation to concrete and through to roofers. Especially since they tend to do large subdivisions where a lot of work is in the same place for a few years...subs love that. Also the production builders use the cheapest materials, fittings and fixtures they can get away with. I agree with you that for a typical owner builder who does their own GC role, they might save 15-20%, and that's assuming they can get the bids from the subs at a similar price that the GC would...and even then do some work themselves like painting, etc. Expecting a 30-40 percent savings is misleading and definitely not the norm.
There wil always be a markup. How can contractors make a profit after paying overhead expenses? The 43 was eye opening though and actually good to know as we consider a new build in the next few years
Wow… i have plans to build 6 micro cabins as rentals. Have half the money already for the supply list really should look into building/managing myself. Each are estimated to cost $45K built with prevailing costs. Could cut that to maybe 30K
Have you done any builds in Southern Cali, specifically San Diego County? Do you think your material is relevant to the San Diego area? We are in escrow on a parcel and are venturing down that road! Looking for as much wisdom and guidance along the way as I definitely like the idea of being able to save up to 43% 😂
Do builders have other “unusual” costs which they need to cover with that markup? Like liability insurance, for example.
Gross profits minus overhead costs, sales commissions, bank loan charges and lot holding fees means that gross profit equals about ten to fifteen percent real profit. The average custom home builder, which of been for forty years makes twenty percent profit before overhead which is about five percent. Building a quality home is a full time job. Prefer builders usually don’t have the time to manage a job and their every day job. Believe me when I say being a general contractor builder is the lowest paid job out there except flipping burgers. And the liability is crazy. The majority of small to medium custom builders will go bankrupt at some point in their career. Wanna build your own home, good for it. It’ll be a valuable lesson.
With ur info and other channels im more than ready to take on this GC myself thanks
What other channels are best?
@@alphabrett2502 tile-winny
Trim-finish carpentry tv
Build- matt risinger
Drywall-vancuber carpentry
@@flozil Matt risinger knows his stuff but his channel isn't geared toward owner builders really. On the contrary, him and the whole build show network is geared toward very high end (and VERY expensive) building. I'll check out the other channels though. See if they're different
@@alphabrett2502 Plus Matt has become a shill for too many products. Given his large subscriber base and views that result in UA-cam income, plus paid product placements, he could probably make a great living just off his channel and not mess with building homes. (Plus his wife is a doctor so she brings home some good bacon too :-) )
Agreed
The iPhone makeup is actually 300%. The 75% figure is for the gross margin, which is (gross profit / total sale price).
Builders try to charge more if they think you are wealthy. I saved about 50% when I owner built my house in 1988.
A couple thousand homes? How many homes do you build each year?
I don’t know any builder making that kind of profit. NHBA looks at all the builders and the top profit was 19%.
That profit margin was right from Pulte's earnings report.
How are owner builders getting construction loans nowadays? All the banks I have called want a licensed contractor involved.
Jim, what state are you in?
@@ryanrite437 North Carolina
@@jimcooke640 I'm also trying to build in NC and having the same problem. Did you find anyone who would do a loan?
@@angytude no. Was going to build for my daughter. She finally found a home close by. We still may build in a few years but will probably get equity line on my home
So. Can you be an owner builder and receive a construction loan to permanent mortgage?
You'll probably need 30/40% for a down payment for a bank/lender to take on the risk, also owning the land (paid off) will definitely help as you can use that as collateral.
I think there's room to potentially look at portions of the job. I'm a builder/GC. I have some clients that wanted to save money and manage the finish process - this is everything after the drywall - they were happy to hire kitchen folks, hire flooring directly, paint, etc.
I don't think it's wise for a homeowner to take on the structural and MEP portion of the build even if it's licensed trades that they're going to hire.
So you are a builder/GC that allows homeowners to piecemeal out the job like that? Never heard of that before...unless the price goes up accordingly so the builder/GC doesn't lose any of his huge markup? All the quotes I received wanted all or nothing...so I went with nothing and did it myself. Saved over $280,000.
@@karlhungus545 I started off my career in remodeling, which is a massive piecemeal zoo. Then fell in love with new construction. I've had a couple of clients that were very inclined on taking on the finish work, one of them a finish sub I've used. In these cases, I will build everything up until the drywall (this includes all structural, roofing, weatherization, windows, exterior doors, all MEP, insulation and drywall. This is only for the owner/client that understands what's involved to get their house finished - from flooring to tile to paint to putting in casework.
There's a savings for the owner, while they can rest assured that the house was built correctly.
I can certainly understand the structural part but why not the plumbing, electric and mechanical?
@@ELIRAXPRT I include that - the MEP, I won't do a build without including those trades too. It's the bare min on a new construction build.
@@aldoogie824 This is exactly what I'm looking for. We plan to break ground on our retirement home in March (located in an Atlanta suburb) and hope to find a reliable, professional builder to take care of everything up until drywall.
Hi
I am a truss designer, in my service I provide truss layout and design.
also provide quantity takeoff for construction jobs i/c; MEP.
Thank you
Y
Well in fairness, I do avoid Apple products in large part because of the high cost. And it's not so much that I care about their markup -- if they could make a laptop with 75% margin and it was cheaper than an equivalent HP laptop with a margin of 35% -- I buy the lower cost laptop regardless how much profit Apple makes. But I understand the point you're trying to make.
I am a Veteran and technical Project Manager. Are you aware of a Mortgage company that will allow "Owner - Builder" for a combined Construction Loan with migration to a 30 year VA Mortgage?
They are definitely available from banks and especially credit unions. A little trickier, but do-able. The neighbor who was owner/builder next to my property had a construction to perm loan through a credit union. I'm working on an application for one myself right now.
Just completed my build, appraisal just came in at a little over 45% over my costs.
Wow! So great to hear that Keith! You are an inspiration to other owner builders.
That's terrific. Do you have any guesses as to what the cost would have been had you used a builder to do the home turnkey? Curious what that percentage equity would be in that case. (I am doing my build this year as my own GC)
@@pcskier3611 It would have been close to cost. Cost plus is 20 to 25 percent of the cost of the build, the other savings are I price shopped where I could. I saved by getting quotes, and being selective on materials.
The cost saving tips were essentially “ask friends and relatives to do work for you for free” lol
Please don’t be that person. Most people I know that ask for help are the same ones that never offer any help.
Wait to you see the markup after the mortgage is paid. lol.
who is building in Jasper, GA
Migrain was but he has been Mia. Would really love to see him back at it if he is healthy.
I miss his videos.
Yeah I’m all for making a profit and shit but when you make 2x what you’re employees yearly wages are on one house you spend about 2 months on…. That’s fuckin bullshit. Builders are definitely a big problem rn
Them and Realtors 😡
Steve Jobs had end to end control till the end & beyond. I don’t complain about the older Apple products I get for pennies on the dollar because Nobody has a gun to my head to upgrade twice a year. That’s wasteful in my opinion. There is a workaround on everything. Owner builder,out. Thx.
I will build my own house. No need for any subs.
Where do you find the subs, trades people, brick layer, concrete pour, framers, drywall installer?
wtf are you talking about the apple phone price is fkn insane now.
also 43% of 300,000 is way more than 75% on 1000 dollars.
Who would have guessed a builder is pro builders charging large sums of money.
So sickening to think human do this to each other. One man's riches cost another family 15 to 30 years of payments.
Im very interested in becoming an owner builder. I love the Den Outdoors designs.