The Top 3 Tips for Building Your Kit Home, Part 1: Set a Realistic Budget
As we rapidly approach the end of the 2020 building season, we wanted to give a jump-start to those who are looking to start the process in order to build in 2021. This is the first of three posts addressing the issues of Setting a Realistic Budget, Getting (and Staying) Organized, and Planning for the Future.
This post will focus on the foundational aspect of setting a realistic budget. If you go into this process with an idealistic budget (or no budget at all), you are setting yourself up for additional stress and strain on top of an already stressful, complicated process. Below are some helpful hints and tips, as well as some resources.
It is a fact that you can save both time and money by building your own kit home. How much you save depends on a few different factors.
First, who is your General Contractor (GC)? If you plan on acting as your own GC, that makes you an Owner-Builder. Being an owner-builder gives you flexibility and saves you money, if you can do it. If you are the GC, you manage the building process and normally you can do any parts of the construction process you want. If you hire a GC, he (or she) hires subcontractors to do the work and marks up their prices by 10%-15% for managing the project. They also normally add 10%-15% for their profit. Some quick math gives you a total markup of 20%-30% for hiring a GC. Depending on the size of your build, that could be a lot of money. However, it is also important to note that there is a lot of complicated work involved with being the GC. The GC is responsible to hire all the needed subcontractors and manage the construction process (keeping everything on time and on budget). They also carry a 10-year liability for any major construction defects (in California; other states vary). If you act as the GC, you are responsible for managing the construction process and the licensed subcontractors. You also have less of a safety net if there are issues with your build that are discovered down the road.
Next, your overall construction budget will be affected by how much of the kit home building process you will do yourself. When we first started in the kit home business 50 years ago, it used to be much more common for an owner-builder to build most of the kit home themselves. These days, however, it is much more complicated. There are two primary reasons for this: home designs and building codes. Houses built in the 1970’s were much simpler than most houses built in the 2020’s. The building code was also a lot shorter. Unless you are skilled in foundations, carpentry, plumbing, electrical, IT, fire suppression, solar, roofing, flooring, and paint, you are likely not going to do much of the work yourself. That means most customers need to hire licensed subcontractors to do the more complicated parts, which will cost more money.
With all those factors in mind, here are some tips to help you set a realistic budget. First, identify what parts of building a kit home you can realistically do yourself. It is helpful at this point to identify the different parts involved with building a kit home. Here is a helpful spreadsheet that gives you a good summary of the major aspects of building a kit home (or any home for that matter). This is the same spreadsheet you would use to submit your construction budget to your lender. These days, most of our customers contract out the foundation, rough plumbing and electrical, mechanical and the standing of our kit home to licensed subcontractors. Sheetrock and insulation are also commonly contracted out to licensed subcontractors, as the cost to have them do the entire job is not much more than the cost of materials themselves, and they do faster, higher-quality work than someone who does not do it every day.
You should also note that some construction lenders require certain parts of the building process be done by licensed contractors, and many are requiring a GC to be signed onto the project. Check with your construction lender for their requirements. If you are not using a construction loan, you generally have more flexibility as an owner-builder.
We hope you can see the importance of creating a realistic budget. Building your own kit home gives you a lot of flexibility, but you should be careful not to bite off more than you can chew. Being an owner-builder offers you the satisfaction of building your house “with your own two hands” and save you money, but a General Contractor can take a lot of the stress and liability off your hands. If you need help filling out your construction budget, or if you have any other questions, please contact your local dealer, call us at the number above, or fill out the form below.