If there’s one question that pops up ALL THE TIME on Australia’s owner builder forums, it’s this one: ‘how much will I save if I owner build my house’?
- Or, more specifically, ‘what percentage can I save by owner building?
- Or, from a more technical angle, ‘what is the builder’s margin that I can save by owner building my own house?’
- Or, even more specifically, ‘how much will it cost me to owner build a 4 x 2 house (four bedroom, two bathroom) in XXX area in XXX city?’
And those questions make sense. Building a house is probably the most expensive thing you’ll ever do. It makes sense to want to know the price.
What is owner building?
In Australia only registered builders are allowed to build houses. However most states also allow you to apply for a permit to build a home for yourself.
This can mean literally physically building it yourself, on the tools (self-building). Or, just project managing – hiring all the different trades needed to complete a house, like a builder would usually do.
For the purposes of your build, using your Owner Builder Permit, you are the registered builder, and you carry the same responsibilities that the builder normally would.
Why would it be cheaper?
Well, people often think that owner building will automatically be cheaper, because you can save the margin that the builder builds in to their price.
What is the builder’s margin? It’s an extra amount, on top of the cost of materials, tradies, permits, etc, that the builder plans to take home themselves. It is payment for their time spent project managing the build, running their business, putting their capital at risk to fund the work, etc.
So let’s say the builder aims to make a margin of 20% or 30% on your build. And, maybe at the end they achieve that. That’s low-hanging fruit, right? You could just keep that money rather than handing it over to the builder.
Well yeah, if you have the time, skills, experience, knowledge, contacts and suppliers to do a decent job of all of those tasks yourself.
You are less efficient than a builder
Let’s say the builder’s margin for your $400K house would be 25% or $100K.
Firstly, to pocket that $100K, you would need to get things done at the same pace as the builder.
If it takes you two extra weeks to get three plumbing quotes, and it takes you two extra months to finalise your drawings, and it takes you an extra three weeks to gather all the paperwork you need for your Building Permit, that’s like three months of extra time before you can move into your new house. Which is three months of extra rent and mortgage payments while you live somewhere else and fund your build. And that’s before you’ve even started building anything. Your slowness compared to a builder will likely continue throughout your project.
Another cost that can creep in here is if you end up needing to extend your owner builder insurance, which tends to be massively more expensive than your original owner builder insurance premium.
On the upside, you may be allowed to move into your project before it’s complete, as long as you’re game to live in a partially constructed house, and the council and your insurers are OK with it too.
So let’s say you drop $6K of extra rent and mortgage costs because your timetable is slower than the builder’s, so your forecast saving drops to $94K.
No ‘mates rates’
Tradies and suppliers will likely charge you more than a builder. You are a one-off customer, and you will probably be more trouble and less smooth-running than a builder they already have a relationship with. In fact, you may even find it difficult to get tradies to give you quotes at all.
Let’s say that the labour and materials to build your house are 10% more expensive than the builder would pay, so you’re paying an extra $30K where the builder would pay $300K. Your saving is now down to $64K.
False economies
This is a good point, which someone flagged up after I originally wrote this. Along the way you may make mistakes, due to lack of experience. Or, you may pick something that looks like a cheaper option, but ends up more expensive than doing it right in the first place. For the purposes of my worked example though, let’s say that you do well though. Nil rookie errors.
Your time and energy are not free
Owner building is generally a project which stretches over several years, and completely takes over your life, using up every spare scrap of time, energy and motivation that you have.
If you are working full time, how would you do this? If you scale back your work commitments, how much income are you going to lose over the course of your build? $50K? $100K? More?
Let’s say your lost income is $30K, and your saving is now down to $34K.
How good are you at resisting temptation?
OK, so do you have exceptional levels of discipline and self control? Do you find it easy to deny yourself chocolate or beer or a nice handbag or the latest iPhone? OK well then you can skip this section.
But for the rest of us, mission creep is inevitable. If the builder’s quote is for a ‘project home’ – the cheapest, most basic form of housing – then that’s what the builder’s budget will cover. Only the most basic specifications for everything, from plumbing fixtures to how many electrical outlets there are to what kind of floor coverings. It’s a very rare owner builder that builds themselves a house fully to the basic specification that’s typical for a project home.
What is MUCH more typical is that you will seize the opportunity to build exactly the house that you personally want to build, and end up stretching your budget a bit further to get the X, Y and Z things that just make your personal heart sing.
Let’s say you’re fairly disciplined, and your specification creep is only 10%, $30K. Your forecast saving is now $4K, and don’t forget that you’re going to do a really large amount of work to achieve that.
Even ‘just project management’ is a LOT of work
So far, we’re assuming that you don’t lift a finger to build anything yourself. ‘Just project management’, right?
Sometimes, when people ask questions about owner building, I think that in the back of their mind, without them realising it, they’re kind of visualising that you go and pick up your Owner Builder Permit, and attached to the back is a 25% off voucher. You go ahead and phone a couple of tradies and hand over the voucher. Six months later, they hand you back the keys to your completed house. Very cool. Like a builder, but 25% cheaper.
Nope. It is a lot of work to project manage a build. Even if you have construction experience, or you are a plumber or a roofer, you may not even fully appreciate how much work this is, across the full duration of the build. If you’re just a regular old homeowner, just take my word for it, even if you never lift up a tool yourself, project managing a construction project is a very serious amount of work.
Think about it. If everyone could save $100K+ on their house build, AND IT WAS EASY, then everybody would be doing it all the time.
Don’t forget, there’s no guarantee about saving that $4K
It could be more, it could be less. Construction is an enterprise packed with risks and uncertainties.
Owner building could very easily cost you MORE than paying a builder. Of course it could. Especially if your relevant skills and experience are limited. Builders are the experts, and still they often struggle to estimate costs accurately.
If it’s break-even, why would I bother?
Yes, exactly, good question! The scenario I’ve described so far is not uncommon. The owner builder takes on project management, and only a minimal amount of labouring on the site. Do they save a ton of money? No. Why did they bother?
Well, because they’ve got a better house for the same money, built to meet their own personal desires for their home. Or because they want to do something unconventional like build a house from straw bales, and builders just aren’t into it.
But then why does anyone think that owner building is a good way of saving money? Ah well, it can be. But, you’ll need to do more yourself than just project manage.
How owner builders really save money
Some owner builders do achieve really big savings. I’ve heard people say they’re on track to save 50% of what the builders quoted them. More often I’ve heard people say they’re expecting to save 25-30%. So for my example, that would be a saving of $100-200K. How do they do that?
By investing a huge amount of time and hard work. Doing absolutely every job on site that you can. Each task you do yourself is a task you’re not paying someone else to do. Some tasks have to be done by registered tradies – electrics, plumbing, etc (it varies by state). I’ve met owner builders who are literally doing everything they legally can, themselves:
- Building brick walls, stone walls, straw bale walls
- Rendering
- Roofing
- Putting up plasterboard
- Fitting kitchens
- Hanging doors
- Paving
- Landscaping
- Decorating
- Cleaning up the site
- Driving rubbish to the tip, or taking it home for their own bins and recycling bins
- Calculating takeoffs (working out what quantities of materials to order) to save waste
- And on and on!
And I’ve met owner builders who’ve put in a huge amount of time to hunt down low cost materials:
- A couple collecting free or cheap materials over the course of a decade, storing them ready for their build.
- An owner builder relentlessly scouring Facebook Marketplace to source surplus rolls of insulation or wrong-sized double glazing or left-over steel frames.
- Three owner builders who bought trailers or utes for the duration of their build, so they could nip around picking things up.
And of course some owner builders are tradies themselves, and bring their own skills and experience to their build, as well as their contacts and supplier relationships.
So, how much will you save if you owner build your house?
If saving money is your only motivation for owner building, then I would really give some serious thought to whether you are ready for the hardships of owner building.
But, if your motivations also include wanting to get stuck in to working on your own build, creating a better home for a similar cost, aiming to do something a bit different, utilising relevant skills you already have, looking forward to learning new skills and being stretched to your limits, well then, welcome to the team!
What would a builder charge?
All of the above assumes you know what a builder would charge to build the house you have in mind. Ways to try and gauge what a builder would charge include:
- Research similar offerings from builders.
- This article from Property Update gives a rough $ construction cost for various Australian cities and scenarios.
- I’ve seen this book, Rawlinsons Construction Cost Guide, recommended to help you cost things up yourself. At $350 I’d wonder whether this might be a better investment if you were planning to do a series of projects rather than a one-off, although perhaps it would help you with decision making before you head down a certain path with plans.
- If you have drawings, get quotes from builders, or start getting quotes from tradies and suppliers.
- If you have drawings, pay an estimator to do an estimate. I’ve seen numerous owner builders highly recommend this, saying that the estimate ended up helping them save a lot more than it cost to get the estimate done. This can also be helpful for including all the costs you may not have thought of, whether it’s a step in the process you aren’t aware of, or a permit or fee that you didn’t know about. Here in Perth I’ve seen a lot of owner builders recommend Jason from West Coast Estimating, and I have used him myself and found the estimate very useful.
- And, further afield, this is an interesting article from BuildIt, about how much it costs to self build in 2023 in the UK (owner building is known as self building in the UK, although no owner builder permit is required, anyone can just do it), which also discusses some of the ups and downs of owner building.
And if all those answers give you an answer that’s higher than your budget, then wishing it lower probably won’t be enough to fix that! That’s magical thinking rather than a sound plan. Consider, can you do more yourself, do you need the rumpus room, is that fancy kitchen really going to be three times as pleasing as the IKEA one, and so on.
What next?
Research, research, research.
And by research, I do not mean going to an owner builder group and asking ‘what % will I save on my build please?’ I wrote this whole article just to show that the answer is, it massively depends.
All the owner builders who have kindly shown me their builds, have been doing a great job. They vary from a lady in her 60s with no prior construction experience, to the couple who spent a decade collecting their own materials and are how building their house themselves by hand, to a young project manager delivering a exquisite high-spec home for his family. Some of their builds are fully conventional, some use totally non-standard approaches. All looked to be on track to create fantastic homes for themselves. What do they all have in common? Resourcefulness. Stamina. Practicality. Research.
So, research, research, research:
- Go to the owner builder groups on Facebook (nationwide and/or for your state) and READ BACK THROUGH THE POSTS. See what current owner builders are asking for help with. Look at the advice given to everyone else who asked about savings or about whether to go timber, steel or brick, or whatever else your question is.
- See if you can identify someone who is currently owner building in your area and reach out to them for any advice.
- Use Google.
- Watch YouTube.
- Look for podcasts that match your interests – for example the Undercover Architect or Sustainable Builders Yak.
- Get a couple of books out from your library about owner building.
- Go to open house days and Sustainable Open House Day.
- Consider doing the owner builder course for your state (they’re like $200, and they explain all of the legal responsibilities of owner building).
- Check out my posts Thinking about owner building? and Builder to lockup then owner build?
And I warmly wish you all the best on your journey to your wonderful new home!
Photo by Josh Olalde on Unsplash