project home v owner build

Discussion in 'Development' started by Want2RetireYoung, 14th Jun, 2019.

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  1. Want2RetireYoung

    Want2RetireYoung Member

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    Hi all,

    Just recently purchased my first vacant lot of land in south west Sydney. Didn’t opt for the H&L package as the land is not registered.

    So, what is better and cost effective? Doing a house package through a project home builder or owner builder home?

    I have been quoted up to $400,000 for a double storey, 4 beds, 2 garage, 2.5 bathroom home from the project home builders. Excluding landscaping, driveway and fence.

    My father in law on the other hand believes he can build it for up to $150,000 less for the same home with a good finish. He has contacts in the construction industry and is a project manager himself. To me, it sounds too good to be true, so how realistic is this?

    I know I can defiantly save costs on the CDC process and the architectural plans as I have contacts within the industry, but for everything else involved in the build I am unsure of.

    Can anyone please shed some light on the topic? Would really appreciate the help and discussions. :)

    Thanks
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Done well your father in law is probably about right on the savings. But...

    ...Lenders don't like owner builders. They believe (and have the stats to back it up) that there's a significant risk of cost & time overruns. Workmanship in some things might also suffer due to inexperience of cutting corners.

    If you do go down that path, you'll find very few lenders willing to fund the project and most will restrict you to an LVR of about 60%.
     
  3. Want2RetireYoung

    Want2RetireYoung Member

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    Thanks for replying and for that information, I wasn’t aware. I will look into this.
     
  4. Lindsay_W

    Lindsay_W Well-Known Member

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    $400K does seem like a lot, and no driveway, fence or landscaping included! Guess it depends on how high end the fixtures and fittings are.
    If you want to know if your father in law's quote is right, maybe speak to some other builders for comparison?
     
  5. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Really depends on the house. For a mass built Metricon style home, it is at the upper end. For a custom build on a sloping site, it's quite cheap.
     
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  6. wombat777

    wombat777 Well-Known Member Premium Member

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    Find a smaller builder. Not one of the big guys. I paid about 15% less using this approach.

    They can be more flexible in the contracting. I negotiated fixed-price turnkey and asked them to quote upfront for various options. I then downselected the additional items I proceeded with. All before I paid a deposit. Meant I could take a fixed-price contract to my bank.

    Do your due diligence very, very carefully. Small builders often have cashflow problems.

    My builder eventually collapsed but about 2 years after I moved in. Build quality was excellent ( due diligence essential by inspecting underway builds ).

    Edit - engineer so I wrote about 10 pages of specs for the design and the quoting. It was a custom build.
     
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  7. Want2RetireYoung

    Want2RetireYoung Member

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    It does seem like a lot, but majority of the project homes are quoting at prices around $360,000 to $400,000 for around 230sqm of home.

    Thanks, I definitely will. I just thought I would try here first to capture the larger audience.
     
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  8. Want2RetireYoung

    Want2RetireYoung Member

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    Thanks for the reply. I will definitely take this into consideration. Would you or anyone have any recommendations for smaller builders in south west Sydney?
     
  9. jrc

    jrc Well-Known Member Premium Member

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    The advantage of using a project management approach is you can save money as different tradies might quote a bit less. I've been involved in 2 project managed builds with a prior employer and we certainly saved money. the issue is whether people will quote on your job because it is small and how you make sure you get good tradies. The site foreman used on the last build which was inthe lower riverina had just moved there from doing similar work in Sydney fir a number of years. He was impressedwith the quality of the trades our project manager wasable to engage.
     
  10. Angad Singh

    Angad Singh Well-Known Member

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    Hi @Want2RetireYoung,

    I'm a builder from Perth so I thought I'd chime in:) One of my friends recently was in a very similar position. His father was a carpenter for over two decades and had the experience to help out with an owner build. As he was a dear friend, I told him to come to our office and use our software to estimate and schedule his build, and our team also helped at some of the milestone checks.

    The bottom line is this;
    You can save money, but it's far less than you think, and it's mostly for the hours you put in. This is because of the "economies of scale" available to a building company.
    1) As builders, we get significant savings in terms of suppliers and material discounts which are not always available to one-off builders.
    2) Some trades become a little opportunistic and quote higher prices when they know they are dealing with owner-builders who may not be as informed as us.
    3) Good builders tend to be far better at controlling wastage.
    4) A good builder will have a team who is not only appropriately trained and experienced but also empowered by software, systems and support so that they can be far more efficient than an owner builder.

    There is also something to be said about the value of on-site problem-solving.
    There is a quote that says "No plan survives the first contact with the enemy." Things go "off plan" ALL THE TIME on a building site, and you need smart people with experience problem solving live. This is something owner builders really struggle with as they simply don't have the volume of experience as a good site supervisor, and this can lead to cost blow-outs and delays.

    Now, with regards to your specific scenario, the difference between your $150k estimate and $400K quote is huge. No way a builder would get away with that in Perth. My sense is that the quote is probably on the high side, but your father in laws estimate is probably underpriced.
    I would start by getting an estimate done by a quantity surveyor to verify the estimate.

    Hope this helps.

    Cheers,
    Angad
     
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  11. Want2RetireYoung

    Want2RetireYoung Member

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    Hello Angad,

    Thank you so much for the detailed response. I will definitely take everything you mentioned into consideration. :)