Reducing labor costs can save you a lot of money. Are you planning to build your own home as a do-it-yourselfer? If you are borrowing money, this can be tricky. The lenders will have requirements and restrictions. The most critical need of the lender is to make sure that the project is completed according to code, on time, and on budget. The lender will have to be confident that the approach you take in building your home is going to achieve these goals. I get a lot of questions about this topic so I decided to write this in a Q&A format. It might give you a better feel when making your decisions. Q: How much money can I save by providing my own labor? A: Since labor costs in most home building projects often represent between 30-50% of the budget, savings can be substantial. As a practical matter, your savings will be far less than that. It will depend on your skills, time available, and cost of additional help. Q: How much of my own labor should I attempt? A: Never bite off more than you can chew. Time is money when there's a construction loan to worry about. If you're taking time away from your business your income may suffer. I recommend providing your own labor only when you or your friends are extremely adept at the particular skill. Q: Can I pay or reimburse myself and my friends for the labor we do? A: This will depend upon the lender. Private lenders can be more agreeable to this. You will likely have to provide paperwork to back up any claim you make for pay or reimbursement. Remember, your goal is to save money and keep your loan amount as low as possible so you don't want to pay for labor when you don't have to. Q: How do we make sure to comply with codes and pass inspections? A: Always use professionally prepared plans that are code compliant with materials and structural components clearly specified. Be sure you have someone who knows how to read blueprints and follow them. Work closely with your building inspectors. Q: Will the bank give us extra time? A: If you need extra time to complete your home, this can be difficult to accomplish. It can also be costly if you're granted extra time. It's best to bring in extra labor if you feel you're falling behind your timeline for completion. DIY Owner Builders Should Prepare Extensively Get all your ducks in a row before the loan starts. Once the clock starts ticking and the interest charges kick in, you can't afford to waste time. Relying on friends to come when they promise can be a problem. Always have back-up strategies so that progress never stops. Prepare well. Communicate well with your help and reward them so that they keep their enthusiasm high and the job gets done.
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