Very few of us are lucky enough to be able to self build our dream home. When the opportunity comes along, we want to make sure that everything is done just right.
Building your own home is a massive undertaking and needs consideration of all the issues….
Topics for discussion have been grouped as follows:
- Needs & Wants
- Risk Management
Some difficult questions need to be asked:
- Are you all agreed on the self-build?
- Is now the best time to manage the intense disruption to your lives? If not now, when is the best time?
- What are you each sacrificing to pursue this dream?
- For how long are you prepared to look for a suitable site?
What are the implications for you and your family if it takes 2 years, 5 years, 10 years to complete your self-build? If it takes you 5 years to find a plot and build the house, does this affect your decision where to build a house? What if it takes 10 years?
- How long do you plan to stay in the house once it is built?
If you are building a house in an environment new to you, perhaps in the countryside, how certain are you that you will adapt to that environment? Should you rent in your target region first of all?
Why do you want to do a self build? Is it one or more of the following:
- To live in the perfect home after years of living in imperfect ones.
If the reason for a self-build is to to build your forever home, it has to work for you at different stages of your life. The house needs to be designed for ground-floor living, in readiness for the infirmity of old age.
- To build the quality of house you couldn’t afford to buy
- To live in an environmentally-friendly house
- To be totally involved in building your own house
If you have always wanted to self-build, perhaps you can scratch that itch by building a holiday home or by building an investment property. This might work out well if you are happy where you currently live. You could earn income by letting out the self-build and decide later whether you want to live there.
- Are there a mixture of reasons, such as your ability to choose the layout, level of comfort and home automation? Can some of the reasons be satisfied in another way?
Location of the self-build
Once you know why you want to do a self-build, it’s easier to consider the location. You will have different considerations for a holiday home location and a permanent home location. Is the self-build an opportunity to relocate? To a new town, a new region or even a new country?
Needs and Wants
Do you know what you need to achieve with your self build as opposed to what you want to achieve? If you make this separation of activity, it becomes much easier to focus on the important parts of your project. With a limited budget, you can prioritise purchasing the items that are needed. If you divide your self-build into stages, you can place the Needs into the early stages and the Wants into the latter stages, when budget or time allows.
Budget for a self-build
It’s essential that a budget is calculated before the project starts. If not, you run the risk of not being able to afford to complete your house. Setting a budget is not an easy task; you have to anticipate the price you will pay for a site and then estimate the cost of building a house that has yet to be designed. There are so many unknowns. Your carefully-balanced budget could be thrown wildly off course by unexpectedly fragile ground conditions or by problematic service connections in a rural landscape.
You will need to question whether you are willing to relocate to get cheaper build costs. Can you do some of the work yourself to save money? Have you checked that you are eligible for a self-build mortgage? Finance options are available from companies such as BuildStore, Ecology and others. Do check out alternatives.
Your budget will typically include the following costs:
- Project Management
- Temp accommodation
- Fees, consultants, taxes, insurance etc
On a self build project, there are some risks that are relatively easy to identify and mitigate. Examples are:
(1) Running out of funds
You might adopt a rigorous budgeting system with cost control and a 10% contingency fund.
(2) Unacceptable contractor/product performance
You can avoid many of the problems associated with poor performance of contractors by doing your due diligence. This means taking the time to obtain recommendations, obtain several quotes for each job, asking for references, visiting their previous work etc. If you don’t allocate the time to do this, you are relying on luck to avoid future problems.
A delayed completion could be due to a number of factors, including adverse weather conditions, poor planning, unavailability of materials, unexpected additional works, funding problems etc. You can mitigate these with excellent project management. Options are fixed price contracts, completion bonus, delay penalty etc.
But what about the risks that are not so easy to identify? And the risks that are identifiable but are not so easy to discuss? You are encouraged to think of as many risks as possible that might derail your self build project. And then you can think of how you will deal with those risks. At the end of this process, you should be feeling more confident about your ability to accomplish your Dream House!
Here are a few suggestions to get your Risk List started:
Interrupted source of funding
- Delayed sale of an existing house
- Termination or reduction of current salary or income
- Funders change decision on previously-agreed funding
- Anticipated funds are unavailable due to account rules
- Change in personal credit rating impacts ability to borrow
Change in family or personal circumstances
- Bereavement of a family member or friend
- Relationship or marriage problems
- The loss of employment or the failure of a business
- Family member moves away from the area
Unexpected Ground conditions
Even where exploratory boreholes have been dug, there is always the possibility of surprises when excavation starts. A groundworks contingency fund is always a good idea.
This is the risk of the contractor going out of business before they complete their work on your site. Mitigate this risk by contract, possibly not paying up-front.
We’ll explore these and more issues in various articles.