To avoid General Contractor fees, some property owners take on the role of contractor themselves. Is this a smart choice, or will it leave you with major regrets?

Consider your neighbor, John, who decided to act as an owner-builder for his new home build. Initially, he expected to save money and maintain more control over his project. However, a few months later, he faces delays, increased costs, poor quality, and significant stress—all issues that could have been avoided with professional help from the start by working with a Design-Build firm like Letter Four. This scenario is all too common among those who opt for the owner-builder route, often unaware of reasons why this route is much more costly in the long run.

Acting as Your Own Contractor: Are You Equipped for the Job?

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Before taking on the role of owner-builder, assess your own capabilities objectively. Are you familiar with local building codes and regulations? Do you have the time and energy to dedicate to this demanding role? Remember, acting as your own contractor places considerable responsibility and liability on your shoulders. It's crucial to weigh the potential risks against the benefits before making a decision.

Do You Have the Time?

Being an owner-builder is like having a part-time job with full-time responsibilities, and every day you spend at the construction site takes away from your regular job or personal life. You need to invest a significant amount of time in coordinating with your suppliers and subcontractors, checking their work, and solving unexpected problems that can arise. 

Unlike professional contractors or Design-Builders who have efficient processes, managing your subcontractors, coordinating material purchases and deliveries, securing inspections, and generating your own project sequencing and schedule can be pretty overwhelming. 

Hiring unfamiliar subcontractors can often result in longer project timelines and higher costs, as they might prioritize other jobs. There's also the risk of subpar work that requires taking a step backwards in your timeline in order to make costly corrections. You should also consider the time investment required to find, vet, and secure bids from subcontractors. Once contracted, ensuring their punctuality becomes the next hurdle. Without all necessary materials on-site, subcontractors are likely to leave for another job that is fully prepared for them. This can lead to significant delays in getting them back to your site and back on track.

Do You Have the Expertise?

Developing proficiency in construction requires time and dedication. Mastery in this field can't be achieved overnight; it necessitates specialized knowledge and skills, which come from hands-on experience. This is where professional contractors become indispensable.

Often, individuals acting as builders to save money will need to collaborate with an architect or designer to create plans for permits. However, these plans aren't sufficient for actual construction. For detailed designs, coordinating with a structural engineer is necessary. Depending on the scope of work, you will need to rely on subcontractors to get their own permits. 

To complete the construction of your project you must also select finishes and fixtures, ensuring compatibility and proper fit. Hundreds of items are involved in a standard remodel, including everything from plumbing valves to trim pieces, and tile and countertops to decorative lighting. Without expertise in selecting all of the parts and pieces needed, managing the quantities required, knowing the correct installation details, and understanding the installation timeline, you will most certainly incur delays and additional costs.

Professional contractors possess a deep understanding of construction means, methods, materials, and regulations, ensuring that all work meets required standards. This expertise prevents expensive mistakes and rework, ultimately saving time and money. Professional, licensed contractors seamlessly collaborate with architects, engineers, and inspectors to ensure every aspect of a project adheres to high standards. Effective communication with these professionals ensures that any design or structural issues are promptly addressed.

Here are some additional qualities and advantages that set professional contractors apart:

Experience: Extensive experience in similar projects provides valuable insights and enhances problem-solving abilities.

Attention to Detail: A focus on the finer aspects of the project ensures high-quality results.

Licensing: Necessary licenses and certifications are held for the specific type of work being performed.

Compliance: Ensures all work complies with local building codes and safety regulations.

Skills: Essential skills include leadership, communication, analysis, and time, and of course project management.

Problem-Solving: Quick identification of issues and implementation of effective solutions.

Network: Connections with skilled workers and craftsmen from various trades, such as foundation and framing subcontractors, waterproofers, tile installers, and cabinet makers. Maintaining a network of licensed subcontractors who work well together and are properly insured to manage any potential issues results in a project that runs smoothly.

Resource Management: Effective management of labor and materials optimizes project efficiency.

Material Availability: Planning ahead and procuring necessary materials in advance to prevent delays caused by supply chain issues.

Pricing: Knowledgeable in negotiating the best pricing with subcontractors.

Budgeting: Provides accurate cost estimates and keeps projects within budget constraints.

Insurance: Carries liability insurance to protect against potential damages or accidents on-site.

Choosing to be an owner-builder without sufficient experience will lead to significant challenges and mistakes during the construction process.

Consider the following examples:

Framing Problems

  • Mistake: Failing to thoroughly review the framer's work and solely relying on city inspectors or engineers, who may overlook critical issues.
  • Consequence: Structural weaknesses could develop, causing drywall or floor finishes to crack, requiring expensive reinforcements and repairs.

Electrical Wiring Errors

  • Mistake: Incorrect installation or connection of electrical wiring, not adhering to local codes and regulations, or using substandard materials.
  • Consequence: This can result in electrical fires, electrocution hazards, or frequent power outages, necessitating extensive rewiring by a professional.

Plumbing Issues

  • Mistake: Improperly installed plumbing systems, such as incorrect pipe connections or inadequate sealing of joints.
  • Consequence: Leaks, water damage, mold growth, and even structural damage may occur, demanding significant repairs and remediation.

Improper Insulation and Ventilation

  • Mistake: Incorrect installation of insulation or ventilation systems, leading to insufficient thermal regulation.
  • Consequence: High energy bills, uncomfortable living conditions, and moisture problems like condensation and mold growth can arise, necessitating upgrades and replacements.

Work Sequencing

  • Mistake: Incorrect order of tasks or overlapping trades that interfere with each other.
  • Consequence: Inefficiencies, rework, increased labor costs, and extended project timelines.

Waste Management

  • Mistake: Failure to properly sort and dispose of construction waste or neglecting recycling opportunities.
  • Consequence: Increased disposal costs, environmental penalties, and a negative impact on sustainability efforts.

Each of these examples underscores the importance of understanding building codes, standards, and proper construction techniques to avoid long-term issues and ensure the safety and functionality of the structure.

These problems not only pose risks to your safety but can also cause significant damage to your property. Fixing these issues later on can be expensive and time-consuming. Paying attention to details and properly coordinating tasks can help prevent delays and minimize additional costs. 

Remember, even seemingly minor mistakes or oversights can have ripple effects on the overall timeline, cost, and quality of your project. Taking the time to plan and execute each step carefully can go a long way in achieving your desired results, all-around.

Moreover, good contractors are often knowledgeable about environmentally friendly building practices and materials. They stay updated on the latest trends and technologies in sustainable construction, ensuring that your project is not only functional but also eco-friendly. By using energy-efficient systems and appliances, they help reduce your home's carbon footprint and lower utility bills. They also understand how to comply with California’s strict energy and green building requirements.

Will You Really Save Money?

One significant advantage professional contractors offer is their ability to procure materials at lower costs. Contractors often receive discounted materials, negotiate better prices with suppliers, and qualify for contractor rates. As an owner-builder, you won't have access to these types of discounts and higher costs can quickly accumulate, potentially increasing your overall project expenses by approximately 5-10% compared to what a professional contractor would charge.

When you hire a contractor, they typically markup the subcontractor's fee by approximately 20%. This additional amount covers their management and operational costs, ensuring your project is handled efficiently and completed on time. 

Let's examine an example to understand why acting as your own general contractor isn't as cost-effective as you think:

Let’s say that you plan to save 20% on a $1 million project by taking on the role of owner-builder. So, you’re expecting to save $200k.

Let’s conservatively break down the costs you’ll need to cover that would normally be part of the contractor’s $1M contract:

  • Material Costs + Subcontractor Work: $880k
    • Let’s say that the contractor marked up the time and material costs that they secured from subcontractors by 20%, so those total $800k.
    • They were able to negotiate an additional 10% cost reduction across all trades because of their long-standing relationship and the volume of projects they do together, so let’s add $80k here 
  • Personal Time: $216k
    • Are you a doctor or a lawyer, let’s assume you bill $300 per hour
    • The project takes you 18 months to complete at 20 hours per week (a conservative time estimate!)
  • Temporary Housing + Storage: $42k
    • If you choose to act as owner-builder your project is guaranteed to take longer. Let’s assume that you’ve added 6 months to the project timeline. 
    • You’re renting a home for you and your family that’s $9k per month in the same neighborhood
    • You’re storing your stuff for $1k per month
  • Builder’s Risk Insurance: $20k
    • You’ll need to work with your insurance company to make sure that you’re covered, at your cost

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TOTAL: $1,158,000

Look what happened here! The $1M budget that was quoted by a licensed, experienced general contractor is now almost $160k more and you’ve taken on an immeasurable amount of stress. 

This means that, even with the additional costs of hiring a professional contractor, their expertise and efficiency can save you money in the long run. So while being your own general contractor may seem like a way to cut costs initially, it's important to consider the potential financial drawbacks and the value of professional assistance in ensuring a successful and cost-effective project.

The Hidden Financial Impact of Seemingly Simple Savings

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While initial savings might seem appealing when considering going solo on your new home build—hidden expenses quickly reveal themselves once underway!

Unforeseen Expenses

Many unforeseen expenses arise during any given build, whether directly or indirectly. These additional costs often negate perceived savings initially thought possible by acting independently!

Temporary Housing

Embarking on a major remodel often requires vacating your home, which can lead to extended timelines and increased costs if tasks aren't properly sequenced. In neighborhoods where rent can reach $9,000 or more per month, a six-month project delay plus storage fees for belongings could result in an additional $42,000 in expenses. This is not even accounting for the fact that you may be paying a mortgage on a home you’re not able to live in, while paying rent, storage, and building costs, stretching your finances incredibly thin.

Opportunity Cost

Time spent managing your build could be better utilized elsewhere—whether at work earning your income or pursuing personal interests. Opportunity cost represents another overlooked factor contributing to increased expenses overall when opting for a go-it-alone approach versus hiring professionals like Letter Four to spearhead your project.

Stress

Construction puts a strain on relationships so when deciding to work with a contractor, it’s easier for you and your spouse to direct frustrations externally. However, managing the project yourself shifts the blame inward. Who will your spouse blame when costs exceed the budget, timelines stretch beyond expectations, and quality falls short?

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Insurance and Liability

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Acting as an owner-builder means that you’re assuming greater responsibility for insurance and liability issues. If an accident occurs on-site or if damages happen during construction, personal liability falls on you, the owner-builder. This increased liability exposes you to potential lawsuits or financial losses if something goes wrong.

Licensed contractors are required to carry insurance policies covering accidents or damages during construction. This includes Worker’s Compensation Insurance. Without this coverage from a contractor's policy in place as an owner-builder, higher premiums may be faced when securing adequate insurance to protect yourself, further driving up your overall costs.

Another risk factor to note is that failure to pay subcontractors and suppliers on time can lead to them filing mechanics liens against your property. Licensed General Contractors understand the proper billing and lien release process to ensure that subcontractors are paid only for work complete and that they file lien releases to protect the homeowner.

Conclusion

While acting as an owner-builder might appear attractive at first glance due to potential savings and control over the process, hidden realities paint a different picture entirely! From significant investments in time and energy to a lack of expertise leading to costly errors; higher material prices, and increased liability risks, it becomes clear why hiring a professional contractor is more cost-effective in the long run.

Experience top-tier Design-Build services with LETTER FOUR, INC. With over a decade of expertise in providing construction services in Los Angeles and Culver City, we offer you the advantage and peace of mind you deserve. Our professional team is committed to delivering high-quality services tailored to your unique needs.

Book a call with us today to learn more about how we can assist you!

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