i hear its really hard to get finance for Owner Builder now, is that right?
what would be the maximum the big banks will lend for land and construction total costs of $500,000
Probably 70% lend or similar might get 80% off the top of my head.
Richard Taylor | Australia's leading private lender
cool thanks
dont know why banks dont lend more.
think about it, owner builder houses costs less to build than licenced builders, so really the end product which is the house will be worth more.does that make sense……….or am i missing something
Warning: my reply is based on generalisations from what I have experienced. No offence intended to you or other owner-builders!
There are many reason that banks avoid them, at least the one I worked for. In 2.5 years I saw all of the following; builds constantly going over-budget; the construction plans being changed without the banks consent (as the clients think they only need to convince their wives to any change!); the clients income dropping significantly while they focus on the build; increased risk of the completed build still needing modifications and repairs for certificate of occupancy; and lastly that some clients only know just enough to get their OB certificate and give up after 3 months.
In the end my office starting referring ob inquiries to our competitors as they weren't worth the time and hassle.
The only recommendation I can make is adding a big safety margin to your construction budget and timeframes. There is nothing sadder then being $20k short of final occupancy and the bank telling you no more.
Good luck with it,
Andyfunny thing is what your saying there is pretty similar to what is happening to a friend of mine. thats why i raised the question.
he had finance approved for owner builder, and has just put down the slab. now he needs more money, he went back to the bank and not only did they say no more money, but they said now they can only go to 60%.
i like the part about the wives
Part of the problem is owner-builders think they can whereas Bob the Builder says "yes we can". The builder is professionally trained (well, most are), they understand the skills required in construction management (time, cost, quality), they know how to budget (or they go bust), they know how to stick to a program & the ramifications of being late (hip pocket/liquidated damages), have a watchdog (toothless, admittedly but none the less requires licensing), are subject to the client's bank approval (for progress claims), do 'it' for a living, etc….
Whereas the owner-builder isn't hampered by professional standards, has very little regard for efficient business practices, has no skill in estimating (the big bits possibly but not prelims, safety, site costs, incidentals etc), has a limited grasp of OHS & Principal Contractor requirements, never heard of SWMS, planning??, project management, attention to detail, buildability etc. There is little wonder why banks don't like owner-builders.
I'm not on a hobby-horse but like to see a quality product for the next occupant/investor who may not know that their pride and joy was jerry-built as the critical elements remain hidden from view..
It is very hard to get finance for owner building. I am currently going through the process at the moment and will have to put in 50% and borrow on a line of credit loan which will make loan .10% above variable rate. I have owner built before and found the savings to be about 50% on prices quoted from builders which is an amazing amount.
What were you constructing that allowed savings of 50%? Did that include all electrical, plumbing etc?
Were you doing the project management yourself and co-ordinating each tradesperson to do their part?
The builders all quoted for one electrical and light points,tiles basic and no painting. I have tiles to roof height double power points and loads of down lights and top end taps and vanities. I was amazed myself at the savings and thought builders made about 30%. It was a busy period for building but one builder was going to make us wait four months anyway. I was against owner building but I ended up with a better finished product. I organised the trades and project managed the build. I paid above other builders so trades were all dropping jobs to do mine first and get paid extra. It does take a massive amount of time and energy.
Great work Kazwood. Do you have a trades background? I would love to do this myself but with no experience would be concerned about stuffing up the order and timing of the build.
Where did you build, what size was it (sqm) and what was the total cost (including site works etc)?
Very interested to hear.
I guess the alternative could be to hire an experienced project manager and get them to engage everyone at competitive rates.
I imagine they could do a number of builds at once… perhaps 20-30k to see through to completion? If they could save you anywhere close to $150k on a $300k build it would definitely make it worth while.
Has anyone done this?
Thanks,
MattThe main thing is time and energy. I have no trade background but do know lots of trades people. Most things are basic and go in the order you expect. I found most of the trades tell you when they will come because they dont like working around each other. I was invited to inspect a unit development by a builder recently. The units had all been tiled so the painter could not spray the door frames to get a really nice finish. The tiles had about an inch of sand over them from the trades walking back and forth. The end result is an inferior finish because of organisation. I am still looking for a builder because of the time and energy required to owner build. It just annoys me when they all seem to make basic mistakes that even I can see.
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