Hi im new to the forum but have been following some of your great responses for a while now. Times come for me to step up to the plate and ask for some advice.
Anxious to hear from anyone with knowledge about owner building or hiring a builder to assist and also construction loans.
My situation is, I own outright, a suburban block of land in Adelaide and I wish to build my own home there.
I have spoken with a builder and he suggested he could writ up a contract for me and also cover the Builders
Indemnity Insurance and he'd sign off on the project for a fee.
My role will be to arrange and manage and pay the trades. I am involved in the building industry and have some
contacts and a reasonable knowledge about the process and feel capable about being able to handle this.
The thing I am not so sure of and this is where I hope you may help. I need to get a construction loan
to start building. I've not had a construction loan before and so I am unsure how the process of payments will work.
How can i get the loan so the payments come to me because I will be paying the trades and paying the builder a fee
at the end.
I'm very interested to hear from anyone that has done this before or even if you can offer any advice in relation to the
aspects about owner building, what to watch out for or pitfalls of owner building and how to work the building contract
with regard to loan building payments. Is there a way they can come to me or would they have to go to the builder.
If they had to go to the builder how can I protect my project and loan monies from the builder if a dispute was to
arise between us and the contract is in the builders name.Thanks in advance.
Hi RTB
Unfortunately you cannot have a the Builder write up the Contract and take the liability and you receive the cheques and payment from the financier.
Lenders will draw the progress payments in favour of the Builder and he in turn can bank it accordingly.
If however you wanted to access cash funds for certain trades, materials etc you could look at a Line of Credit against the land and then progress draws against the construction.
Not ever lender will like this or indeed will consider but we have a couple of such deals going through at the moment for forum members who are in a similar boat to yourself.
Drop us a line if you want further information.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi there,
I recently built our new home under owner builder. I had a contract with a builder to take the build through to lock up stage. I managed the trades throughout the whole build, and oversaw the final fitout. I used owner builder insurance to safeguard us across the term of the project.
I was financed under a construction loan. It was a tricky process to manage the cashflow. I would make progress claims almost weekly to ensure I had the money to pay people and keep the build running as fast as possible. The bank would pay the various trades directly for me IF the invoice was large enough that it wasn't reasonable for me to be managed from our cash account.
Payments to various suppliers up to about 20k I had to manage from our cash account. Essentially I would pay everyone on a Monday, ensure I got the paid invoice reciept back IMMEDIATELY, and then submit the progress claim THE SAME DAY. It would take the bank between 4 – 10 days to reimburse.
My suggestion would be to try and have a 'healthy' cash account to be able to manage the cycle without having delay payments.
It's a lot of juggling but in the end it was worth the effort.
That is exactly why i suggested a Line of Credit secured against the land to assist in cash flow.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Securing a construction loan as an owner builder may be possible but in a roundabout way. When I decided to be an owner builder I also considered trying to get a construction loan, however with little knowledge of how these loans work it all seemed too difficult.
What I did was to get a Line of credit loan secured against another property I owned. This worked out quite good as it's a lot like having a big credit card limit but at housing rate interest. Enabling me to pay trades as they completed their work.
As a first time owner builder I found it pretty difficult dealing with some tradespeople and not without a lot of problems.
It all did get finished a lot longer than it should have and cost more as I had to spend more time fixing things myself without getting paid. I am living in the house now and it's real good.I would say you really must do your homework thoroughly, get recommendations on the trades companies you use, see their work elsewhere first, find out as much as you can about them ask others that have used them if they are happy with their Job. Work with a signed contract with each trade, setting out exactly what they will do and a time frame for completion with a clause of withholding payments if not completed on time etc. Try to meet some other owner builders and discuss how their prioject went.
In my opinion owner builder is definately not for the faint hearted.It seems to me you want to be an owner builder and secure a construction loan and I doubt it will happen as simple as that.
I have met some people since my house was built and they told me that they had just done what you want to do. They did it with the help of a builder friend with the appropriate licence. As far as I remember they had the builder draw up the contract to get the loan but I think they also had another contract between themselves and the builder, an agreement and it must have said something about who was doing what and who gets the money because they said they paid a fee $15K to the builder for his role and somehow they controlled the money.
It seems to me there are some ways around it but you'll need to be very creative or get some more creative input from the forum.
Best of luck with your project.
I truly agree to most of the opinions but however ,I would recommend a project manager to oversee the whole project in a
professional manner.appointing a project manager saves your time of managing the project and saves you money
I recently did a project of house building and I saved almost 100,000 dollars by appointing. A Melbourne based company
cax building services .i would highly recommend them.they are professional in their dealings and manages project with passion
you could talk to roschy who would help you through ,his email is [email protected].
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