Owner-Builder vs Building Contract

Granny Flats: Owner-Builder versus a  Building Contract

Today we ask if it’s better to construct your new granny flat as an Owner-Builder or is it better to hire a Qualified Builder to do the work. This is often asked by our clients so we thought we’d illuminate the important aspects of this vital decision.

Below, we’ve listed most of the advantages and disadvantages of Owner Building versus hiring a Qualified Builder.

Advantages of being an Owner-Builder

  1. Money. It saves you money because you are the only builder. You can shop around for cheaper prices plus you completely cut out the builder from the process. In our experience  the savings are around 20 to 25% if building to turn-key completion.
  2. Decisions. Being an owner-builder  allows you to be intimately involved with every decision from start to finish. This includes all decisions on choosing structural materials to internal inclusions such as floor coverings, the type of trimmings and other finer detail. This way you won’t have to haggle with your builder if you want to make a change or add something during the build. You are the decision maker and this can be an attractive aspect of being an owner builder.
  3. Free Training. Being an Owner builder provides you with free education on the building process and how to build to Australian standards. If you plan on building again in the future, any mistakes act as invaluable lessons which you can carry on to future projects.
  4. You’re the Boss! You get to choose every individual tradesperson and supplier. If you have friends who are ‘tradies’, you can also choose these people to work with you. This helps them and you at the same time.

Disadvantages of being an Owner-Builder

  1. Time. You’ll need lots of time to organise your trades, choose materials, organise deliveries and to coordinate the work. When it rains or deliveries get delayed, you’ll need to re-organise the workers. This takes considerable time and effort as many trades overlap each other, especially after lock-up. In our experience acting as owner builder doubles the build time; if not triples it! This is because you have to dedicate every other minute to the build. This means before work, after work (sometimes during work), mornings, afternoons, evenings and weekends. You could take six months off work to build but then you’ve lost income which doesn’t offset the cost of a qualified builder.
  2. Quality Control. Since you are effectively the builder, you’re responsible for ensuring quality work is done. You’ll need to know what to check at critical stages of the development. This will include checking the foundations are prepared properly, the frame is plumbed and braced properly and the suitable waterproofing is installed, for example.
  3. Stress. If you talk to anyone who has acted as owner-builder, they’ll tell you that building for yourself can be quite exhausting. This is because you have to deal with all of the problems inherent to general construction. A good example is when something goes wrong, it rains or a part is missing. One trade may blame another for an issue and you’re left with the problem. A good builder is a technical guru and a people manager. If you can’t cope with stress, being an owner-builder is not for you.
  4. Where’s my Rent! Many people start a granny flat build in order to save money but don’t realise that time is money. It’s worth noting that for investors, any loss in time during the build is also a loss of rental income.
  5. Getting Finance. Most lenders will not provide construction loans if the builder is an Owner-Builder. There are some very good reasons for this such as most people’s lack of experience, a lack of financial control and the risk that a project will be halted due to family or other personal issues.
  6. Home Owner Warranty. A building contract is covered by seven years of insurance by the builder. You can purchase this type of warranty as an owner-builder but you’ll be the one chasing trades should a claim be necessary.

 

Below, we’ve listed the advantages and disadvantages of using a Qualified Builder:

Advantages of using a Qualified Builder

  1. The Contract. A contract is binding and enforceable. Put simply, a Building Contract obligates the builder to complete your construction to a strict budget, finish and timeline. This can of course be a disadvantage if the builder isn’t reputable, as described below under ‘disadvantages’.
  2. Experience. An experienced, quality builder knows how to build quickly, efficiently and to the budget. He or she sticks to the ‘The Contract’ and is an expert in all aspects of the build.  Preferably, your builder is experienced in building granny flats with their specific requirements in mind. You should also check any builders work and speak with his previous clients to get a real sense of how you and your project will be dealt with.
  3. Speed. Building with a reputable company means faster completion and hence you’ll earn rent from your new granny flat a lot quicker than being an Owner-Builder. They say that time is money and this is especially true if you’re waiting to lease your granny flat out to tenants. You can also get a faster valuation for your property so that you can get onto building your second, third and fourth granny flat!
  4. Low Stress. The only responsibility you’ll bear is choosing colours and finishes. All other issues are borne by the builder.

 Disadvantages of using a Qualified Builder

  1. Pricing. Using a qualified builder costs more than Owner Building.
  2. The Contract. We have all heard of fly-by-night builders who breach building contracts by either carrying out shonky work or going bust in the middle of a project. This is where it pays to employ a reputable company. We have discussed this in our other articles and we advise you always check out  a builder’s previous work and talk to their previous clients.
  3. Dishonest Builders. It pays to employ an honest, trustworthy and reputable builder. A sure sign of a dishonest builder is one who prices a build based on your personal intellect. If you can’t get a clear picture of the pricing from checking out a builder’s website, that builder wants to check you out before pricing your build. We see this as dishonesty. We strongly believe that all people should be treated equally irrespective of their ‘street wisdom’.  This all goes back to the point above about contracts. Suffice to say, there are good builders and there are bad builders.
  4. Choice. Some builders don’t offer a full range of choice as it applies to design, materials and finishes.

Conclusion

At Granny Flats Sydney NSW Pty Ltd, we believe in educating our clients so that they can choose what works best for them. Some of our clients have successfully completed their own granny flat builds and we certainly assist them in this process as much as possible. Throughout the years, we have noticed that successful Owner-Builders have either done it (or part of a build) before, they have ample time on their hands and they they have someone to act as a mentor for their project.

The most important consideration is whether the 20% you’ll save by being an Owner Builder is worth the time and effort. Will your efforts be offset by the loss in rental income caused by the delays when acting as owner-builder? Will your own job suffer?  If for example, you lose $10,000 in rent because of a 9-month build (instead of a 3 month build by a qualified builder), is a $10,000 saving worth the time, stress and loss of rental income? In a growing property market, you’re delayed revaluation could cost a lot more than this, should you be looking to rinse and repeat.

stress owner builder

There are some definite advantages to being an owner-builder but it’s certainly not for everyone. We hope this helps to highlight some of the important facets when deciding between acting as Owner-Builder or going with a Building Contract by a Qualified Builder.

Helpful Resources:

If you do decide to act as Owner-Builder, we highly recommend Allan Staines books which are well written guides to residential building in Australia. These can be bought online or from Bunnings at the time of writing this article. You can also get more information on becoming an Owner-Builder on the NSW Fair Trading website here: http://www.fairtrading.nsw.gov.au/ftw/Tenants_and_home_owners/Home_building_and_renovating/Becoming_an_owner_builder.page

Warm Regards,

Serge Panayi Granny Flats Sydney NSW

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Comments

2 replies on Owner-Builder vs Building Contract

  • Binday says:
    April 25, 2018 at 11:29 am

    Hi
    I have a inground fibreglass pool 4m x 6m size. Is it possible to build a 60sqf granny flat over the pool? Also will I be able to install separate meter box for electricity?

    • Serge Panayi says:
      April 25, 2018 at 8:02 pm

      Hi Binday,

      Yes you can remove the fiberglass pool insert and build a granny flat in its place. There will obviously be some associated costs for doing this – excavation, filling the void and stronger structural support but many people do and they have us arrange this for them.

      A separate meter is not mandatory but again can be done and we can organise this for you as well.

      Cheers,
      Serge.

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