Grand Junction Real Estate Advice
Dear Dave,
I’d really like to build a house, but I’m not sure where to begin. I’ve looked into hiring a contractor to build it for me but, by my estimates, I think we could save about 30% if I hire all of the subcontractors myself. Do you think that is accurate? And would you recommend it? I would appreciate any advice you can provide.
Ron and Cindy - Grand Junction, CO
Ron and Cindy,
I understand the lure of acting as the general contractor on your own job, however, I believe your estimates of a 30% savings are significantly over estimated, unless you plan on doing A LOT of the work yourself. Everyone would like to save a few bucks on a new home build, but consider that most general contractors operate on 10-15% margins. 10% would be typical and 15% would be a best case scenario.
If a build goes near perfect with few mistakes and no big surprises then 15% might be achievable however, most jobs I have been around have problems that were not predicted and many times those problems are expensive. The National Home Builders Association reported in February of 2014 that the average gross profit margin of home builders was 17.4% and after all expenses were paid the average net profit was 4.9%. Listen, in my opinion your best savings would be 17% and that is if their expertise in running a construction job site was worthless and saved you no money at all.
To obtain this number you would also have to assume that the subcontractors would give you the same or better price than the prices they give the builders. I don’t believe that in most cases that would prove to be true. One of the advantages of hiring a builder is not only their expertise in building, their knowledge and ability to manage a construction site, their vision and input, but also the pricing they get from their subcontractors. Your builder should get great pricing from his/her subcontractors because he keeps them busy and in turn can pass these cost savings on to their customers. All of this, does not take into account the time, energy, headache and heartache of you acting as the general contractor on your own job site.
“Here is my advice, if you do not have experience in acting as a general contractor on a construction site - don’t do it! Everything that goes into making a job run smooth, run on budget, run on time and ensuring that corners are not cut is worth 10-15%!”
Here is my advice, if you do not have experience in acting as a general contractor on a construction site - don’t do it! Everything that goes into making a job run smooth, run on budget, run on time and ensuring that corners are not cut is worth 10-15%! I can also tell you that most of the time when I see a home where the home owner was the general contractor it shows! Listen, I say this to my kids all the time, little things add up to big things. When the little details are overlooked or not given the constant attention they deserve, the end product will suffer and not be nearly as good as it could be! An experienced home builder is a master in managing the details and making sure your finished product is the best that it can be.
When it comes down to it, building a new home is a huge project. Put it in the hands of a professional. If I need heart surgery I am not going to my family doc and handing him/her a knife - not because they could not do it, but because it is not what they do every day! The hiring of the right builder will be worth the money and the proof will be in your finished product!
Dave Kimbrough
The Kimbrough Team
