Building a house is a major financial undertaking, according to data from Australian Bureau of Statistics (ABS), average cost of constructing a new 4-bedroom home in 2020 is $320,000.

Not surprising then that many prospective home builders in an attempt to save up to one-third of the construction costs consider managing the project themselves. After all, you don’t have to possess the ability to swing a hammer to oversee a home construction, or so they think.

Building a house as an owner-builder involves co-ordinating and supervising the entire construction process, including managing the various trades involved and taking responsibility for the safety of the building site.

While it’s a challenging task, the reward is pocketing the margin that a builder would otherwise charge, can potentially reduce the total cost of construction by between 10 and 35 percent.

What does it take to be an owner-builder?

Applying for an owner-builder permit online is surprisingly simple, you can effectively become a builder in a matter of hours.

Owner-builders need to undertake an approved course or have existing accreditation before applying.

You need to be able to co-ordinate and have your trades lined up in advance so that as one’s finishing the other is ready to begin.

While hands-on experience isn’t required, industry connections will help. The larger the project, the more assistance an owner-builder may need from trades and possibly someone from a construction background.

Check how your home loan compares

Most owner-builders are typically juggling a job and managing a build, So, unless you’ve got a stable job or a bank account full of cash, banks are likely to fund only up to 50 percent of the construction cost or 80 percent of the land value.  

Financing as an owner builder is the biggest challenges. Most lenders will assess applications based only on the value of the land plus the cost of construction and then lend 50 percent of this value. Unless of course you’re using loansHub, our lender panel lends up to 80 percent to eligible borrowers.

Is being an owner-builder worth the hassle?

It does depend on your personal circumstances, if you work full time and can’t find a professional trades person to assist, it’s best to leave it to the professional.

Whereas if you’re a qualified trades person with a builder’s licence, as long as your owner builder project doesn’t impact your main income producing business, why wouldn’t you save money by project managing.  

Five things to consider before becoming an owner-builder

1. An owner-builder permit isn’t the same as a builder’s licence, but owner-builders are still legally responsible for ensuring all sub-contractors are licensed and insured and provided with a safe working environment.

2. Supervising means more than just making sure tradies turn up on time. Owner-builders need to make sure all workmanship meets a certain standard, which is why building experience helps.

3. It’s harder for owner-builders to secure a construction loan than for homeowners who engage a licensed builder. Most banks only will only lend up to 50 percent of the land plus construction costs.

4. Lenders normally make progress payments rather than a lump sum, with each payment dependent on the project reaching a certain stage. A common cash-flow pitfall is spending funds on fixtures and fittings which can’t be installed during the early stages in construction, and therefore aren’t assessed by the bank’s valuer.

This can mean funds are withheld and construction stalling unless you maintain a cash reserve to keep the hammers swinging while waiting for the bank to disburse the stage claim.

5. Lenders won’t approve a loan after construction has commenced, or accept a partially completed home as security. Budget conservatively, don’t start construction until the loan is approved, and always maintain a cash reserve to keep the construction moving while waiting for the lender to draw down the loan.

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This article does not constitute advice; readers should seek independent and personalised counsel from a trusted adviser that specialises in property, a tax accountant and property design specialist.