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Owner Builder Blog

Owner Builder Quality and Cost

29/11/2016

12 Comments

 
Understanding Quality and Cost 
 
Over the last couple of months, some of our owner builder course students have expressed a concern over the cost of their owner builder projects when considered against an expected per square meter rate.
 
There are so many variables that affect your build cost including quality of finishes, fixtures and fitments.
 
But as an owner builder you need to look at the other factors that may affect your build cost. 
 
Building on a steeply sloping site for example will often require innovative design that enhances the usage of the site or allows for unique and interesting features. This normally comes at an increased cost.
 
Site access is also an area that is often overlooked when establishing your construction budget. To take this to the extreme, imagine the additional costs associated with having to barge every item and all materials to your site if you are building on an island. Site access or lack there of can require the use of specialist equipment or worse still the manual handling of all loads and excavated materials.
 
In many cases, we find the cost overruns occur in the preliminaries stages where unique or non standard design or construction techniques are required.
 
Additional footing complexity due to the adequacy of site founding materials are just one example where additional engineering works and certifications may be necessary. Temporary services may be difficult to establish and traffic management both pedestrian and vehicular may require extra manhours or resourcing as may erosion control, dewatering or sediment and environmental factors.
 
Other than these preliminary and design considerations, prime cost allowances need to be understood and identified or at least quantified when producing your budget estimates.
 
Floor tiles as an example can be sourced at rates as low as 20 dollars a square meter or can cost as mush as 250 per sq meter. So when an owner builder student tells me they are spending more than 1200 per square meter for a building of standard design and construction with 'standard quality finishes', I start to look at their quality expectations.
 
There is always a reason that building costs are greater than anticipated.
 
First question to ask is were they realistic to start with?
 
If they were, then look at where you have not been disciplined enough in selecting contractors or materials and where you have paid too much.
 
Learn from these experiences and always try to buy well.
 
If you have seriously overrun your budget, look for potential savings in the remaining works and the level of finishes and fixtures. 
 
The good news is, unless you have very seriously overcapitalised on you project or over extended yourself financially, quality is good and will enhance the value and liveability of the dwelling.
 
I hope this answers some of the questions our owner builder course students have or at least gives you a little direction.
 
I look forward to the comments and the discussion that this post will ultimately generate.
 
As always,
 
Happy Building,
 
Rick

12 Comments
John Watchers
7/12/2016 15:33:18

Hi Rick,

Regarding the overall price of the build, is there a rule of thumb that could be used to determine whether you are potentially over capitalising? Also, how would you go about determining the right price bracket for a particular suburb or area?

Regards, John

Reply
rick heaton link
8/12/2016 19:43:03

Hi John,

Certainly the most commonly used rule of thumb is to build a dwelling that is consistent in value with the block upon which you intend to build.

That is, if you pay 500K for a block then you will not over capitalise if your build cost is around the 500K

Of course there are many variables, but if you use this as a guide you cannot got too wrong

Reply
Colin Thoren link
11/12/2016 13:05:24

Hi Rick
I have started a project to build our retirement home. Retirement is 10 years away so time is not a critical factor. I plan to build in stages. We started off by buying a 1.1 hectare bush block and designed a steel framed house around the site, the environment and my abilities to build it.
I am a boilermaker welder with 20 years experience in manufacturing and erecting steel buildings, and now work in the lifting industry.
I have bought a small truck and machinery, which allows me to do site preparation and transport materials needed for the project. We found an excellent architect and engineers who were very open to our ideas, and helped design the home we wanted.
I know this is not very conventional way of building, but because of the truck I can buy materials direct from quarry's at a cheap rate, look for cheap steel needed for the build and go and pick it up, saving a lot of transport costs.
A lot has been accomplished in the 3 years, the DA has been approved, a 180 meter drive has been built, 30 plus large trees removed, gardens built and trees planted. I am starting to realise finding the time to do the project will take a huge commitment, only time will tell if I succeed.

Regard, Colin

Reply
rick heaton link
19/12/2016 19:38:27

Hi Colin,
Good to hear about your owner builder project.
It is great to be able to plan and take your time to source value materials and the services you require.
When you have time and are not carrying finance costs, it can be a whole lot of fun doing an owner builder project over a protracted time.
Please keep us informed of your progress and your learnings along the way, post photos if and when you can.
Best of luck,

Rick

Reply
Tom
19/12/2016 15:00:51

An important consideration in costing your project is the Local Council requirement that you submit a valuation of work for the calculation of fees.I recently discovered that my carefully constructed budget was rejected as too low and I was basically told to use a per square metre figure of around $1400.I ultimately accepted the Council approach rather than delay my project-but when you plan to do a lot of the work yourself, and in retirement the opportunity cost of your time is low, then it seems a bit unfair and leads to higher fees. I guess in the end I will keep a detailed record and will only then know who was right

Reply
rick heaton link
19/12/2016 19:42:30

Thanks Tom,
Opportunity cost and Net Present Value are certainly a consideration in most typical owner builder projects. This along with holding (finance costs) can seriously affect your budget.
That is why we stress to our owner builder students, the importance of getting in and out of your project in a timely manner.
Your time is valuable and it must be considered.
Thanks for your input,
Best Regards,
Rick

Reply
Joanne
25/12/2016 06:57:03

Most council value your project on the Market value or the contracted price ,as an owner builder you cannot contract your self ,so hench forf they will value on market price which most calculate at square metre rate

Reply
Ben Gill
27/1/2018 18:10:55

I agree with Tom's comment about the local council's estimation of costs. I guess they have to have a cross-the-board standard or it gets a bit messy. My project is under $40,000 so they did not request a breakdown. I agree that retirement is a good time, but there does not seem to be too many pensioner discounts with building fees. Pity.
Ben

Reply
rick heaton link
1/1/2017 20:36:51

Hi Joanne,
You are correct, the Local Council will normally value a typical owner builder project based on a square meter cost.
The most important thing that I try to get our owner builder course students thinking about, is how the quality of the fixtures and fittings they choose can have a significant impact on their cost.
The council will not know at the approval stage what level or standard you are intending to build to.
Thanks for your comment, it is great to get engagement from our owner builders!
Rick

Reply
Brian Mahnkopf
26/4/2018 18:23:19

Hi Rick,
We're planning on building a liveable shed and fitting it out with functional fixtures and fittings and, due to my sister being next door, have accommodation and 6 months of leave to complete the build. We're hoping to build for a lot less than $1400 /m2! Are we being realistic?
Thanks,
Brian

Reply
Paul Calneggia link
11/8/2017 07:52:56

Thanks for this informative blog! I really agree that "unless you have very seriously overcapitalised on you project or over extended yourself financially, quality is good and will enhance the value and liveability of the dwelling." Much appreciated.

Reply
Steven Riley
17/5/2020 12:04:00

We found out the hard way that scaffolding costs ALOT! Our builder put an allowance of $3000 into our contract. One day, he told us the cost would be $20,000 OVER the allowance. Word of advice...always check allowance items and what the likelihood of them being over or under is

Reply



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    Rick Heaton is a Building and Construction Industry professional with formal tertiary qualifications in management and training.

    With over 30 years assisting Owner Builders, he brings an easy style to providing information and advice to our students.

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