The allure of being your own general contractor is quite simple. Acting as your own general contractor will not only save you a lot of money (most believe a savings of 10-20% is pretty realistic) but will also save you the trouble of having to interview several general contractors and finding the right one for the job. Not to mention you'll have total control over every aspect of the project.
But the attraction to the position seems to end there when you take into consideration what is required for the job. Typically a general contractor is responsible for hiring subcontractors, meeting with inspectors, buying supplies and setting realistic work schedules.
Being a good general contractor is all about preparation, planning and always knowing what's supposed to happen next. It's making sure all of the materials are ready for the day's scheduled work and that the subcontractors are there to do their jobs and making sure they do it right. It making sure all the subcontractors work well together and that everything goes smoothly. And when things don't go smoothly or as planned, it's knowing what to do next.
Another thing you have to consider if you plan on acting as your own general contractor is financing. Some banks may be reluctant to loan you money given your inexperience as they may see you as an unnecessary risk. And on top of that a homeowner will usually have to pay more for supplies since he doesn't already have a relationship with suppliers as most professional general contractors do. As you can see there are several things to take into account if you're considering acting as your own general contractor and to make things worse there's a lot of debate over how much one can actually save by being his own general contractor.
That's not to say that's it's impossible for the average Joe to be his own general contractor but you do have to take several things into consideration. The position is best suited for people that are very organized and detail-oriented. It also helps to have a good idea of what you want. Someone who has a flexible schedule is also a good idea because you literally never know when you're going to be needed on the job site.
Know What You Want
Before you start with anything you'll want to make sure you have a clear picture in your head about what you want. To gather ideas you'll want to visit and walk through as many homes as possible. There are also several magazines that are targeted at general contractors and architects that you can use for ideas. A good idea for a homeowner who decides to be his own general contractor is to start a scrapbook to collect all his ideas and thoughts about the new house. This makes it a lot easier to come back to your thoughts and ideas at a later time. You'll also want to start thinking about the different materials you want to consider using and checking out prices.
When you've done enough research and you feel you've finalized all of the details, it's time to consult with an architect to have him put all of your plans on paper. If you're trying to save money on the overall cost of the project or just trying to keep it under budget, it's best to make any and all changes on paper before you begin building. Once building commences, all changes will cost you more money in the form of change plans and adjustments. A word to the wise, it's best to make all changes on paper prior to beginning the project. When hiring an architect or designer look for some who is experienced with local coding requirements to avoid delays in the city approval process.
Hiring Subcontractors
As the general contractor one of your largest responsibilities is finding the right subcontractors to do the work for you. For tips on finding and hiring good contractors check out our contractor hiring tips at: How to Find a Contractor.
The easiest method for sourcing some good subcontractors right away is asking your neighbors, friends and family members who they've used in the past and ask if they would they be willing to recommend them to you? If you already have a subcontractor or two that you've already vetted you can also ask them for leads as well. Local home improvement stores may also be able to provide some leads as well but you have to be a little more careful and thorough with leads from people you don't already know.
The most critical aspect to finding and hiring good subcontractors is the actual vetting of the subcontractors. Find out as much as you can about the contractors by searching for them on Google and look for feedback, reviews and complaints from past users. Check for complaints with your local state licensing bureau and also with the Better Business Bureau. Get a list of references from each contractor, call them and ask about the contractor's work. Whenever possible, check out past work in person as this is the best way to vet a contractor. Ask if you can meet them at a current job site to see the quality of their work. Picking the right contractors for the job is one of the most important aspects of a general contractor's job so make sure you take your time on this part of the process. Make sure you review several bids before making a hiring decision.
The biggest mistake most homeowners cited when building their own homes or remodeling?
Overwhelmingly here the answer was not hiring well-qualified subcontractors. Although most homeowners admit to hearing that getting at least three bids and not hiring the contractor with the lowest bid were both good ideas, many homeowners also admit to doing a bad job of following that advice.
One of the things you have to realize when you decide to be your owner general contractor is that you're often going to have to hire several subcontractors. So let's say you need to hire a carpenter, a plumber, a roofer, an electrician and a mason. Now you're going to need a lot more than just five subcontractors but I used five to keep the numbers small and simple. At five subcontractors, you should be getting at least 3 bids for each trade so that comes out to 15 total bids and it's best to qualify all of the contractors to make sure you're looking at good bids. You can see where it can become easy to cut corners.
And another thing discovered about homeowners that act as their own general contractors is that they primarily do so to save money. Nothing wrong with that but don't let it cloud your judgment! Hiring the contractors with the lowest bids usually leads to low quality craftsmanship and cheap materials which will ultimately cost you more in the long run!
So to avoid making this costly mistake, heed the advice of those that have gone before you. Get at least three qualified bids for each subcontractor you have to hire and make sure you don't hire the guy with the lowest bid unless he's thoroughly been vetted.
Materials
The next important decision you'll have to make is whether or not you want to buy the materials or if you would prefer to allow the subcontractors to purchase their own materials. There's no right or wrong answer here. Some people like shopping so buying all of the materials for them is a big reason why they decide to act as their own general contractor. Other people prefer to farm out as much as possible and stay as close to the job site as possible at all times.
One thing you may want to consider is that subcontractors will often be able to obtain better pricing on materials than you would be able to since they already have a relationship with their suppliers. Unfortunately, this also means they may need some money up front for the purchase of materials. Again, there's no right or wrong decision here and ultimately the choice is yours.
Factor in the following items to come up with a proposed total cost for your project:
- Subcontractor fees
- Cost of materials
- Cost of the property
- Permit and building fees
- Insurance
- Legal
- Architect or designer fees
Financing
As mentioned previously, things can get a little hairy when you're a first-time general contractor and you start to look for financing. Ideally a bank would prefer to make a loan to a general contractor who has experience and who has already built several homes. Most banks will see a first time general contractor as a bit of a risk.
Another decision you'll have to make is how to apply for your loans? Will you apply for a construction loan and mortgage together? Or will you apply for a construction and mortgage loan separately? There are advantages and disadvantages to both and another hot topic of discussion amongst professional general contractors. One argument for separate loans is that construction loans are more flexible by design since most projects very rarely come in on or under budget. If you were to file jointly and need more money to finish the project, you would have to apply for a second loan and incur a second set of closing costs. Then again you could always pad your construction loan estimate by 10 or 15% to make sure you have plenty of funds for the project.
If you're having trouble obtaining a loan due to your inexperience, you may want to instill some trust in the lenders by hiring either a construction general contractor or building professional under a management contract. Either one would cost you significantly less than a full-time general contractor and will hopefully give the bank's the confidence they need to give you a loan.
So I don't know about you but after reading all of that, I'm actually quite terrified about acting as my own general contractor… So why do people do it?
Overwhelmingly the three biggest reasons most homeowners cited as their reasons were to save money, the chance to design their dream home and the pride that comes with knowing you designed and built your own home.
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