Financial considerations when embarking on a self-build project

Published On : 03/04/2020

By Sandro Heitor, Founder of Trio.

When exploring your options for renovating a property, or perhaps building from scratch, it can be tempting to explore the self-build route as it could potentially save you valuable money and allow your budget to stretch further. That said, there are likely to be aspects which do require the expertise of contractors and in some cases, it can be more efficient to pay someone to complete a phase of the project quickly, than to draw it out by trying to do it yourself. Here, property expert Sandro Heitor, founder of Trio explores the financial considerations of embarking on a self-build project.

The construction industry is fraught with negativity and assumptions that all builders are likely to overprice and cut corners to ensure they make as much as they can from a particular project. This view is unfair in my opinion, as there are a great many contractors who are ethical, professional and highly cost-efficient. The trouble is that unless you can obtain recommendations from previous customers, it can be difficult to tell from the outset, as they all talk the talk!

Whilst there are certainly some cowboys out there, there are also contractors who are doing a good job yet poor management of the project leads to wasted budget, avoidable delays and unsatisfied customers. We conducted our own research into a variety of projects and found that some had been left with as much as 50% of their budgets wasted on projects that had only been 30% completed. Invariably, the causes were inaccurate valuations, poor project management and poor money management.

So how can this be avoided? When embarking on a self-build project, it is important that you follow these key steps, in order to avoid being hit with any hidden surprises once the project is underway.

1. Seek quotations from at least 3 suppliers

Even if you have received recommendations for a particular supplier, or have worked with others in the past, I would always suggest gaining at least 3 quotes for your project from different suppliers. This will help you to gauge whether the prices being put forward are fair, competitive and realistic. This isn’t always about finding the cheapest supplier either, it’s about finding someone who has the right expertise, understanding and capabilities for the task at hand. Also make sure that you are clear what exactly is being quoted for in each case, so that you can compare like with like. Some may be offering additional services or skills within their pricing which may need to be factored in.

2. Create a timeline for activities

Be sure to work with your chosen suppliers to create a realistic and achievable timeline of activities, including building in some contingency time for unexpected delays. Suppliers who really understand the project will be able to provide you with some clear milestones, so if your contractor is being fairly generic with timescales, it could be a warning sign. If you are paying by the day, try to get the contractor to provide both best and worst case scenarios, so that you have an idea of how far the budget might need to be stretched. Check in with them at key points in the project to check on progress against this plan and to amend the budget and future timeline if things have changed.

3. Don’t pay it all upfront

Sometimes it can feel easier to hand over all of the cash for the project upfront so that you know it is all paid up and can progress without a hitch, but this can be a very dangerous game as leaves you with very little wiggle room if things don’t go to plan. It is understandable and perfectly acceptable for a contractor to require upfront payment for materials and potentially the first few weeks/months of labour, but any credible supplier will be happy with a staged payment plan. This helps to protect you against losing money and gives the contractors an incentive to hit certain milestones on time.

4. Consider an external project manager

Many excellent relationships in the contractor industry have turned sour due to disagreements or misunderstandings and the added emotional attachment of a self-build can make the process much harder and more stressful to manage effectively. Employing the services of an external project manager allows an impartial third party to oversee the project and ensure it follows the agreed timescales and budget. In almost all cases, the gains in efficiency will offset the costs of employing a project manager.

In summary, self-build projects can be extremely rewarding and can cost significantly less than if you outsourced the entire project, but only if the process is managed effectively. Finding the right contractors is essential, as is setting realistic timelines for the project. Even the most meticulously planned projects can experience unexpected problems, and so having a third party handle the overall management could help to reduce the associated stress of reworking the plan. Whatever option you choose, making sure you keep a close eye on the budget is essentially to ensuring that your self-build project runs smoothly.

Wanda Rich

Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.