Budget for a Self Build Home ProjectNo one would dream of travelling in an unknown country without a road map and working without a budget in self-building would be just as foolish and possibly costly as well. Anyone who has successfully built their own house without a budget is definitely in a small minority!
It is wrong to think of all budgets as being elaborate schedules of costs consisting of parcels of work all costed out on spreadsheets. Budgets can appear in many forms but as long as long as they are updated regularly they can be an essential tool to maintain financial control of a project.
The first budget you prepare will be the simplest. Let us say you have taken a decision to build your own house. The equity in your present house is £260,000 and you can borrow £120,000 based on your earning power. So you have £380,000 to spend. That sentence is your first budget figure!
In this example, it would be pointless looking for a plot of land in the £300,000 region because there would not be enough funds left to pay for the construction work. It would advisable to look a plot whose value is about 25% of the available funds. 3 to 1 is the usual ratio of building to plot costs but this not a rigid rule. So a plot worth about £90,000 to £100,000 would be about right. So the position at this stage is:
Funds available 380,000
- Land cost 95,000
- Insurances, fees etc 5,000 (a)
- External works 15,000 (b
- Contingency sum (say 5% x £265,000) 13,250
- VAT reclaim (say £251,500 x 40% x 5%) (c) -5,035
Funds available for construction 256,785
(a) it is difficult to assess this figure at an early stage but you must include something
(b) the square metre cost of building the house does not include drains,
paths, fencing, landscaping and the like and £15,000 is about the going rate for an averaged sized detached family house
(c) difficult to predict accurately but this figure should be somewhere near.
So what size house can be built for £256,785? Working on a square metre rate of £900 per square metre for a standard specification it should be possible to construct a house of about 285 square metres for this sum. This is a large house so you have an option of either increasing the specification or buying a more expensive plot or a bit of both. Here is an example of the choices available.
|Cost per m2||House size|
Assuming that you have found and bought a plot for this amount you must then decide on how you are going to move forward. Here are the main options:
• employ a contractor to build the entire house from start to finish
• manage the work yourselves by appointing sub-contractors and
tradesmen and coordinating their programmes to ensure continuity
• employ a timber-framed firm to erect the shell and watertight and carry out the rest of the work yourselves.
There are other options but these are the main ones that self-builders choose
and each one requires a different type of budget.
Option 1. Employ a contractor to build the entire house from start to finish.
Assuming that drawings have been prepared and the necessary permissions
obtained, you will then need to appoint a contractor. So the budget for this
option at that stage would be about £ 250,000 or less, and this is the target figure for quotations from builders. If successful, the only involvement required during the construction period is keeping an eye on progress, arranging payments and making sure that no extra costs are incurred. These normally happen when clients change their minds about the design. Indecision or making changes can cause delay and builders will look for extra payment if this happens.
Option 2. Manage the work yourselves by appointing sub-contractors and tradesmen and coordinating their programmes.
This option requires good managerial skills to appoint, supervise and co-
ordinate the sub-contractors and tradesmen. People without any experience of the building trade should not be deterred from taking this option because most of the problems that will arise can be solved by applying some common sense.
Construction work is usually broken down into various elements and these can
be changed to suit each individual job although using standard elements can be
useful when making comparisons between different projects. Here is a typical
budget for a job that has already commenced. Note that the figures in the Budget column have been rounded off.
|Self Build Work||Approx%|| Budget (£)||Actual(£)|| Difference (£)|
|Site clearance and foundations||6||11280||11414||+134(c)|
|External walls||12||22560||20968||-1,592 (c)|
|Roof timbers and coverings||11||20680||20987||+307 (q)|
|Internal walls and partitions||5||7520|
|Plumbing work||7||13160||12740||-436 (q)|
|Electrical work||12||22560||18353||207 (q)|
|Painting and papering||4||7520|
|Paths and drives||3||5640|
These figures show that the site clearance, foundations and external walls are
complete (c) and that quotations have been accepted for the roofing, plumbing and electrical work (q). Losses were made on the site clearance, foundations and roof but savings have been made on the external walls and are anticipated on the
plumbing and electrical work. At this stage of the work, it is expected that the final figure will be £ 183,680 (£189,474 less £5,794).
The budget layout can be adjusted to show more detail - the plumbing, joinery
and electrical work could be split into two parts each, first and second fix. An
extra column could be added to show the percentage of work completed for
each element and other elements could be added, e.g. security and landscaping.
The budget should be adjusted as actual costs become available but in any case
it should be examined at least once a fortnight and it is important to display the date that was budget updated.
Option 3. Employ a timber-framed firm to erect the shell and carry out the
rest of the work yourself
This option is popular with self builders who have the skill but not the time
to carry out a full self build. In this example, it is assumed that the timber frame
company would supply and erect the timber frame, the roof (excluding tiling),
the external doors, windows and all other work would be carried out by the
| Self Build items||Approx%|| Budget (£)|| Actual (£)|| Difference (£)|
|Site overheads||1||1584 |
|Timber frame package||44||69714||69754 ||+40(c) |
|Internal walls and partitions||5||7922|
|Painting and papering||1||1584|
|Paths and drives||4||6337|
The figures in this section show that the budget is reduced from £189,474 to £158,442 because in the previous option the self builders intend to carry out most of the work themselves and the difference between the two sums represents the theoretical savings that they should achieve by taking this option. The sums in the budget column are mainly for the cost of materials. Note that although for clarity the electrical work is shown as carried out by the owner, this is not an option.
Self Build Costs Summary
The costs of the three options can be summarised as follows.
Option 1. Employ a contractor to build the entire house from start to finish - to be negotiated.
Option 2. Manage the work yourselves by appointing sub-contractors and tradesmen and coordinating their programme £189,474
Option 3. Employ a timber-framed firm to erect the shell and carry out the rest of the work yourself £158,442
Managing the self build budget
It is important to remember that a budget is a tool to help you manage the project efficiently. If, for example, you hit bad ground conditions when excavating the foundations and incur an extra £3,000 costs, you want to know about it as soon as possible so that you look for savings in future work packages.
You may need to adjust the specification or take a tougher line in negotiating sub contracts, or decide to leave items like landscaping out of the budget for twelve months. Having a well-planned budget gives you the resources to solve financial problems that will almost certainly arise.
A contingency sum can be built into the budget if wished and a figure of 5% is usually considered adequate. Finally, don't let the budget run the job! It should monitored and adjusted regularly but it is more important laying one brick on top of another than spending hours poring over a piece of paper. It is a tool, like a trowel, and should be used as such.
Self Build Money sources
Until recently, raising the necessary funds to build your own house was difficult. Bridging loans were available from banks but at punitive rates of interest and there were not many building societies enthusiastic about self building.
Then the Accelerator mortgage from BuildStore arrived. This enables self builders to stay in their own homes until they can move into their new house and it will also pay 95% of the land value and building costs in advance. Previously, self builders had to notify the building society or bank when agreed stages of work had been reached.
A surveyor would then inspect the work and make arrangements for a stage payment to be made that would arrive three or four weeks after notification. In the meanwhile, there was a danger that tradesmen and contractors would leave the site because of the delay in payment. Because the Accelerator mortgage is paid in advance, this problem does not exist anymore.
Self Build Conclusions
Having a budget that is regularly updated is essential for any self builder. It will enable him or her to plan for the future and also can be used as a correcting tool when financial over runs occur. Any device that can bring a little peace of mind to the self-building process should be welcomed!
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