Building a Home and Self-contracting

I’ve been getting lots of questions about home building and how it was to be our own General Contractor. Before you start thinking “I could never self-contract a home build,” read this and then decide. It’s definitely not for everybody, but it COULD be for you.

Why we chose to be our own General Contractor (GC):

  • To save saving thousands of dollars. I have Champagne taste and a beer budget when it comes to home design. My husband estimates that we saved about $100,000 by self contracting our home build.
  • We also wanted to be able to be in control of the budget and be able to cut back in certain areas and spend more in other areas that are more important to us. I’ll be doing a blog post soon that goes more into detail about this.
  • Sometimes when working with a builder, you have to go along with the limited choices they provide and we did not want that.
  • Being our own contractor also allowed us to save money by doing some work ourselves. (I will go into exactly what we did ourselves further down.)

Skills & Requirements:

  • Time and ability to make phone calls. A lot of the collecting of bids is just making lots of phone calls. Some calls will need to be made/taken during business hours, so you or your spouse, or consultant should be able to talk during the day.
  • Ability to read/understand Floor Plans. 75% of being a GC is answering questions by finding/pointing to the answer on the plans. Seriously.
  • Ability to keep a budget sheet. I’ll admit, this is NOT a skill set I have, but my husband does, so it works.
  • Having negotiation skills helps, but it’s not necessary because you’ll be getting multiple bids for each job.
  • Knowing how to find and hire subcontractors. Sometimes it’s a matter of just asking everyone…the people at the hardware store, other customers at the paint store, your neighbors, friends, relatives. You’d be surprised how many people have a family member who’s an electrician or plumber or whatever.
  • Asking questions. If you don’t know, ask.
  • Money to pay subs – this is a whole can of worms so I dedicated the next paragraph to it.

In my state (Texas) and many other states, it is required to have an actual licensed General Contractor in order to secure financing from a bank. Are you or do you know a licensed contractor who could be the contractor on record? If not, you can get financing another way such as funding from your own savings/sale of previous home, family loans, take it slow and pay as you go, etc. The way we did it was by going through a company called Owner Builder Network (OBN). U Build is another, and it may be worth a search in your own state to see if this is an option for you. This was our second home build with OBN. OBN goes on record as the GC and helps you secure a construction loan, they also provided us with a lumber takeoff, budget, timeline, guidelines for best practices, and list of vetted sub contractors in the area to contatc for bids. They checked in occasionally and were there if we had any questions, but the rest was up to us. If you find other companies in your area that provide this kind of service please let me know so I can share the info with others who ask.

Construction Loan

Okay, full disclosure: I’m not a money person. My husband handled all the loan stuff and paying of contractors. I know my lane and I stayed in it. I have asked him to tell me about the money part so I can share it here. Here’s the basic information I know. With a construction loan, the money is released as you need it. You don’t take the full amount at the beginning and you don’t pay interest on money you haven’t taken out of the loan amount. You only pay interest on the money you have withdrawn. It’s called a “draw” when you take a portion of the loan. Why is this important? Because you can save a bit of money (interest) by having some liquid cash at the beginning of construction. Let me use a real life example with fake numbers. Say you have a $100,000 loan. Your first contractors that will need to be paid are your dirt work and foundation contractors. Let’s say their bill is $10,000. If you can pay that in cash, you can put off a month of interest on that $10,000. The bank will want to see receipts and will likely send out their own inspectors occasionally to make sure you are not paying for work that hasn’t been completed yet.

Paying Contractors

NUMBER 1 RULE: Do NOT ever pay for work that hasn’t been completed and always keep a bit back to ensure the job is done right. Contractors will sometimes tell you they need money to buy materials, don’t do it. They should be able to float the cost until they have completed some work. Only pay for completed work. If 25% of the work is done, pay for 25% (or a little less). If you paid 75% of the bid when 75% of the work was done and 90% is now done, do not pay until it is 100% done to your satisfaction or your risk them walking off the job leaving it incomplete.

Pay the concrete supplier directly. Often the Foundation Contractor will pay the concrete company directly from his pocket and bill you. Do not do this. When you get your foundation bids, tell them you will be paying for the concrete directly to the concrete supplier and to remove that from their bid/bill. Do not give a check to your foundation guy to give to the concrete company, deliver it yourself. We speak from experience. We have had to file a lawsuit and only got a small portion of our money back.

Refer to the plans

Contractors will ask lots of questions. Don’t get flustered, just find the answer on the plans. Many times, they think they have the plans memorized and they stop even looking at them. Keep pointing back to the plan. And check often to make sure they are building according to the plan. Mistakes WILL be made. You will need to decide if it’s okay to move forward or if the error needs to be corrected. Most of the time it will need to be corrected, because things snowball and may cause other problems down the line.

You can do this

It’s a bit of time and effort but it is only temporary and when you are finished you will have accomplished something amazing…and saved a lot of money!



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