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Should you be your own general contractor?

But the supply issue can make a big difference in what you pay and when. "Supplies are going to cost a pro less," says Don Sever, general manager of Sever Construction LLC, in Oakton, Va. In addition, subcontractors may have their own preferences.

Remember, if your subcontractors are buying their own supplies, they will probably want some money upfront. And that leads to another point of frequent debate: when to pay the subcontractors.

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"They don't get paid until the work and the inspection [are] done," says Heldmann. The one exception: carpentry. You might pay in stages as the work is completed, he says. "But I wouldn't pay them the last 30 percent until the inspector looks at it."

Sever disagrees. For a typical remodeling job, he gets about 10 percent of the project total, plus the cost of any special order supplies, when he signs the contract. The balance is divided into thirds and paid at various phases of the job.

Finally, pencil in estimates for your subcontractors, plus any supplies that you are buying, the property cost, permit fees, construction insurance and legal fees, and you'll have your first total estimate.

Last but not least: money
Now that you've got some numbers, it's time to shop for financing. And that could be ticklish.

When it comes to parting with a large sum of money to build a house, who would you rather back: someone who's done it a few hundred times already or an amateur doing it for the first time?

"It's not as tough as it used to be, but it's tough," says Heldmann, who also heads up Construction Loan Management Inc., a firm that consults with credit unions in Michigan on owner-builder financing.

Possible solutions:

  • To reassure your lender, consider hiring a construction general contractor under a management contract. For a flat fee (about a third of what a regular general contractor would make), he will help you out with permits, hiring, generating a realistic estimate and getting the project in on time, says Heldmann. For a referral, try the local home builders association.
  • Shop lenders as carefully as you do your subcontractors. "You have to match the loan to the lender because they all have different financial goals," says Woodson.

You also need to choose between getting one loan for construction and another for your mortgage, or one loan that would cover both phases. There are advantages and disadvantages either way you go.

Heldmann recommends separate loans for construction and final mortgage. The advantage: a construction loan is by nature more elastic. "You will never bring this house in at the price you've predetermined," Heldmann says. "It's never been done. You'll go over by 10 percent, at least."

If you have a combination construction loan and mortgage, you're locked in on construction costs. That lack of flexibility might mean you'll have to return to your bank and take out a second loan with a second set of closing costs, says Heldmann.

But Woodson believes a combination loan is a better choice because you are qualifying for both the mortgage and the construction loan at the beginning, so funding for both phases is assured no matter what happens later.

Ready, set, build!
When you hire your pros, give them a rough estimate of when you'll need them. After you have a good idea of when you really do need them, call with a firmer date, says Irwin.

No matter how organized you are, some glitches will delay your progress and increase your costs. Figure on running at least 10 percent over budget, according to several pros.

When he built his first house in 1972, Heldmann admits that his biggest mistake was "not hiring good subcontractors."

"I had everything go wrong that could go wrong, including subs going bankrupt and not showing up," he says.

Bottom line: When you act as your own general contractor, there are no guarantees. And no matter how carefully you shop, things can and do go wrong. Subcontractors disappear. The price of materials goes up. A company you've paid in advance folds. And then there's the weather.

There can be complications on your side, too, from changing financial situations to changing careers.

So why do it?

The chance to save some money, the opportunity to get exactly what you want and "the joy of doing it," says Irwin. "You really get a sense of accomplishing something. Everyone should do it just once in their life."

Dana Dratch is a freelance writer based in Atlanta.


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-- Posted: Nov. 23, 2004

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