Why Be an Owner-Builder

Are you trying to answer the question "Why be an owner-builder?" There are many more reasons than I have listed why one would want to be an owner-builder. But continue reading for my own personal top 8 reasons.

Substantial Cost Savings

When Melissa and Roger were building their house in 2014, they saved substantially over using a general contractor.  Here is how it played out.  

The  land was purchased using cash. They added $25,000 to the project from savings and ended up only using $340,000 of their construction loan.  For the total home and land, they paid $423,000. Their custom home was then appraised for $570,000 upon completion. That is $147,000 instant equity. 


This is not an isolated case.  It happens over and over again as people decide to be an owner-builder.

Make Money the Tax Free Way

Let's start by using the example that one could save 35% on a home in the first year by being an owner-builder. Then continue to add five percent or so to the value of the home each year through appreciation. If the average appreciation amounts to $2,000 a month, that is about $24,000 a year in equity. But remember, during the year where one builds their home, one could make $12,250 per a month through construction savings (using Melissa and Roger's example above).

This substantial income is protected from taxes in two ways. First, money saved building your house is not taxed at all when you save it. You don’t pay federal, state, social security, sales tax or property taxes on what you save. It goes direct and untouched into your home equity and your net worth. Second, when you sell it, the U.S. Taxpayer Relief Act allows you to keep your profit tax-free.

According to the TurboTax website, "If you owned and lived in the place for two to five years before the sale, then up to $250,000 of profit is tax-free. If you are married and file a joint return, the tax-free amount doubles to $500,000. The law lets you exclude this much otherwise taxable profit from your taxable income."

Keep in mind, you must live in the house for two years to enjoy this tax-free benefit. But you can do it again and again, as long as Congress maintains the current law. All those savings accumulated in building your own house go to your net worth. It’s pure wealth!

Control of Sub-Contractors

As an owner-builder, you get to choose who works on your home.  Let's say you have a brother-in-law in the trades who is willing to work at a "family discount."  Hire him!  It is totally up to you.  

Why be an owner-builder? Sweat Equity!

Owner-builders don’t need to swing a hammer to achieve this level of wealth building, but it doesn't hurt. By limiting yourself to performing only the trades you know (which could be none) and emphasizing your role as general contractor/project manager, that will do the trick.

Sweat equity is the term used when you have gained these savings "by the sweat of your brow." Which means one has done the work for themselves instead of paying someone else.  When you provide labor to reduce costs, the value of the property and your equity in it rise. Most of these savings are achieved in planning, managing, organizing, and controlling construction costs.

Satisfaction and Accomplishment

Saving money is wonderful, but that isn't the only benefit.  A sense of satisfaction, knowing you did this, can become a real daily pleasure as you live in the home. Think of the sense of pride that you accomplished such a tremendous goal.

Upgraded Custom Features Through Frugality and Sales

No one will ever build a home exactly the way you do.  It will be 100% custom. When being an owner-builder, you can be frugal and still don't have to cut corners.  Chose the upgrades you want by searching for the best deals.  The savings are yours to keep, not for the general contractor to line his pocket. 

Room in your budget? Why not bulk up the framing, insulation or get the fancy new electrical outlets.  Go ahead and get the upgraded cabinets and counter tops on sale; they are probably the same price as the specified ones would have cost at retail.

As an owner-builder, you get to buy everything buffet-style.  Some things you want may vary from the norm, but at least you don't have a general contractor with whom to argue that it falls outside the specifications.  And you will never have to have the conversation about the merits of using pre-built roof trusses vs. stick-built roofs. Or using structural insulated panels or insulated concrete forms instead of conventional stick-built exterior walls. You can realize increased savings on labor because you negotiate with each trade directly.

Let's use ceiling fans as an example.  The general contractor may provide a few ceiling fans in the home.  But as the owner-builder, you get to shop for higher grade fans on sale, and add as many as you like.  This keeps the home cooler on those hot summer nights, with no extra cost to you.

Bottom line, your frugality and sharp eye for a sale can greatly increased the quality of materials in your home.  Not to mention the higher sales price you will receive when you sell it.

Know What is In Your Walls

This may be trivial to some, but just knowing that what is in your walls is supposed to BE in your walls is a great comfort.  Some contractors cut corners in this arena, and they can be costly down the road. 

Truly Custom Home

Owner-builders get the exact design they want and can afford. You don't have to conform to the 3 or 4 choices of house plans that the general contractor offers.