Owner Builder Loans Guide: A Developer’s Perspective

What would be an extremely valuable perspective to utilise when considering  an owner builder loans project? Answer-looking through the eyes of an experienced property developer! Simple, right? 

But who has one of these to draw on in a moment’s notice-not many I guess, and perhaps a lot of self proclaimed experts at best who wont have been taking any personal risks with advice.

What we can use is the basis for what we have seen over the past 20 or so years in dealing with owner builders–many of whom were themselves property developers. The following is by no means an exhaustive list, but may form the basis for helpful assessment of a potential project.

Start with the end in mind

Imagine an end goal relative to when you will sell the completed property at some point in the future. If you are looking to create a mansion in the suburbs with six bedrooms, entertainment room/s, four bathrooms and two kitchens with platinum-coated taps while the entire neighborhood consists of two-bedroom compact “cheap but cheerful” homes, then guess what?

You may be in for a nasty surprise when bank valuation time comes and you are not even close to recovering all you will spend on a new build. 

This might be an extreme example, but this happens due to the fantasy of what life will bring in the new home, while not appreciating what the property market demands. For many, this amounts to a “ So What” moment, it will be our long term home loans, but this is asking for trouble.

Property developers will utilise all their life experience in property sales-and in some cases advanced demographic modelling software and project feasibility calculations to determine what the market can bear-relative to home size, owner occupied versus rentals, amenities , neighbourhood lifestyle, level of finish proximity to shops, schools etc. So a few things to consider from outset.

Working with expert in owner builder loans

This is often misjudged due to lack of experience by many. Before even contemplating the design and final finish of a build, the pre-construction costs need to be investigated. This include the designs/architects fees, finance costs, land preparation (demolition, excavation levelling, retaining walls, fill, tree removal ), building surveyors/certifiers, soil tests, structural engineers reports, council approvals/permits/contributions, town planning where needed, and project management costs, among others. 

These costs can vary from several thousand dollars to several hundred thousand dollars. Property developers gauge these in an instant  from past experiences, while you and I can get caught very quickly due to lack of that experience. Always find an experienced builder or developer with whom to get an opinion on these before purchasing a site.

Design of home and costs to build

A lot of things have to be considered here. As the first point started with the “end in mind” the home needs to be functional, and cost effective to build. The costs of some items might affect the entire build cost dramatically, and leave projects running well over time and budget. 

Simple things like sizes of doorways, sizes of windows, number of floors and proximity to forests can have large impacts on engineering and approvals and for many, a huge amount of time will be spent costing out all these factors to arrive at a frequent compromise on style, inclusions and functionailty. 

Tips and tricks

There are many “tricks” to shorten this process such as buying ready-drawn designs, utilising take off (build materials and time/trades), software/services, and mainly the insight from an experienced builder or building project manager.

So when we finally add up land/existing house purchase costs, professional fees and site costs and all the associated costs for construction we can finally arrive at a figure for the proposed project. This way you can budget the time and money needed-as opposed to jumping in and hoping it works out-a very risky proposition. 

As mentioned, always source the advice of someone with experience in building as a minimum, and if you have a friend or family member who has developed property before, then ask questions. The time and effort to do so is minor in comparison to sleepless nights endured through stress and worry. 

We wish you all the best in your owner builder endeavours! 

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Are you looking at buying a property anytime soon? Talking to a seasoned broker will enable you to get the most competitive rate in the market. Start today by talking to our experienced brokers who are knowledgeable in different loan products, especially owner builder loans. Give us a call today at 1300 55 10 45 or send us a message to start your journey.