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Making the money go round

Posted by Rachel Pyne on August 2, 2017

Although many TV shows may suggest otherwise, self building makes good financial sense.  It’s possible to create a great home on a relatively small budget, and your clients will almost certainly make a profit if they plan to sell it on.

If they budget well, your clients can expect their finished house to be worth around 20% more than their outlay costs. This is dependent on location and quality, but they can certainly expect to pay far less than they would by purchasing a like-for-like developer built dwelling.

Where can your clients make most savings?

It’s important to get a variety of quotes before selecting tradesman to work with and not to always go with the cheapest option.  A poor finish will mean the completed home will lose value.  Your clients should seek recommendations from fellow self builders – if someone has done a good job for them, they’ll probably do a good job for your client.

Self builders can save money on VAT, too, as labour costs on new houses are zero-rated and they can reclaim the VAT on many building materials after completion. Compare that to a conventional renovation – where labour and materials would both be charged at 20% – and that’s a significant discount.

Self builders oversee the purse strings, so they can make the key decisions on where to save.  For example, they could cut back investment on a high-end kitchen in favour of increased insulation, which will save money in the long term.

BuildLoan’s costings service can prove enormously useful to  clients when it comes to producing detailed costings for their project.  Our team of experienced builders and estimators can check over their costs to make sure they are realistic and suggest ways to make their budget go further.  

How much extra should my client set aside as a buffer?

Whatever their project, your clients will need to have a contingency – it makes good sense to cater for the unknown, be it delays caused by weather or unexpected site conditions. The amount they need will vary from home to home, but allowing for an additional 10% is advisable.

Tips for managing cashflow

Once your clients have their funding in order, they will need to keep a strict eye on their cash flow.  The bills will come in thick and fast once building starts, so it’s important they have the money available to make payments as they arise.

Key points to remember are:

Getting organised – They need to be clear about their project schedule and the costs incurred for each stage. Before they even start building work they will have fees to deal with such as legal costs, site surveys and planning charges.

Additional costs – The biggest single cost for their project will be land, and they will need to pay for this prior to anything else.  They can expect this to be 30%, if not more, of their overall budget.  All projects need to factory in a contingency fund.  Around 10% is generally recommended for a flat site where the ground conditions are know, and 20% for a sloping plot or one where they’re not not sure what may lie beneath the surface.

Accounting records – As they’re responsible for paying bills, they have to make sure that every penny is spent wisely and accounted for.  Most self builders will create a spreadsheet to record expenditure in key areas such as professional fees, materials and labour.  They should also keep a filing system for invoices, delivery notes and receipts.

Claiming VAT– While clients can claim back VAT on materials used in a self build project, if they are buying the materials themselves, they will have to pay for them first and then claim back the tax at the end of the build after completion.


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