See also Budget homes for first time buyers
In some cases you may be correct, in which case the starting point may be in becoming involved in a project in another cheaper area, or in by becoming involved in a build project to build a smaller home, not for you to move to, but to let out. This allows you to take a step onto the housing ladder and start accumulating equity, both directly from the savings on the self build and by generally increasing prices, like everyone else who has become involved in 'buy to let'. It does not matter how small the first project is, at least you are involved, later you can either continue to rent this out or sell it freeing up a large deposit for the next property to build. Others may decide rather than 'buy to let' to go for a holiday property, that they can both use themselves and let out, the effect is often exactly the same.
Quite a lot of people find that by doing a series of self builds they can become mortgage free, while others do the same, but with a couple more steps and start from a very modest first project, to end up with their dream several steps later, mortgage free.
However, far more people can afford to build in their own area and exactly what they would like to live in, than realize it. This is because most people don't want a home that much larger than the one they have been used to and there is often a saving of anything between 25% and 60% on a self build compared to buying a house from a developer. Like new property from a developer, as soon as the group of houses is complete, rubbish cleared away and landscaping done, the value jumps up, and then often increases more rapidly than older properties, as there is at least conceptually less maintenance involved in new as opposed to older homes. So the equity value can double or more very quickly.
We would normally expect to see members get at least a 40% saving on a conventional modern home. Those on a low income may also find the joint projects being run between us and the Affordable Homes Project, a separate non profit UK company, that allows lower cost plots to be obtained via a leasehold arrangement with the option to buy out the freehold at a later date, at the equivalent of the value difference at the time of your build. This combined with the self build saving means that homes are available at under half the normal cost of a similar local home. The clubs affordable project is also looking to find other ways to reduce the build cost further, and has its own section of this web site.
You may also like to consider running cost, such as heating. A new home with high insulation will cost far less to heat, and other utility bills may also be able to be reduced, so that the outgoings that you have may be considerably lower and this could go perhaps towards paying a slightly larger mortgage, or combined mortgage and loan initially until the time it can be re-mortgaged to allow it all to be put onto the mortgage.
There are a number of reasons:-
Land price makes up a sizable element of any cost and accounts for the major difference from one area to another. A developer often wants to buy very large blocks of land to make it worth bringing in equipment, organizing and managing a build, marketing and to keep down the number of projects they need to keep in focus at the same time. As there is a lot of competition for these large blocks of land the price is higher, plus the councils in granting planning often make other work, such as building roads, providing schools or other requirements conditional on granting permission to build. Individual plots can also be expensive as self builders going it alone spend often years looking for a site so when one pops up that is suitable, the price is forced up. In between these two are the smaller sites that will take several homes, these share the cost of infrastructure, roads, services etc as well as planning costs and other joint costs, while are not in the same demand by others or rarely have other requirements imposed on them by councils. By actively being involved in searching for plots, in working with owners of land at no cost to them, to gain planning and in other ways, we as a club can often get plots at attractive prices.
Developers both have sizable overheads and marketing cost to promote and market the properties and of course expect to make a sizable profit as well. You don't have the overheads they do, large offices, staff, directors.... nor do you have to consider having expensive brochures produced, scale models to market it made, setting up and staffing a show home or paying agents commission. Plus of course all the profit is yours.
VAT - you may be surprised to find that the vat you pay on building materials and most other parts of the build, can be recovered by you as a self builder. This alone you will see is a sizable rebate off your home build cost. The tutorial section explains why and how this is achieved.
Stamp duty. When you go and buy a home you would normally have to pay stamp duty on the purchase, of course with self build you have not bought so don't pay stamp duty on a home, just on the land if it is over the minimum amount set.
Finance cost - You will find that there are a number of lenders now providing low cost funding to cover the period of the build, allowing you to have funds at the points you need them. Most you will then convert to a normal mortgage or a 'buy to let' mortgage after you have completed the build. The best mortgage rates can often be obtained where the lender sees no risk at all, and this is where the amount you are borrowing is a lower percentage of the value of the property, so you not only save on the price of obtaining the house but should find you can get a lower cost mortgage as well once it is complete.
This is based on documented cases, although some cases show the property to have been obtained at a larger discount than 60%, and you may from time to time see these featured in specialist self build and other publications. This is often due to owning the land before, by buying and holding the land for some time prior to starting the build or by doing a lot of the build work yourself. There is a very large range of savings between projects, with normally savings towards the lower end when single properties are built and where the person has no experience and does not use any project management. A project manager should save at least as much as he costs in getting better prices from subcontractors and keeping them to their times and prices, and utilizing a subcontractor on several builds in the same development. Many in the building trade work on half day units of time, so will look to charge the same for doing a small job as a series of small jobs that fill half a day.
Most projects will fall about half way between the extremes and if you were to work on saving around 40% compared to going and buying a similar home you would usually not be very far out.
We can on each project estimate the expected percentage saving/margin and you will then be able to see what the scope for you is before joining in. Once you or a group are running your own project, you can keep cost in control by not constantly changing the design and in buying at the beat prices possible. Using your club trade card to get the full trade prices and having a good project manager, manage the site for you.
Sometimes you can get the idea that self build homes are always large detached expensive properties, while this is not the case. There are estates, linked homes, starter homes and blocks of apartments. While these perhaps don't get the same magazine coverage, they provide very nice homes for many people at prices they can afford. In many cases you will understand that the cost is very highly influenced by land prices, so if we were to look at building a single 5 bedroom property with triple garage this may be very nice, however with good planning, we could probably have built 8 or more 2 bedroom houses on the same area, so each has only an eighth of the land price attached to them, as well as of course only a fraction of the construction costs.
Many councils have a policy of encouraging starter homes or small homes to be built and it can sometimes be considerably easier to get planning permission for homes for first time buyers than to build larger homes. This can mean that some property can be sourced for small properties that cannot be used for other uses and therefore the price may be lower, also we may be able to create projects with a mixture of property sizes, to best use land that we come across.
As we have mentioned before, we also have a whole section of the web site devoted to affordable homes and getting the cost down, plus are working with the Affordable Homes Project to source lower cost plots. Combining these with self builds normal savings, it should be possible for most who need an affordable home to get the equivalent of what is being currently offered locally at under half the cost.
From a club viewpoint all members are equal, we are just as keen to meet your needs as any other member, we look at the requirements of each member individually and then look to put together the best combination of builds so as to get the best deal we can for members. Some members will require more work and more individual searching and to cope with this requirement, we have different membership types and cost structures.
So we can help you to get a home at half the price' you would normally expect, but what if you still can't get a mortgage that is high enough for the property in your area.
When we look within the work book, at how you can fund the build, it will be clear to some that its not the amount that you can afford to pay on a mortgage that is often the limit, but earning multiples that lenders use. Even with the lower cost of a self build this can still present a major problem for many in lower to average paid jobs in many areas, particularly the south east. Many lenders do provide self certified mortgages that allow you to add in any other income that you think you have, or may be going to have, and while this has been the way that many have overcome the problem, with the encouragement of employees of the lenders, it is a gray area, are you lying, or not.
Another approach is to get another person to become jointly involved with you, it could be a parent, friend or just some one who sees the business advantage of such an arrangement. It might be that they are involved in name only, as in the case of a parent and have no actual stake in the equity of the property, or are paying any of the costs. It could be with a friend, that they look on this a partnership that can get you and them into home ownership. Agreements for these arrangements are essential, and in many cases give one partner the chance to buy the other out, based on an agreed formula, often tied to valuation, or they agree to sell the house at a set point in the future, so that they can both realize the equity produced.
There are many variations upon this theme, including where you own a part of the house and rent the other part, until such time as you are able to purchase the other part, and rent to buy arrangements, where although involved from the beginning it belongs to an investor until you have reached a set point, it may be that you have an option to buy at an agreed price within so long, or that the formula of the price is totally or partly related to the future value. Up to the time you can buy, you rent the property, but under special terms that also make you responsible for some other aspects. This can present a very safe trouble free form of investment, and in some cases could be set up where the investor did not actually spend any of his cash at all, in effect he is there just as a guarantor, and stands no real risk at all, because of the large discount self build homes earn. You will see that given this you should be able to negotiate extremely favorable terms, that would allow you to have a larger home than you would otherwise, or to become involved where your salary would not allow you to qualify. We investigate this in much greater depth in the work book looking at funding your build.
See also Budget homes for first time buyers
See also affordable homes section of this web site, (button on left panel)
The club has a points programme, that allows members to earn non repayable grants towards their home, of up to £200,000. You can earn other rewards as well from your joining costs and subscription to cases of wine. While most members are going to want to get on and get involved in their own projects, some will enjoy telling others about the club and all that it can offer and receiving points for all those that join through their introduction. A chance to use a variety of approaches from talking to those you know, to putting on parties, get people excited and involves no selling as such.
see also Points programme
We don't fix loans, mortgages or tell you what you can or cannot spend. There are many people who will do this, most getting commissions from lenders, so involve no additional cost to you.
Having said this, we will both help you to understand the cost of building different styles, sizes and types of property, and at different locations, and help you to work out what you can do and where. The clubs work books do go quite a bit further and allow you to research many options.
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