Building a family home from scratch is a pivotal project that combines creativity, careful planning, and sound financial strategies.
The challenging process involves carefully considering financing, sourcing materials, managing contractors, and complying with laws and regulations.
This guide aims to explore these key aspects in detail, focusing on practical strategies and expert opinions to help you complete your project successfully.
1- Financial planning for building a house…the foundation stone
Every successful construction project begins with a careful financial plan. Accurately estimating the total cost is essential, and this includes:
- Buy land
- Design
- Permits
- Materials and construction
- And final finishes such as space coordination and interior design
The average global cost of construction ranges between $150 and $400 per square meter, but this number may change significantly depending on location, location, type of materials used, and complexity of the design.
In an interview with “The Construction” platform, Laura Matthews, a financial consultant specializing in construction projects, stresses the importance of allocating funds not only for expected expenses, but also for unexpected expenses.
“It is necessary to allocate an emergency fund equivalent to at least 15-20% of the total budget,” she says. “Market fluctuations and inflation may suddenly increase material or labor costs.”
By taking this precautionary approach, homeowners can protect themselves from unpleasant financial surprises.
The average cost of construction globally ranges between $150 and $400 per square meter, but this number may change significantly depending on the location, type of materials used, and the complexity of the design.
2- Financing the dream home…options and opportunities
Financing the construction of a house or house is one of the most important stages that any person must carefully consider to ensure that the project runs smoothly without facing sudden financial crises.
The options available for financing home construction vary based on the financial situation of each individual, and range from complete self-financing to using financing loans or benefiting from government or institutional support.
- Self-financing
For people with significant financial capacity or long-term savings, self-financing home construction without resorting to loans may be the ideal option.
The main advantage here is that you build your home without any obligations to banks or financial institutions, which gives you complete freedom to make decisions without the pressure resulting from repayment dates or loan interest.
However, financial advisor Jonathan Carter, speaking to Forbes magazine, points out the need to be careful not to exhaust all savings in construction.
“Even if you have the ability to self-finance construction, make sure you keep an emergency fund that covers your daily needs and sudden expenses for at least two years,” he says.
- Financing loans…the majority’s choice
For the vast majority of people, loans are the primary way to build a home. The most prominent types of loans used are:
1- Construction loans
These loans provide short-term financing to cover construction costs. Funds are usually disbursed in instalments that coincide with the progress of work on the project, such as the completion of the foundation or exterior structure.
After completion, the loan can be converted into a long-term mortgage.
In the United States alone, construction loans make up about 35% of new home financing sources, according to a 2023 National Association of Home Builders report.
2- Real estate loans
If you already own a property and have a high equity balance, you can utilize this balance to finance construction. The interest for this type of loan is often lower than traditional loans.
3- Personal loans
Small personal loans can be used to cover specific parts of a project, such as purchasing materials or interior finishes.
- Government and institutional support
In some countries, governments provide support programs for home building, especially for first-time or middle-income families.
- Combining financing sources
Economic consultant Marcus Chang, speaking to Forbes, stresses the importance of combining multiple sources of financing. He says: “Combining self-financing with a construction loan or benefiting from government support may relieve financial pressure and reduce the risk of the project stopping due to lack of funds.”
3- Choosing building materials…the balance between quality and cost
The materials you choose will determine not only the look and feel of your home but also how durable and affordable it is. The balance between quality and affordability is key.
While premium materials may enhance the durability and appeal of your home, there is a danger of overspending in areas that may not add commensurate value.
Purchasing materials locally may reduce costs and environmental impact. Architectural consultant Elena Varga, from Citibank, points out that the choice of materials also affects the speed of construction and the level of waste.
“Choosing off-the-shelf components or modular elements may speed up the construction process and reduce waste, which is especially beneficial for projects with tight timelines or budgets,” she says.
The long-term cost of materials should also be considered, for example, energy-efficient windows or high-quality insulation may significantly reduce utility bills over time.
4- The contractor or the self-administration… who is better for construction?
Choosing the appropriate method to implement your home construction project depends on several factors, including your budget, your experience in project management, and your availability of time.
The two basic options are to hire a professional contractor or take on project management yourself.
Both options have advantages and challenges, and require a careful understanding of what suits your personal circumstances.
- Relying on the contractor… Handing over the tasks to professionals
Hiring a professional contractor is the most common option for people who lack the experience or time needed to manage a project.
The contractor manages all aspects of construction, including:
- Purchase materials.
- Recruiting the necessary workers.
- Supervising the schedule and ensuring that the work is carried out according to the required design.
It saves the contractor time and effort and reduces the possibility of costly errors resulting from lack of experience. According to a report by the International Construction Management Association, projects managed by professional contractors are completed on average 20% faster than projects managed by the owners themselves.
Hiring a contractor is subject to the cost of contracting, which may be high.
Typically, contractors receive between 10-20% of the total project cost for their services.
- Self-management…saving while bearing risks
Project self-management may be an attractive option for people who have sufficient construction knowledge or time for direct supervision.
- Advantages of self-management
1- Cost saving: Between 10-15% of the total cost can be saved by eliminating contractor fees.
2- Complete control: This option gives you direct control over the selection of materials, labor, and construction phases.
- Self-management challenges
1- Time managementConstruction is a project that requires full-time dedication, as you need to daily supervise the work, deal with suppliers, and solve problems that may arise.
2- Legal risks: If local regulations or building standards are not adhered to, you may face fines or legal problems.
Civil engineer Carlos Hernandez points out in an interview with “The Construction” that self-administration does not suit everyone.
He says: “Even if you are familiar with the field, it is important to consult a specialist at critical stages, such as foundations or the structural structure. This reduces the risk of errors that could cause huge costs later.”
- Combining the two methods
To get the best of both worlds, hire a contractor or project manager to oversee critical phases while you manage the less complex parts, such as purchasing materials or following up on schedules.
According to a 2022 study by Building magazine, owner-managed projects with partial contractor supervision save approximately 10% of total costs compared to complete reliance on a contractor.
5- Comply with the laws when building a house
Building a house or home requires complying with a variety of laws and obtaining multiple permits. These requirements vary by location, but usually include building permits, zoning permits, and environmental assessments.
In an interview with The Sun, Karen Lee, a British urban planner, recommends working with a local architect or civil engineer from the beginning of planning.
“These professionals not only ensure compliance, but can also anticipate potential issues, helping you avoid costly delays,” she says.
6- Monitoring the stages of progress in building the house
No matter which method you choose to build, staying involved in the process is essential. Regular site visits allow you to monitor progress, resolve problems as they arise, and ensure that the work is in line with your vision and budget.
Technology may also play a role in project monitoring. Construction management software provides tools to track schedules, expenses, and changes in real time.
Technology consultant Rahul Gupta recommends using these tools to improve transparency between all parties involved.
Adopting sustainable home building practices is an increasing priority today, as the benefits are not only limited to the environment, but also include financial savings in the long term.
For example, installing solar panels or rainwater harvesting systems may significantly reduce utility bills over the life of a home.
Environmental engineer Sophia Anderson points out that sustainable homes often have a higher resale value.
“Investing in environmental certifications such as LEED or Energy Star adds value to the property while ensuring sustainability,” she says.
