What is Shell Building?

Please read this article describing various homeowners electing to save some money and do the job themselves, some of the pitfalls and a description of what type of skills are necessary to complete projects on your own. After that you will find four categories of shell building that we at Leading Edge Builders have found homeowners elect to do.

Does It Pay to Become Your Own Contractor?

By PERRI CAPELL

Updated June 14, 2004 11:59 p.m. ET; This article originally ran on June 14

Some homeowners act as their own general contractors on their home-renovation projects to save on the fee they’d normally pay to hire this building professional: about 10% to 25% of the total cost of the project.

But managing a kitchen remodel, garage addition or other renovation can be deceptively difficult, and many owners who opt to be general contractors to save money end up losing money instead, say builders.

General contractors seek bids from subcontractors, estimate the cost of the entire job, hire the subcontractors and then supervise the job to completion. The work may look easy, especially if a builder only shows up briefly each day to check on the subcontractors, says John Moffitt, president of Moffitt Development Co., a Kansas City, Kansas, developer and builder. “What the homeowner doesn’t see is the four hours the builder spent behind the scenes to get things organized to that point,” he says.

In Over Their Heads

Home repairs and other improvements are big business, churning up $173 million in the second quarter of 2003, reports the National Association of Home Builders. The percentage of U.S. homeowners who decide to manage their own home-renovation projects isn’t known. Typical problems they encounter include organizing the work, spotting flaws in the construction or simply getting subcontractors to show up.

Even homeowners with extensive prior experience in or around construction can run into difficulties, especially if they have demanding day jobs, because the amount of time required usually is greater than they expect.

Giving Birth to a Garage

In May, Terry and Matt Yost gave birth not only to a 7-pound-2-ounce baby girl but another big production they planned and conceived – a detached 950-square-foot garage in the backyard of their Boise, Idaho, home. The project took seven weeks to complete, with Ms. Yost, 31, serving as general contractor. They hoped to save money because she supervised and they did some of the work themselves.

But when the couple broke ground, Ms. Yost, a real-estate attorney, was eight months pregnant. As her due date approached, Ms. Yost could be seen carrying lumber or helping build concrete forms, sometimes long after dark. But even though she hired all six subcontractors and worked hard herself, building the garage cost $10,000 more than the $25,000 they’d projected. “I was clearly off on my estimates,” she says.

The couple’s garage and its landscaping, which includes a sunken hot tub, turned out well, but Ms. Yost says she wouldn’t supervise another home-renovation project — even if she wasn’t on the verge of giving birth. While she and her husband may have saved $5,000 because she served as project manager, they probably lost an equal amount because of the time she had to take off work to meet with subcontractors and secure permits from city officials.

Before you decide to be general contractor on your next remodeling project, contractors and homeowners suggest asking yourself these questions.

Do I know enough?

Most homeowners aren’t aware of the complexities of managing a construction project themselves and aren’t qualified to do it. General contractors must know in what order subcontractors need to work and how to schedule them and when and how much of each building material to order. They also must be able to understand building code requirements and spot and correct problems during construction.

Ms. Yost says she ran into trouble scheduling her subcontractors. This caused a small emergency midway, when the couple needed to bring in an excavator on a weekend to stay on schedule.

“I organized the framers and finish work first instead of getting the excavators and concrete people lined up,” she says. “Since the excavator I wanted couldn’t do the work when we wanted it done, I had to hire another company and pay them overtime to do it over a weekend.”

But Ms. Yost says she knew enough to spot a crooked electrician who said her house needed electrical work. “I said I was working on a garage that was detached, so there was no reason I had to work on my house,” she says. “I told him not to bother giving us a bid.”

A former builder, Doug Ryder, 47, has supervised construction of three of his homes and is now overseeing a $300,000 remodeling project at a family ranch 150 miles south of his home in San Antonio, in Hebbronville, Texas. As the owner of an apparel company, he has the time to make the drive frequently to Hebbronville to ensure his subcontractors are doing the work correctly. He expects to save as much as $45,000 because he’s supervising his remodeling project, but he takes on the task primarily to ensure work “gets done the way I like to do it and think it needs to be done.”

“It’s a tough deal to do your own contracting. If you wake up one day and say, ‘I want to be a general contractor,’ be prepared,” he says. “It could cost you twice as much because you might have to have a lot of work redone.”

Can I get subcontractors to work for me?

Many homeowners don’t realize that their jobs typically aren’t the first priority for local plumbers, electricians, framers, roofers, excavators and landscapers. These subcontractors give their first allegiance to general contractors because “they take care of people who give multiple jobs to them during the year,” says Mike Elliott, president of Elliott Construction, a general contractor in Cannon Beach, Ore. “If you’re a homeowner, you’re going to get put on the back burner.”

Most of Mr. Ryder’s subcontractors have worked for him before. Even so, he can run into difficulties. He paid a deposit to a cabinetmaker he had used previously to make new cabinets for the ranch, but the subcontractor has since disappeared — with Mr. Ryder’s money.

Mr. Ryder says he doubts he’ll get his money back and agrees that if a general contractor had hired the cabinetmaker, he would have been responsible for seeing the cabinetwork was done. He declined to state the amount of the deposit, but it’s enough “to make you go ‘ouch!’ ” he says. “Let’s just say that I haven’t told my wife about it.”

The delays in your project caused by being low on a subcontractor’s list of priorities can drain your budget, says Phil Timm, who had a home built in Frenchtown, N.J., in 2000. Mr. Timm, a 54-year-old property specialist for a wireless-communications-infrastructure company, secured a short-term construction loan to pay for the building, which could be converted to a conventional mortgage after the structure was completed. He hired a general contractor because he lacked the time and expertise. But the contractor had another business, which caused him to neglect building Mr. Timm’s home. The home still wasn’t built when the construction loan came due, so the bank charged Mr. Timm penalties to extend it.

Can I afford to have work redone?

A general contractor will provide warranties on the products and work he completes, either personally or through subcontractors. If, say, a toilet that the general contractor had a plumber install doesn’t work, the general contractor will make sure it’s removed and a new one is reinstalled at no charge to the homeowner. But if a homeowner supplies a toilet that proves defective, no plumber will remove and reinstall a new one free of charge.

“Some of my homeowners buy their own lighting fixtures, and parts are missing,” says Mr. Elliott. “You have to call the client and say, ‘Come and get these,’ or we get them fixed and charge the homeowner for the cost of getting it right.”

How much will I really save?

By serving as a general contractor, you may expect to eliminate the builder’s markup. What you may not realize is that subcontractors hired by general contractors generally charge them 10% to 15% less than they would bill a homeowner who hires them directly. In other words, the subcontractors’ retail prices negate the savings you might expect to realize on the overall job.

“The money the homeowner thinks he is going to save doesn’t exist because the sub won’t give them the same price they give to the industry,” says Mr. Moffitt. “They give a better price to someone who hires them all year.”

Can I take the stress?

If a value could be attached to emotional angst, most homeowners who serve as their own general contractors probably pay a high price. Subcontractors who don’t show up, delays due to weather, and mistakes and unforeseen problems that cause projects to go over budget raise homeowners’ stress levels. General contractors, on the other hand, deal with these issues daily, says Mr. Moffitt. “When it’s your own house, you get emotional,” he says. “You don’t need the stress. Do what you do for a living and leave the contracting to the professionals who know code and the subcontractors.”

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Four Levels of Shell Building