Becoming an Owner Builder: The Jobs, Liability & Real Savings

William Reid (: 00:00

All right, everybody, welcome back. We just finished something big. For the last stretch of episodes, we lived inside the world of construction. We took apart what contractors actually do. We walked through how your project gets estimated. We spent four episodes on contracting methods, and then several more on what belongs inside your contract.

We closed it out last time with liens and how your subcontractor you never hired can end up with a claim against your house. That was a lot of knowledge. Knowledge is the point of really all of this. But knowledge sitting on a shelf doesn't build anything. So today we turn the corner, and everything we have done up to this point was about understanding the world you are walking into.

Everything from here forward is about what you actually do with it. This is where you stop studying the players and you start assembling your team. Don't forget, every one of these episodes, at least in the last couple months, I'm trying to create a little tool for each one so that you don't have to take notes. It's a little micro tool that you'll be able to go to the show notes and download the link and play with it. It doesn't cost anything.

So the very first question in front of you is bigger than a lot of homeowners realize. Before you ask who you should hire, you have to ask a different question. Which path are you taking? Because there is more than one, and the path you choose changes who you hire, what you sign, what you are responsible for, and frankly, how much of your life this project is going to consume over the next year and a half or whatever it takes.

So there are four paths. Two of them are the well-traveled roads that a lot of homeowners take. Two of them are specialized and they sit at the opposite ends of the spectrum, on the outside edges of these two core ones that I have talked about in the past. One of these ones on the outside spectrum puts you deeper into the work than you have ever been, and the other actually lifts you out of it almost entirely.

So today I want to map all four for you quickly so you know where you stand. Then I want to spend the bulk of our time on the one that tempts almost everybody at some point, usually right after they see a number they did not like. Becoming your own general contractor. I want to be fair why that temptation is so strong, because it's not foolish.

It usually shows up at a very specific moment. You have been through design, you've been through estimating, you finally have real bids in your hand, and the number is bigger than you planned for, a lot of times a lot bigger. Somewhere in that bid is a line for the builder's overhead and profit. You look at that number and a very reasonable thought arrives. What if I just did that part myself?

This is not a dumb question. It is actually a smart question, and it deserves a real answer instead of a lecture. So that is what we are going to get at today. My promise for the next half hour: by the end of this episode, you are going to know exactly what you would be signing up for as an owner builder. Not the sales pitch version, the real version. The paperwork, the liability, the jobs that land on your desk, and the honest math on whether you would actually save anything when it comes down to the end.

If it turns out this path is right for you, you will walk in with your eyes wide open. If it turns out it's not, you will have saved yourself a year of misery and probably a whole lot of money. Either one of those is a win.

William Reid (: 03:50

Okay, so let me lay out the four paths because you need the whole picture before we go deep on any of them. Path one is what I call the guided path. The industry calls it design build. One company handles both the design of your project and the construction of it. One contract, one point of contact, one organization that owns the outcome from the first sketch all the way to the final walkthrough.

I've described this before as showing up at the airport for a two-week trip through Europe where somebody else has already planned every single day for you. Your hotels are booked, your trains are reserved. Somebody who does this for a living has handled the logistics, and you get to experience the trip. If that is pulling at you, go back to Episode 42.

That is the full design build episode where I walk through the two kinds of design build companies, how to tell a real one from a contractor who has just put the words on a website, and the questions to ask before you sign. Episode 42 is the guided path.

Path two is what I call the self-guided path. The industry calls it traditional construction or design bid build method. You hire your own designer, they produce your plans, then you take those plans out to contractors, collect bids, and you hire your builder separately. Two contracts, two separate companies, and you sitting in the middle, connecting them.

This is the most common path by a pretty wide margin. It is also the path where you personally carry the coordination between design and construction. That one is Episode 43, the self-guided path, traditional construction versus design build, straight up. I go through the bidding phase, where the handoff between your architect and your builder tends to break, and the strategies that keep you from getting caught in the middle of it. Episode 43, right after the guided path episode. They sit back to back in the episode feeds.

Now those two are the well-traveled roads. Both of them, and I want you to hear this clearly, both of them involve the exact same players, the same architect, the same engineers, the same subcontractors and suppliers. The difference is not who is on the field. The difference is who is holding it all together and how they are contracted.

Then there are the specialized options, and they sit at the opposite ends of the spectrum. At one end is the owner builder. This one goes further than self-guided, much further. On the self-guided path, you coordinate between two professionals primarily. As an owner builder, you do not hire a general contractor at all. You become one. If the guided path is the planned European tour and the self-guided path is booking your own flights and hotels, then the owner builder is backpacking indefinitely with no itinerary.

You are responsible for finding your own food and water. You might be sleeping in a hostel under a blue tarp next to a character named Trail Dog to save a few bucks and take in the experience. It can be rewarding. I'm not going to pretend it cannot be. But you had better have experience, fortitude, stamina, and maybe deodorant.

At the far other end of the spectrum is the owner's agent. This one is the private concierge level. You still have your team, but now you have a seasoned professional traveling alongside you the entire way, protecting your interests, watching the details, and turning down the sheets for you at the end of the day. An owner's agent fortifies every planning and building step and frees you from the day to day. That one deserves its own episode, and it's going to get one next time.

So four paths: self-guided, guided, owner builder, and owner's agent. Two of those are about how you structure your team. Two of those are about how deep into the trenches you personally go. The way you find your path is not by asking which one is best, because none of them is best. You find it by answering four honest questions about yourself.

How much construction experience do I actually have? Not how much I've read, how much I've lived. How much time can I genuinely devote to learning and navigating all the process I just became aware of? Do I like being in the middle of the battle? Do I enjoy controlling every detail, or does that sound exhausting? Am I a planner type, the person who will invest heavily up front and step back and let professionals do their thing?

There are no wrong answers to those four. There are only honest ones and dishonest ones, and the dishonest ones are expensive. So today we are climbing down into the trenches.

William Reid (: 08:48

What does it actually mean to become an owner builder? Most people think it means saving money. That is genuinely what they think it is. Skip the general contractor, skip the overhead and profit, keep that money in your pocket. That's not what it is. What it actually is: in most places in this country, there is an exemption on the books that says a property owner can build, improve, or repair their own property without holding a contractor's license.

That exemption exists. It is real and it's legal and homeowners use it every single day. But read what that exemption is actually doing. It is not giving you a discount, it's giving you a job. When you pull a permit as an owner builder, the building department does not treat you as a homeowner anymore. They treat you as the general contractor for that project.

You file a declaration, you sign an affidavit stating you understand your responsibilities. In most jurisdictions, you sign waivers related to insurance for each subcontractor you hire. From the moment you sign that, the burden of compliance, coordination and liability rest squarely on your shoulders. So I want to give you the single most important sentence in this entire episode.

The liability you assume as an owner builder is comparable to that of a licensed general contractor. Not similar, not a lighter version, comparable. You did not take a test, you do not carry a license, you did not build a company or buy commercial insurance, but the responsibility landed on you exactly the same.

So let's talk about that actual work because this is the part that surprises people. Here is what owner builders commonly do, and I want you to keep this as a running count in your head. You design the project and create the plans yourself, or you hire an architect or designer and manage them. You select every material, every piece of equipment, every window, every fixture, every appliance, every finish.

You develop the specifications and the scope of work documents. If you listened to our episodes on estimating and bid packages, you know how much that document actually determines. You handle the approval process, the planning department, the building department, every submittal, every correction, every resubmittal, whether you're doing it yourself or whether you're coordinating and orchestrating this with the design professionals that you hired.

You source and hire all the consultants your project needs, structural engineer, soils engineer, whoever that jurisdiction requires. You may be able to get your architect or your licensed design professional to help you with that, but the bottom line is that you're responsible to make sure all of that happens. You either perform most of the work with your own hands or you source and hire subcontractors to do some or all of it.

You work closely with those subs and suppliers to make sure your work is done accurately and to code, which means you have to know what accurate and to code looks like. You coordinate every single city inspection. That's eight jobs, each distinct, each requiring a different skill, each with its own deadlines, each with real consequences when it goes sideways.

I want to be clear about something here. That is not a list of extra things that you do on top of your project. That is the list of what a general contractor does. That is their entire profession, majorly condensed. So when you become an owner builder, you did not eliminate the work. You just stopped paying somebody to do it. The work is still there, every single hour of it, and probably takes you twice or three times longer than a qualified, seasoned, licensed general contractor.

Because not only are you taking on the responsibility, but you're learning every step of the way, which can be fun, but can also be extremely aggravating and risky. It just moved onto your calendar next to your actual job and your family and your life. So let's make this concrete because eight jobs on a list sounds unmanageable. Here's what it looks like on a Tuesday.

William Reid (: 13:08

The framer calls at 6:40 in the morning because the lumber package is short and he needs a decision before his crew starts standing around. The inspector wants access at ten, and if you miss that window, you're waiting another three days. The plumber and the electrician both scheduled themselves for the same day for the rough in, and neither one wants to go second. Your window supplier just moved a delivery date, which cascades into your siding schedule.

Somewhere in there, the tile you selected four months ago has been discontinued. Every one of those is a decision. Every one of those has to happen today, not this weekend when you have time. That is what a general contractor absorbs, and that is the actual product you are buying when you pay for their management. Not paperwork, not a phone number. Availability, judgment, and somebody whose entire day is your project.

One more thing that catches people because it's genuinely counterintuitive. That exemption covers you. It does not cover the people you hire. Anyone you bring in to do permitted work or work above a fairly low dollar threshold still has to be properly licensed. It is your responsibility to verify that. The exemption gave you permission to run the job. It did not lower the standard for anybody working on it.

You should visit some of my past episodes where I talk about hiring unlicensed contractors and unlicensed subcontractors. If you really want to expose yourself to risk and start paying people cash and hiring unlicensed contractors as an owner builder, you've just blown open your exposure. You never know what's gonna come at you when you hire somebody because money changes everything.

William Reid (: 15:01

Let's talk about accountability as an owner builder. I'm gonna tell you a little story here, and I want you to notice how reasonable every single decision in it sounds. Let's say you've decided to replace all the windows in your home. Not a remodel, not an addition, just the windows. They are all going back into the existing openings. No framing change, no structural work, nothing exotic. Simple, right?

So you take charge. You assume the role of owner builder. You do your research. You call the city building department and you ask questions. The person on the phone is helpful and sounds like they know exactly what they're talking about. You gather your information, you sit down and you write a detailed scope of work even. Honestly, you're proud of it. You should be. Most homeowners never get that far.

Contractors start showing up to bid the work and they are impressed. They tell you how organized you are, how thorough your scope is. You feel validated, and that feeling is real. The bids start coming in, one is sky high, one is shockingly low, and one sits right in the middle. You review their qualifications and experience, and you choose the middle bid.

Feeling wise, you place the window order because lead times are long and you are being smart about the schedule. Then you apply for the permits because you want to do things the right way. That is when the lessons in accountability begin.

openings are original to the: 1960

Mistake number two: tempered glass. Windows near tubs and showers and swinging doors have to be tempered for safety. You didn't know that. Nobody told you. Two bathroom windows are wrong. They also have to be reordered.

Now here's the hard part. There is nobody to call about this. There is no contractor who owns a mistake. There is no warranty claim, no back charge, no uncomfortable conversation when somebody else makes it right. You can only look in the mirror. I want to be careful here because I'm not telling you this story to make you feel foolish. Mistakes like these are not rare. They are close to inevitable when you're navigating water you have never navigated before.

That is not a character flaw. That is what unfamiliar territory does to all of us. But look at what it costs. Six windows reordered, weeks of lead time gone, money spent twice, a permit application that is now out of sync with the product sitting in your garage. On a window job.

There is a third thing in that story that most people miss entirely because it never shows up on a line item. You're a one-time customer. That middle bid contractor you hired, he works for builders who give him steady work all year. So when your reorder lands and his schedule is full, where do you think you fall in his priority list? Not out of malice, out of math.

A good general contractor has spent years building those relationships. When they call a sub, that sub answers because there's another job behind this one and another one behind that. You do not have the leverage. You cannot build it on a single project. That is not a small disadvantage. On a long build, it's often the difference between a six-month schedule and a 14-month one.

Now scale that up. Imagine that same dynamic on a whole house remodel or a custom home project, where instead of two code requirements you missed, there are hundreds. Where instead of six windows, it's the foundations, the structural connections, energy compliance, fire suppression, egress, drainage, and a plan check that comes back with 40 corrections. The stakes just get higher.

So let's run that same story a completely different way. Instead of taking on the owner builder role, you call a contractor who specializes in window replacement. You invite them to your home. You point at the windows and you say one sentence. Now they are responsible for measuring correctly. They are responsible for ordering the right product. They are responsible for code compliance, including egress and tempered glass, because that is their trade and they do it every single week.

They pull the permits, they coordinate the work, and they carry the accountability for the result. What did you give up? Control over the technical details. What did you keep? The big picture. Evaluating contractors, reviewing qualifications, understanding costs, and making informed decisions. That is not a smaller role. That is the role that actually protects you.

William Reid (: 20:09

Let's talk about the four exposures that come with the owner builder path. These are the ones that almost never come up at that permit counter, and they are the reason I'm careful about this topic.

Exposure number one: you may have just become an employer. If you pay an unlicensed individual to perform construction work on your project, in a lot of jurisdictions you are not their customer. You are their employer. The permit is in your name, and you are personally responsible, which means if that person gets hurt on your property, you can be looking at their medical bills, their lost wages, their rehabilitation through your homeowner's insurance policy, which was never designed for that, through a lawsuit.

Remember the episodes we did on insurance. Workers' compensation coverage exists precisely so that risk sits with a company that carries a commercial policy for it. When you skip the general contractor, that coverage does not disappear. It just relocates onto you.

Exposure number two: liens. We just spent a whole episode on that last time. So you already know the mechanics if you listened to that episode. If you haven't, I highly recommend you do. Subcontractors and suppliers who do not get paid on schedule can file a claim against your property. They can do that even if you never wrote them a check, even if you never met them.

On a normal project, your general contractor sits between you and that risk. They pay their subs, they collect their releases. They manage that entire chain. Their license and their reputation are on the line if they get it wrong. As an owner builder, there is nobody in that seat. You are the one collecting every release, tracking every supplier, and making sure every single person who touched your project has been paid and has signed off.

If you didn't download that lien protection material from the last episode, this is your second reason to go back to that episode, look at the show notes, and download that little micro tool I built so that you can help protect yourself.

Exposure number three: insurance and financing. Your homeowner's policy is written for an occupied home. It is not written for an active construction site. The risk profile is completely different, which is exactly why builder's risk coverage exists as a separate product. If you are financing the project, your lender is going to have requirements. Builder's risk, liability, and often something addressing workers' compensation.

Some lenders will let an owner builder sign a waiver instead, which sounds like a favor. It's not a favor. It means you just told the lender that you personally will make sure every worker on that site is covered and if they're not, it's gonna come out of your pocket, not theirs. That is a promise with your house behind it.

Exposure number four: what happens after. A lot of jurisdictions put restrictions on a home built or renovated under an owner builder permit. Commonly it cannot be sold or leased for a period of time following final inspection. The exemption is designed for owner occupants, not for people building to sell.

Some places also require you to keep detailed records after completion. Copies of permits, copies of contracts with the names of everyone who worked on the project, proof of payment to the subcontractors' employees. If you violate the owner builder requirements, you can be barred from pulling new owner builder permits for years.

If there's any chance you might sell that property sooner than you think, or if that property is held in an entity rather than your personal name, this path can get complicated fast. Now I want to say something balanced here, because I'm not trying to scare you off. Every one of these four exposures is manageable. Every one of them. There are homeowners who handle all four beautifully, but they handle them on purpose with preparation.

Knowing these exist, that's why we're here. The people who get hurt are the ones who found out about exposure number one on the day somebody got hurt.

So who is this actually right for? I have four markers. I want you to be honest with yourself as I go through them, because self-honesty here is worth more than anything else I can give you today.

Marker number one: you are in the construction trades, not adjacent to them. In them. You do this work or you have.

Marker number two: you have plenty of experience with past projects. Not one bathroom, a real track record.

Marker number three: you plan to construct much of the project with your own hands. This matters more than people expect, and I'll explain that in a second.

Marker number four: the completion date is not a top priority. You have schedule flexibility and nobody is counting the months.

Now look at what those four markers are actually measuring. Three of them are about capability. One of them is about time pressure. Notice what is not on that list. Enthusiasm is not on that list. Being organized is not on that list. Being a fast learner is not on that list. Those are wonderful qualities, and they will not save you from an egress requirement you didn't know existed.

Now let me give you the honest math on savings here because this is where I see the most wishful thinking. On the surface, skipping a general contractor's overhead and profit looks like pure savings. Deal directly with the subs and suppliers, cut out the middleman, keep the difference, right? But those savings are only real if two things are true. You have strong existing relationships with subcontractors and suppliers, and you have the knowledge to avoid costly mistakes.

If either one of those is missing, the savings evaporate. They get eaten by reorders, by delays, by rework, by subs who deprioritize you because you are a one-time customer and they have a builder who feeds them work all year long.

Here is what I found over 35-plus years. The most significant savings in owner builder projects almost never comes from skipping the markup. They come from the homeowner doing the actual work with their own hands. This is evident all over the place as you look at Facebook groups and all these people talking on the internet about how they built their home for $200 a square foot, their custom home.

When you keep prying and you keep reading through a lot of the comments, they did most of the work themselves. Of course, they didn't charge that to the job. Labor is a significant percentage of construction these days. So this is where the distortion comes in. If you're a homeowner wanting to be an owner builder but not planning to do all the work or most of the work yourself, but thinking you're going to be saving a ton of money, it's probably not going to be the case. You will have an inferior result for the most part.

Which brings us all the way back to marker three. If you are not personally swinging a hammer on this project, the savings you are imagining are probably not there.

So here is how I want you to hold this decision. Being an owner builder is not a discount, it's a job. It's an unpaid, full-time, high liability job that you are taking on in addition to everything else in your life. If you are qualified for that job and you want it, take it. Go in with your eyes wide open. Go back to everything we covered on managing risk, because that material is not optional for you anymore. It's your protection plan.

Understand that mistakes, big and small, are part of the process. They are the cost of independence. If you are not qualified for that job, that's not a failure. That's clarity. That is you making an intelligent decision with real information, which is the whole point of the show.

I also want you to know that this is not strictly a yes or no. There is real estate in the middle that almost nobody talks about. You can hire a general contractor for the structural shell, the part where mistakes are expensive and permanent, and then take on the finish work yourself under a separate arrangement once the building is dried in and inspected.

You can hire a builder for the whole job and negotiate specific scopes you handle personally with that carved out in writing. Both of these keep professional accountability on the parts that can hurt you and let you put your own hands and your own sweat where the savings actually are. If the honest answer to those four markers is mostly yes, but not entirely, that middle ground is usually a better fit than either extreme.

Just make sure it's written down. A handshake about who does what turns into a dispute the moment something goes wrong. Trust the professionals, hold them accountable, and focus on the broader vision, which is the part only you can do. The choice is yours. Just make it with your eyes wide open.

William Reid (: 29:11

Okay, let's bring this one home. We opened part four of this journey, which is where you stop learning about the world of construction and start building your team inside it. We mapped the four paths: guided, self-guided, owner builder, and the owner's agent. We went deep on the one that tempts almost everybody.

You now know that becoming an owner builder means the building department treats you as the general contractor. You know the liability you take on is comparable to a licensed builder's. You know the eight jobs that land on your desk. You saw how a simple window replacement turned into six reordered windows and weeks of lost time. You know the four exposures: employer liability, liens, insurance and financing, and the restrictions that follow you after the project is done.

I made you a free download for this one. It's a self-assessment you can work through in about 10 minutes that walks you honestly through whether this path fits you before you sign anything at a permit counter. Grab it in the show notes for this episode. If you want to go even deeper, section 4.3 of my book, The Awakened Homeowner, lays out specialized options side by side.

If you're organizing a project now and you want a system that keeps us all in one place, take a look at BuildQuest over at buildquest.co. It's being built. It's not 100% done yet, but it's for exactly this kind of planning. Here is everything in one spot.

Get the book, The Awakened Homeowner. It's a book I wrote recently. It's on Amazon or any other platform where you read or listen to books. There's even a little free download for a story that I have called The Tale of Two Homeowners, which covers a lot of this stuff in a fictional short story that I wrote. You can always visit theawakenedhomeowner.com for a lot of articles that I write about this. That is even more information than what you're hearing today.

I love your questions, so you can always email me and the email address is there at the show notes. If today's episode helped you, do me a favor and send it to somebody who has been saying they're just going to do it themselves. That is the person who needs this one.

Next time we head to the complete opposite end of the spectrum. The owner's agent, your guardian angel, the professional who works only for you, sits on your side of the table and watches the details you cannot watch yourself. If today felt like a lot to carry alone, next week is the answer to that.

As always, I'm Bill Reid, your home building coach, and I'm here to enlighten, empower, and protect you. Let's go make it happen.