How to budget for your self-build

In this article we cover:

• How to build the dream home at a price you can afford
• Turning plans into action
• Self-builder survey results
• Top tips to avoid cost overruns and most common pitfalls

Read on…

If you’re planning to build your own home, knowing how to budget a self-build is one of the most important steps in making your project a success. Getting the finances right from the start can help you avoid cost overruns and keep your plans on track.

To help, Linda Stevens from the Chartered Institute of Building (CIOB) shares expert self-build budgeting tips – practical advice for keeping control of your costs, protecting yourself from unexpected expenses and planning with confidence.

Turning your plans into action

Building your own home is one of the biggest investments you’ll ever make – and according to a recent CIOB survey of 2,000 homeowners planning projects in 2024, many may be underestimating what’s involved in managing their budget.

Almost three quarters of respondents said they were worried about the cost-of-living crisis impacting their project, yet many weren’t taking steps to plan for hidden or unexpected costs, or to protect themselves from poor-quality products and costly delays. Around half (48 per cent) didn’t consider having a contract with their builder essential – leaving them vulnerable to disputes and budget overruns.

Managing a self-build project doesn’t just need sound financial planning; it also requires a significant time commitment, especially if you’re working at the same time. Make sure your plans factor in the time needed to liaise with suppliers, consultants and relevant authorities.

Early on, your budget will serve as a guide. As the project develops and quotations start coming in, your costs will firm up – but even then, surprises can happen. Good planning, research, clear communication and written agreements are all vital to keeping your self-build on track.

CIOB’s top tips for budget setting and reducing the risk of cost overruns

• Assess what you can realistically afford from the start and put aside at least 10 per cent of it as a contingency fund. Use the remaining amount as your ballpark budget for the entire project to set your suppliers’ expectations on the right track.
• Don’t underestimate the total cost and make sure your budget allows for the costs of searches, regulatory and professional fees including building control, getting utilities to your site and any taxes such as VAT – as well as materials and suppliers.
• If costs spiral beyond your contingency sum, you may be forced to compromise on the project or the quality of finishes and equipment, so it’s worth giving this proper consideration in advance rather than taking risks you may regret.
• If using tradespeople, make sure you approach more than one for each element of the project. Once you have a shortlist (usually three to five companies), ask for quotations or bids. Ensure your tender documentation, which will include your client brief, provides a detailed description of the project. This will help the companies to produce an initial response that is comparable with others.
• The tender documentation will form the basis of your eventual contract, so it is important to be accurate. If you appoint an architect or architectural technician, they can draw up tender documentation on your behalf. If your project is large or complex, you would be wise to appoint a quantity surveyor to provide early-stage cost advice.
• Make sure your tender document secures full details in writing of what is included in the bid and what is not. It should cover everything in the tender document, including arrangements for site maintenance, clearance, health and safety, material supplies and so on.
• Check references for suppliers and tradespeople. If they claim to be a member of a trade association or professional body such as CIOB, be sure to check their credentials.
• Check if they are insured. They should have public liability insurance to protect themselves against property damage, and personal and public liability insurance to protect them and the public in the event of an accident or injury. If they don’t have this and the worst happens, it could seriously derail your budget or your entire project.
• Check guarantees and warranties. Are your suppliers offering any guarantees? Not having the correct levels of comeback in the event of problems could leave you out of pocket.
• Your property is likely to be your biggest single asset, so make decisions based on quality and value rather than the lowest cost. You are very likely to want the work to last and to add value to your self-build property.
• Once the project is underway, ensure you track progress against budget at regular intervals. And remember, any last-minute changes you make will cost you more.
• Ensure you have a robust contract with anyone you ask to work on your project.
• Avoid paying your suppliers up front. Also, avoid any “cash in hand, VAT-free” deal – you will not have a valid contract if there is no proof of payment.