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The Granny Flat Makes a Come Back

Adding Granny FlatsIf you ask the government (local, state or federal) they will call it a “secondary dwelling”. If you ask the public what that means you will get a blank stare. But ask the public what a Granny Flat is and you will get instant recognition.

The context of this article is based on these facts:

  1. There is a severe shortage of affordable rental housing in Australia.
  2. Housing affordability continues to rise in Australia making it one of the least affordable countries in the world now to purchase a home. 
  3. Governments are recognising this.

A Granny Flat planning document was recently issued by the NSW Government. If you live in NSW and are considering building a Granny Flat on your property then it is well worth a read.

The document is titled: Supporting Affordable Rental Housing – Granny Flats (Secondary Dwellings) and can be downloaded through this link: NSW Govt Granny Flats

The NSW Government are doing everything they can to make building a Granny Flat easier. They are providing a dedicated State Environmental Planning Policy (SEPP) to cover all local council areas.

In the past Granny Flats were only permitted by local councils under very strict and complicated local planning and environmental plans. The new policy is state based and is basically the state government saying to local government, “This is the way it is”. The NSW Government sees this as a logical (and some would say radical) plan towards boosting the supply of rental accommodation.

Owner Building a Granny Flat is a great option. There are 3 basic options:

  1. Convert part of your existing home into a Granny Flat. 
  2. Build an extension onto your existing home and turn this into a Granny Flat.
  3. Build a new fully detached Granny Flat on your property.

Now there are still a few rules you need to consider and the government document is a good a summary. Bear in mind that not all states have undertaken the same initiative as the NSW Government in promoting the building of Granny Flats, so do some research.

If you need help in assessing how to build a Granny Flat on your existing property then give us a call. We’d be delighted to help.

Home Warranty Insurance

Home Warranty Insurance MazeThe whole issue of Home Warranty Insurance boils down to one question: How financially safe are you as an Owner Builder?

Here are some relevant points to help answer that question:

1. Different states use different Home Warranty programs. Choice Magazine refers to the programs run in NSW and Victoria as “Junk Insurance”.

2. By and large (and you need to research this relative to your state guidelines) you do not need to purchase home warranty insurance as an owner builder. You are the principle contractor and therefore the buck stops with you. However in some states, if you wish to sell your owner built home within a specified time frame (usually 5-7 years) then you need to purchase a home warranty insurance policy to cover the house for the remainder of the period of cover.

If you’d like some guidance with your insurance obligations as an owner builder  simply pick up the phone and give us a call. We’d be delighted to help you.

And here’s some more info on the subject of risk management and what Builders Home Warranty Insurance is.

If you were to look for a good example of how Builders Home Warranty Insurance works then you should look at the situation in Queensland and how the BSA manages the process. The opposite of that is in NSW and Victoria where it is regarded by those in the industry as a “basket case”.

In reality Home Warranty Insurance is designed to protect the consumer against two major risks:

1. That their builder will go broke before completing construction of their home under contract, and
2. To protect them against major work rectification issues in the event the builder fails to rectify sub-standard work prior to the end of the warranty period (ie. 5-7 years depending on the state program).

The bottom line is that currently in NSW and Victoria the Home Warranty Insurance scheme protects the consumer against neither of these risks. The insurers simply deny all claims whilst pocketing premiums of between $2000 and $4000 on every home built in those states!

Now owner builders are exempt from purchasing home warranty insurance and their numbers are on the rise. Which means one benefit of being an owner builder is a straight up cost saving in excess of $4000. However you must be conscious of your responsibilities if you sell your home within the 5-7 year period. Make sure the work you undertake is of high quality else you will ultimately be liable along with the trades and suppliers you engaged.

For example, suppose you choose a builder and you understand that as part of your contract price there is a mandatory premium included for Builders Home Warranty Insurance. Let’s say you reside in NSW or Victoria. What happens if your builder cannot complete your home and/or your home is riddled with defects?  Well, nothing… unless of course he happens to have gone insolvent, died or disappeared! Yes, you read that correctly. Regardless if your home is literally falling down, unless your builder is dead, disappeared or insolvent then you cannot even make a claim, let alone be compensated. Your only recourse is to trundle off to court for what has turned out for many consumers to be a heart and bank breaking exercise in legal futility where the only winners are the lawyers.

In fact, even if you managed to get a claim up – what are your chances of success?  This is where the real surprises lay because in NSW the official statistics show the insurers pay a 7% claims loss ratio while in Victoria the figure is an appalling 2.5% claims ratio.  This means that for every $100 million in premiums charged by insurers, only $2.5 million is paid back in claims! Compare this to a 65% – 80% claims loss ratio for most other statutory insurance you can see why Builders Warranty Insurance is not being voted the product of the month by consumer groups!

So where does all this leave the Owner Builder? 

First of all about $2000 – $3000 better off by not having to purchase a policy and secondly as an Owner Builder you get to manage your own finances without relying on a third party builder to be doing it for you.  The key to this of course is having the right financial management tools at your disposal to empower your financial control over your own project.

Also having the correct administration and project management tools to ensure that you, as the principle contractor, manage all your risks for the long term life of the home. The management tools that are offered through a UBuild Homes process have been specifically designed to give you this control and long term peace of mind.

If you have control and knowledge then you minimise the risk so the question to ask as a potential owner builder is ‘How can I best minimise my financial risk?’.  If this question is important to you then we should talk!

If you have any questions or comments about Home Warranty Insurance and Owner Building then just add a comment to this article. Be specific about how the insurance works in your state and how it might impact you as an Owner Builder.

Designing a Home the Smart Way

It may shock you to know the high percentage of people who lose thousands of dollars during the home design process. The home design process meaning: concept idea through to final plans and engineering.

Smart House DesignDesigning a house is a project in itself and it takes skill and experience to do it successfully.

In just the last few months UBuild Homes have come across at least four different prospective Owner Builder/Kit Home customers who have had losses between $5,000 and $50,000 each on designing/creating house plans that they just cannot afford to build! Unfortunately, the drafting/architect service providers they dealt with did not properly assess their situation and took them down a misguided path that resulted in tragic outcomes. And that was before any ground was even broken!

It is important to complete some research before engaging a drafting, architectural or plan drawing service for your dream home.

Here are some tips that will point you in the right direction:

1. Don’t allow a drafting firm or an architect to be involved in estimating the cost of your home. Drafting people know how to draft plans. Only a very small percentage of these service providers can estimate the cost of a building accurately. The same goes for architects. An architect should only be engaged if you want an architecturally designed home with an open ended budget.

2. The first goal of any design is to meet your budget. You must be very clear from the outset what you are trying to achieve and ensure that your drafting service understands. Also be aware that during the design you will quite often focus on the things you “like” instead of the things you “need”. Always remember that the things you like may not be mainstream and as a result will cost more to construct – even if you are owner building.

3. Builders and trades generally do not like working with architects because they most often design something that is either very difficult or near impossible to build. Most builders and trades will describe architects as too creative and lacking in practicality. So unless you want a complex designed home and you have a hefty budget then stick with a reputable drafting firm. How do you find one? Ask UBuild Homes. You’ll have access to a panel of highly skilled, cost effective drafting professionals.

4. All costs associated with house plans, building reports, engineering plans, soil tests and energy reports must be fixed priced. Never engage any of these service providers without a fixed quote upfront.

5. The average home design process will need:

  • Budget and Finance to be pre-approved and fully advised to the drafting service. They must be under strict instructions that the cost of the home cannot exceed the budget provided. If they do not know what the design is going to cost then do not use them. 
  • Finance provision is a critical component. Do not get your design then go and talk to the bank. That is the wrong way around. If you are having challenges obtaining Owner Builder Finance then talk to us – we could have the solution you’re searching for. 
  • Before you decide on a house design service you will need a survey, contour plan and a soil test. If you need help finding a reputable service provider then let us know – we’d be delighted to help.

6. If you don’t understand the technical challenges of building a home then be wary of unique roof designs and roof lines. UBuild Homes recently had a set of plans presented to us (from an unkown third party drafting service)  that literally could not be built. These plans cost $5,000 and were useless. What a waste.

7. Try not to be too emotionally attached to the things that you “want”. These “wants” are sure to blow your budget. Unless you are not concerned about your budget stick to conventional rules in construction and the power of resale value. Sometimes a slightly smaller design with better use of space and design features will be a more valuable commodity than a giant box with a funny roof!

8. Consider energy, water, and the outside design of the total space being used. The first thing people see when they come to your home is the outside. They will also ask about water and energy efficient features of the home. Bear this in mind early on and you can design accordingly. Trying to fix this in hindsight is an expensive process.

By following some of these simple steps correctly you will have a more accurate and predictable outcome to your budget. Too many Owner Builders are unable to complete their homes due to poor quality up front planning. This is the main reason most lending institutions refuse finance to owner builders.

Relationship Based on Trust

“UBuild has assisted me in developing 2 high-quality houses in the Glen Alpine area of Sydney.

Owner Builder Marek PolbratekPrior to commencement Barry (Managing Director) explained the answers to all my questions and concerns. Consequently, we built the relationship based on trust and mutual understanding. Barry was always ready to help me, provided fast service and delivery. I’ve been very impressed with his knowledge of the industry and drew from it during the construction process. We communicated via phone, fax, and e-mail. Barry also came twice to inspect the progress and provided hands on assistance required at the time. Every promise Barry made has been met. I have taken the opportunity to recommend Barry and his team to all my friends.

Working with UBuild was a great pleasure. I would recommend Barry to anyone who’s planning to build a new dream home in the future.”
 
Sincerely, 
Marek Polbratek
Glen Alpin NSW