For many of us, the ultimate dream is to one day be able to build a custom home that is filled with our favourite design finishes and layout ideas. As land value continues to increase in Toronto and the GTA, the option to build a custom home is becoming more realistic for many home owners, since the cost of home construction has not increased at the same rate as Toronto property values.
The process of buying and rebuilding on a property in a previously developed part of the city is called infill development. Although infill development can offer one of the most rewarding types of homes once completed, it must be carefully planned and managed in order to ensure successful completion which meet time and budget constraints.
Coming from a building background specialization in the custom home design and construction niche, I have outlined my top 5 steps to ensure your project goes smoothly and will ultimately result in turning your dream vision home into a reality!
1. DETERMINE YOUR PROJECT BUDGET
When planning to build a custom home, one of the most important steps you can take even before you begin is to determine a budget. It is great to look through custom home design and architecture magazines, but unless you have determined your budget, you have not yet established a guideline of what you can afford.
Remember, when setting your project budget, you must note that it includes your PROPERTY BUDGET + CONSTRUCTION BUDGET. Oftentimes, people think that once they get approved for a mortgage, they will automatically be able to take out a construction loan using the house as collateral. This is not usually the case. Traditional lending institutions such as Canadian banks usually require a minimum financial commitment by the homeowner in order to finance the rest of the construction project. Also, remember that in order to get bank financing for construction, you must usually have design drawings to show them, or in some cases, a quote by a general contractor will be accepted. Lenders offer a wide variety of mortgage products that are tailored to accommodate home construction, such as a mortgage plus improvements mortgage.
Note: Traditional lenders have different qualifying criteria when financing a custom home build compared to a typical home purchase.
If you are interested in getting more information about mortgage products that are tailored for home construction, I would be happy to refer you to one of my trusted mortgage specialists.
One more thing to remember when determining your budget is that you must also include room for the hidden expenses that are both present when purchasing a property as well as when planning for construction. Some common hidden fees include but are not limited to:
- Closing Costs/Lawyer Fees
- Land Transfer Tax
- Building Permit Fees
- Survey/Planning Fees
- Architectural/Engineer Design Fees
- Committee of Adjustment Fees (required in some cases, but not always)
- Municipal Service Fees (i.e. electrical cutoff and hookup fees)
- Construction contingency fees
2. FIND A SUITABLE LOT FOR BUILDING ON
Once you have determined your project budget, you are now ready to find a suitable building lot. Although you may be anxious to start looking though designs and home ideas, I would still recommend to hold off at this point until you have found a property, since some property lots may not accommodate what type of home you want designed. If you are really stuck on a certain home design that you like, I suggest you find a property that will be suitable to build such a home on. If you are interested in looking for suitable building lots that will accommodate your type of home, please feel free to contact me and I conduct a customized building lot search for you.
Remember, when looking for a suitable building lot, you must take property setback lines into consideration. This is a bylaw that is set by each municipality and is normally detailed on most home surveys. Another point is that waterfront properties also have stringent restrictions as to how close an owner is allowed to build to the water in order to prevent erosion and to protect local wildlife and plant species. This can also usually be found out through city files.
3. PLAN YOUR PROJECT
Project planning is a key element in creating a quality custom home. I strongly encourage homeowners to engage in the the design process, especially at the early stages. Remember, after all this is going to be YOUR custom home, and you should be involved in putting your favourite features and finishes into it. Even if you are not technically inclined in making house drawings, don’t worry. You can make a design bubble diagram which will give you a working idea of room styles, sizes and locations which a home designer or architect can easily base working drawings from.
Although I do encourage design input by the home owner, I definitely would recommend working with a licensed architect, architectural technologist or BCIN certified home & small building designer to complete the working drawings. Although this will add some expense to the project, it is highly worth the cost. Using a professional will ensure your design will not only look good, but also will work. Some of the main benefits of hiring a professional home designer is outlined below:
- Make design suggestions throughout the design process which will result in better/more efficient space planning
- Suggest up to date highly desirable home design and finishing features that will result in a home that is more desirable and increase home value
- Can create a professionally drawn set of working drawings that contractors and trades can easily understand with less confusion and interpretation errors
- Results in faster project approval for permit approvals by the building department with less revisions, resulting in the project getting started quicker
- Experienced at proposing minor variance proposals which have a much greater chance of being accepted than if submitted by a home owner
4. MANAGE CONSTRUCTION
Once you have finalized your design and have obtained all the necessary permits, you are ready to start building! At this stage you can go through one of three routes to manage your construction project: general contractor, project manager, self-managed project. I have outlined each one of these three options below:
- General Contractor:
A general contractor (GC) is a licensed home builder who is responsible for manage the construction project in its entirety from breaking ground to project completion. Toronto requires that all General Contractors must have carry a valid municipal license as a ‘General Contractor’ or a ‘Builder Renovator’. In addition, all GC’s must have WSIB insurance for themselves and all the sub-trades that he/she employs. It is also a requirement that all GC’s have general liability insurance. Minimum coverage is dependent on the project’s construction budget. Be sure to verify these credentials before signing any type of agreement with a contractor. Failure to hire licensed and insured trades can result in hefty to the contractor as well as the owner, if discovered by your local building inspector.
General contractors often operate under the project price model, where they will ask the client to sign off on a flat project price that will be paid off in instalments, over the course of the project. Instalments are paid usually upon completion of various project benchmarks.
Advantages of hiring a project manager is that a good GC is usually well connected with building suppliers and sub-trades which can cut down on construction and labour costs Also, by using a GC, you don’t have to worry about finding or paying the sub-trades. It is the responsibility of the GC to ensure the quality, timely completion and compensation of the subtrades. The GC approach is also the most hands off approach, which owners may or may not like. On the flip side, the GC option tends to be the most expensive, however the cost is often justified. The presence of a professional on board full time usually results in a project that runs smoothly with less hiccups, and avoiding costly mistakes that need to be remediated with projects that are not well managed.
For GC recommendations, feel free to contact me and I would be happy to refer you to a local GC who does work in your neighbourhood.
- Project Manager
A project manager (PM) like a general contractor, will oversee construction of the project and ensure that it is being completed on time, within budget, and with high quality. A PM differs from a general contractor in the sense that he does not hire the trades or act as the licensed builder. In addition, the PM is also involved in the design phase of the project, and generally offers more design + build collaboration, project reporting, and organization management than a General Contractor would.
Project managers often will work on the ‘cost plus’ model, where the project manager will charge a percentage of the total construction cost (usually between 10-20%, depending on project scope). Whereas a general contractor profits on the markup on construction and labour, a project manager will be paid a percentage of the total money spent, usually payable on a weekly or biweekly basis. Oftentimes, bonus incentives are built in when projects are completed in shorter time than anticipated or under budget.
A project manager typically operates as a consultant, where the owner is ‘the builder’ who consults the project manager to advise on collaborating the design professionals with the trades and ensuring that the project is running as effectively as possible on both fronts. A project manager usually also has a fairly extensive network to building suppliers and sub trades. Don’t expect the same kind of discounts that you would expect to get with a general contractor, since the PM doesn’t usually pay for their products or services, the home owner does. A nice aspect of using a PM, is that in addition to recommending suppliers and trades, they are usually willing to work with any trades or suppliers that you bring in as well. This allows for more control by the homeowner while still benefiting from the professional advice of the PM.
Project managers are a great balance for owners that want to be involved in the construction, but still want to have a professional to guide them through the project. PM’s also usually offer better collaboration with the design team and construction team, acting as a whole project manager, rather than just a construction manager. Since one of the jobs of the project manager is to get a homeowner the best project price, they often feel that the cost of a PM is justified. The cost of using a PM is often lower than going with a General Contractor. One negative aspect of hiring a project manager, is that he is not technically the builder, so he may not have the same liability as a general contractor would. Although he may recommend and bring on licensed and insured sub trades, there is no general contractor so all the trades will be working as independent subcontractors. Ultimately, the homeowner is still ‘the builder’ under professional consultation from the project manager.
For PM recommendations, feel free to contact me and I would be happy to refer you to a local PM who does work in your neighbourhood.
- Self-Managed Project
A self managed project is a project where the homeowner acts as the builder and construction manager of their project. The homeowner is not only responsible for finding the licensed sub trades, but is also responsible in ensuring that the work is being completed to meet timeline and budget constraints as well as ensure its quality.
Although many homeowners feel that they can save money by managing construction on their own, the opposite is usually true. Self-managed projects often miss vital mistakes that happen at the early stages of construction. When it is time for an inspector to inspect the construction, if there is a code violation, the inspector may order to remedy the situation prior to further construction. Code violation remedies can cost thousands, if not tens of thousands of dollars to fix, which can blow the budget on a project. If a code violation is not remedied and construction proceeds, the inspector may issue a stop work order on the project which restricts all building activities since the building permit is no longer valid.
In addition, it is the full responsibility of the homeowner to confirm that all sub-trades are licensed and insured (General Liability and WSIB). Failure to verify insurance from even one of these trades can result in costly fines issued by the building department, or in the event of a work accident, a personal injury lawsuit that is not covered under the WSIB program.
For the reasons mentioned above, I highly discourage self-managed projects. What you think will save money up front, can end up in headaches and extra expenses in the long run that might jeopardize the project. Unless you are highly experienced in residential construction, I would highly recommend utilizing services from either a GC or a PM.
5. SIGN-OFF ON COMPLETION
Project completion sign-off is often overlooked by many homeowners, but is a vital part of the project construction process. You as the homeowner should always hold back a minimum of 10% of the project budget as a construction holdback. This amount would be payable upon project completion.
The construction holdback has two purposes. First of all, if ensures that your GC, PM or sub trades will complete the job and finish the final touches. Secondly, it provides a reserve fund incase any of the trades were not paid in the case that a GC decides to leave a project or becomes insolvent. The construction lien act specifies that any trade that has done work on a property and has not gotten paid has the right to put a lien on the house. This lien application can be filed up to 45 days after the contract has terminated. By withholding 10% of the project cost, you can ensure that all sub-trades have been paid. Once you have determined that all the trades have been paid and that you are satisfied with the finished product, you can release the final 10% and sign off on completion. Be sure to sign off that the project has been completed, because that will officially end the contract with your GC or PM.
Note: Subcontractors and trades have the right to put a lien on your home within 45 days, if they have not been fully paid for their work. A purpose of the holdback is to ensure all trades have been paid upon project completion. Ensure all subtrades have been paid upon project completion and be familiar with the Ontario Construction Lien Act
Although a custom home project requires a great deal of planning, organization and coordination, it is a logic based, manageable task. The key to a successful custom home build is to be involved, or ensure your PM or GC is involved throughout every stage of the project, and that no part of the project is left neglected or unmanaged that can lead to costly remediation work down the road.
DISCLAIMER: The information in this article has be written with my opinions that have been based on my experience in the design/construction industry. Although I make these recommendations, you are ultimately responsible for your project and must use your own discretion and best judgements when determining which solution best suits you. If you are unsure at any point of your construction project, I suggest you consult a custom home building professional or architect.