Building your own property from the ground up can be a viable way to save a few hundred thousand dollars on your future housing project. However, this comes at a non-financial price: it often takes a tremendous amount of effort and a much longer time to see your dream home to completion.
For the average Australian homeowner, it’s not unusual to fall a bit short of having enough capital to realise your homeownership goals. On top of that, first-time homeowners may also not have the expertise to know what resources and materials to purchase to fulfil their housing project.
Many of these homeowners resort to buying a kit home build—or a housing project where manufacturers deliver a package of pre-cut building materials and instructions to the real estate land.
Such a strategy can be an effective hybrid way of saving money while still being able to construct a house in your own discretion. That said, it still costs money, like almost everything that’s part of a home construction project.
If you want to structure your finances before dipping your toes into buying a kit home build, then you’re in the right place. This article will give you some insights to improve your financial situation before you begin your new construction project.
Let’s get started!
What is a Kit Home Build?
For the uninitiated, a kit home build is a construction package that’s manufactured by a third party and delivered to the site where the property is expected to be built.
The home kit can vary depending on the customisation requests of the buyer. But generally speaking, this kit includes all the necessary housing components, including panels, frames, roofs, windows, and doors. Essentially, it includes all the physical components that could be assembled to make up a home.
Some kit home build providers may provide additional services that could increase the price. But generally speaking, in Australia, a finished kit home build ranges from $1,500 to $2,500 per square metre. And to calculate the final cost of the house in Australia, for whatever you pay for physical materials, you should roughly triple it to get your final, live-in cost.
The reason for this increase in price is that there are hidden on-site costs to account for when constructing a house in Australia from scratch. Besides the materials, you should also account for other housing costs associated with property construction, such as site levelling, utility installation, and acquiring council permits.
On top of that, if you hire a contractor to assemble the kit yourself, the savings gap will narrow significantly. As such, it’s important to consider all these factors and make a budget breakdown before committing to buying a home kit build versus saving up for a pre-built one that takes a lot less work to finish.
How to Prepare Your Finances Before Starting a Housing Project
Before you save up for a kit home, you should ensure that you have adequate finances to cover the home build kit’s cost alongside all the other costs that the construction project entails.
You’re likely well aware that housing costs in Australia are no joke, and that prices are only going up with each passing year. As such, it’s much better to prepare yourself financially sooner rather than later.
If you’re curious about how to do just that, then read on to get some tips on getting a head start with your finances.
1. Assess Your Current Financial Situation
One way to go about evaluating your financial readiness is by taking a thorough look at your current finances.
A realistic budget covers the costs of the entire home, including its permits, labour costs, and construction materials like steel and doors. Categorising each category into buckets can help you structure a proper plan to follow to tackle the expenses that come with buying and building a home.
Furthermore, assessing your finances also allows you to see expenses that you can reduce or eliminate to improve your savings rate. This gives you a clearer idea of how quickly you can attain certain budget milestones.
Typically, when buying a kit home, manufacturers use a milestone structure to align cash flow with their factory production phase. This means you’re expected to pay a deposit of about 10% or less upfront, then 20% once contracts have been signed for engineering, and so on until completion.
In any case, it’s crucial to know your current financial situation so that you can identify gaps and work towards improving both your active savings and passive income. You can look into savings account options, for instance, to ensure that unused funds are generating higher monthly interest than they otherwise would in more traditional accounts.
2. Establish a Realistic Savings Target
Once you’ve developed a clear picture of your financial situation, the next step is to establish a savings target that you can work towards. Remember: there’s more you’ll need to spend besides the advertised price of the home kit. Take that into account when creating this savings target.
Look into all the various factors of the home build that you’ll have to pay for. You should also set aside a contingency fund in case emergencies arise during the construction or planning stages.
Work your way backwards to determine how much you need to save per month to reach your target. Having a timeframe and microgoals in place can help you change your daily spending behaviours with greater intention, giving yourself a better chance of saving and succeeding while doing so.
3. Increase Your Finances
If you feel that you’re behind in your savings, then you should work towards improving your financial capacity more proactively.
Rather than relying on cutting expenses, look for ways to strengthen your active income streams. This may mean taking on a part-time job, hopping to a new job that pays better, or restructuring your investment portfolio to generate more income.
The goal here is to be able to speed up the process of paying for your project. Over time, even relatively small increases in your income can help you reach your savings milestone sooner. This, in turn, can make it easier for you to save up for a home building kit and see your dream home come to fruition in due time.
We hope that we’ve helped you gain some insights on structuring your finances before undertaking a home construction project. All the best in your homeownership journey!
Disclaimer: This content is general information only and is not financial advice. It does not consider your personal circumstances, including your objectives, financial situation or needs. Independent advice should be obtained before making any financial decision. Any references to third‑party products or websites are provided for general information only.
