On Mar 25, 12:12 pm, wrote:

You can't be serious. If you pay yourself, you're taking your own
after tax money and recycling it back through the tax system. Not
only are you going to pay income tax on the wages your paying
yourself, but also social security and unemployment insurance. It's
highly unlikely that is going to be offset by writing off tools or
other expenses. Plus, the IRS does not allow a homeowner to assign a
value to labor they do on their own home with regard to capital
improvements. I would think they would take a dim view of an S
corporation, set up to skirt that, especially one that is running at a
loss.

I digressed from my main point that the value of the homeowner's time
should be calculated as there is no such thing as "free" time. I got
off point, gave an example that may or may not work for some/most
people, and you are right to call me on it. In my defense, I did
include _lots_ of weasel words! "It might make more sense, depending
on your particular situation...", etc. I have not done the S-chapter
thing, but a contractor buddy got started in construction in just that
way. He'd messed around enough on earlier homes that when the time
came he decided to set up a business and start with his own house. He
said it worked out very well for him on a a number of levels.

In most cases this is a non-issue. The first $250K in capital gains
is exempt from tax for singles, and $500K for couples. So, the house
would have to appreciate a lot before there is any issue at all. And
beyond that, the rate is only 15%. So, if he saves 40K doing work
himself, on the slim chance he exceeds the limits, he only winds up
paying $6K in tax someday in the future. Meantime, he's got the 40K.

He's got the 40K "savings" and how much time did he put in to earn
it? Would he have earned as much or more putting in those hours in
overtime at his regular job?

It's pointless to argue details for a specific case, as everyone's
situation is different. I am pointing out that there are a lot of
intangibles and hidden costs that must be taken into account if
someone is doing something other than pretending to understand what's
involved so they can proceed with building their house. If I
mentioned the increased risk of getting hurt traipsing around on a job
site, some might counter with with, "I have insurance." That does not
offset the increased risk. Similarly, all the things you and I have
learned over the years, some learned the _hard_ way, are not included
in books, anecdotes or covered by an architect's once a week visit.
And let's face it, the type of person that looks to be their own GC to
save money will rarely spring for the architect's paid site visits at
$125 a pop (or whatever). Rookie didn't mention an architect in any
capacity other than preparing "very detailed drawings." Have you ever
seen a set of plans that didn't have errors and omissions? Me
neither.

People point to change orders as being a contractor's way of gouging
the homeowner. Obviously that does happen with some contractors, but
that's the contractor, not the change order mechanism. If an owner
wants to move something, that change can cascade back through the
construction process, requiring existing work to be reworked to allow
the change. It also can interfere with the scheduled flow of work.
It's a disruption. People charge for disruptions. I know I am
preaching to the choir, and you are well aware of how it works, but a
newbie owner-builder probably doesn't. They're thinking, "Well, hell,
just pull out that one, add a trim piece and put in the new one. How
hard can it be?"

Rookie wrote: "Right now I am in the middle of a major remodeling in
my house where I decided to be the General Contractor. I am saving a
lot of money in the process. At least 30% of the average price some
GCs quoted me." Out of curiosity, do you count up your profits before
the job is over? You're well aware that the things at the end of the
project - all of the _visible_ things - can eat up profit at a
tremendous rate.

There was another proud owner-builder (Rookie this does _not_ apply to
you) in alt.architecture who was fumbling his way through his build a
year or so ago:
http://groups.google.com/group/alt.a...bb41f2beddf24c
The situation quickly deteriorated from the
http://groups.google.com/group/alt.b...9dce5b8e106985
"The rough opening for our staircase on the second floor is off by 3
feet. The mistake was made by the truss company that designed our
floor truss systems, and nobody caught it until after our staircase
was built."
I have no idea how such a large dimensional error could get past the
truss company, builder and owner, but it did. An extreme and
unfortunate example.

There are no free lunches. If you think it's free, you've missed
something. That was all I was saying.

R