House Building Margins

Discussion in 'Economics' started by toc, Aug 7, 2005.

  1. toc


    Does anyone here know what is the cost difference in building your own house by hiring few labors and you being the general contractor vs buying one made by the builders. Also, how much profit do these builders make on each house 10-15%. Cheers!
  2. If I was serious about getting into a new house then I would go to a reputable building supply company and ask for a list of subcontractors and then get estimates for each required job.

    Next, I would shop the job out to local builders and see if the savings are worth your time.

    I built two houses many years ago by shopping them out to local builders and was very satisfied with the cost relative to buying a new finished house that was on the market.

    My nephew is in the building trades and he is now building himself a new house and he says he is saving a substantial amount.

    I imagine that the savings is directly related to the geographical area where you want to live. For example, no two bedroom, one bath house is worth the kind of money for materials and labor that they charge in Palo Alto. On the other hand, if you want to build in a small town in Ohio the savings may not be very substantial.

    Just my thoughts on the matter.
  3. There is 30% or more in there if you can get it out. If you have no prior experience with building or dealing with low life criminal subcontractors types then I would not suggest it for you.
  4. jem


    I can confirm what was just said.

    Being friends with a bulder though, I asked him about the fact that he might build a nice house for 100 a sq foot and builders might charge 200. These are very rough numbers and obviouly depend on the price of the land.

    My friend said the new homes builders have some serious expenses and overhead that have kept him out of the game. Like carrying the models and the salaries of many employees.
  5. toc


    Jeez, 30% margin is good enough, if possible. How many business will give you 30% returns. However, the daily headache of building and dealing with lowlife types is another important issue. I do not think house building is for the 8-5 types. I think 30% would be good for a single house maths, not of the builders who have to buy all sorts of insurance and $250K equiptments etc.

    The reason I raised this issue was I know somebody who is getting paid $15 a hour cash by the builder and he does the minor work like trims and painting etc. The complex jobbers get good $20 to even $25 an hour. Cash payment means builder is not including labor cost into his calculation or builder is counting that he will still declare it hoping that low economic scale employees i.e. criminal types will not declare their incomes. That is why I was wondering how much do the normal average builders margin out on an average house. All in the team are Italians and so are the builders whom I talked a couple of times, so they must have some understanding among them. He said on a $450K house he makes $50K meaning roughly 10% and that too when he has people not on payroll but on an hourly basis........meaning if it rains then people are sent home without pay, this variable work condition is a big relief for them. Another major savings come from quantity purchase of items.

  6. I meant 30% on a house you built for yourself with all your attention on it and having the skill to to do it. You will not make that if you go into the business of building spec houses. 20% is more reasonable.
  7. Mvic


    I have done this twice (a 450K house ex land and a 900K house ex land). I must have been nuts to do it the second time but it was a new area so thought it was going to be different, it wasn't.
    If you are going to do it a service like Ubuild will help and there are also purchasing clubs you can join to get substantial discount on kitchen cabinets, bath room fixture, applicances etc. (15-30%). I endded up saving about 20% over what it would have cost to build with gen contractor and I endded up with great products as I was riding these guys to do it right or do it over (unlike a gen contractor I never have to see them again so I don't care if they get pissed off with me). However I almost came to blows with subs a couple of times on each build so if you are not preapred to stand your ground then don't even think about doing it. Also don't even think about doing it 1st time if all you have to go on is book knowledge, you have to have someone you can trust who knows how things should be done to counsel you or you will get scammed left and right.

    This is a great book " Houses are Designed by Geniuses & Built by Gorillas : An Insider's Guide to Designing and Building a Home", just make sure none of the contractors see it in your possession (or lying on the pax seat of your car at the site LOL).

    For my next house I am having these guys build it and oversee contruction (keep in mind that better materials means easier buid and better finish as they tend to be more forgiving). They do fantastic houses and the finished product is of the highest quality. In fact I would suggest you go and look at one of their homes just to see what a well built home looks like, maybe even ask then if they can rec. contractors in your area as they only deal with the best. They offer great value too
  8. toc


    What purchasing clubs you can join that would give you 15-20% savings on Kitchen cabinets etc.
  9. Mvic


    I used but i am sure there are others.
  10. How much is it to be a member of directbuy?
    #10     Aug 8, 2005