Margins
Hi all, seeking any information on typical margins for building spec SFH, either stick-built or modulars. I'm in CA and in the range of 250k-350k priced homes, but would be happy to hear numbrs for any ranges.
I've been hearing 50k per home or 20% is not unusual.
Along with this, it seems that certain places have better ratios in terms of cost of land/permits compared to future value, if anyone would like to share ideas or places with good ratios that would be very helpful!
thanks, scott
This is a current project that we have under way.
I purchased a lot for 75,000 and had it appraised at 98,000 so I picked up 23,000 not to bad for 3 weeks of hard work Ha Ha!.
I then got a construction loan to build a 3400 Sq. Ft. home on the lot. I'am currently under way about at the dry in stage and about 3,000 under budget so far.
My construction budget for the house is 210,000 + 58,000 land pay off. the house appraised At 437,000 on completion I will let you do the math It comes out to about 35-38% profit.
Hope this helps the cause. Words of advise to all future developers let the numbers do the talking don't let others Ideals or egos side track your earning
potential. More simply put I had a number of so called Pro's tell me I could not possibly do the above Including some in this forum as I said let the #'s do the talking. Good Luck to All !
Thank You JL. That makes sense and you information was inspiring. I can't wait to take out some profit on the land I own.
Good luck to you too.
A question for jlwirk. Are you doing the building yourself? Or are you the general contractor?
I am going to do some developing. But I am struggling with costs. It is necessary to have an experienced GC. But doesn’t the cost of a GC pretty much eliminate so much of the margin that it makes the deal thin? Enlighten me!
Paula S.
thx so much for the replies -- please keep this thread going, as it was said, the numbers are the core of the business!
I seem to keep hearing about 50k-150k is possible on homes between 300-450k selling price...
Re: GC seems like one can do the modular approach or find a GC who is willing to work on thinner margin, I keep hearing they're out there, seems more risky though with potential quality, cost, schedule issues...
I suggest you be the builder. That way the costs are under your control and no games can be played. When I build I have a trailer on site. My table and chair is outside looking at the job. I check it in the morning and I check it out at night. I see that the security or blinds are up. The lights and sensors are on.
I know no other way.
Right now I am playing with containers. I now realize that I am also up against a political issue and that I am going to have to produce a paper blizzard and gain political support to push through the building department for a permit. So I am preparing for a large first cost. I hope to recapture as I drive on for my first plateau of 3,000. I will be reworking my time schedules over the next few days and of course my initial costing. Looks like I have a fight on my hands all the way. Tempted to cross out of Los Angeles to another county. But that would be giving up. There is a tremendous need here for low cost state of the art housing.
Lucius 8-)
It depends on the current market conditions. Here in Connecticut, I just finished a spec home of 2,800 sqft. Here are the numbers from that transaction:
The land cost me $100k
The house cost me $230k
The construction loan payments $6k
The house sold for $385K
Margin of $49k
If I did this same transaction, 12 months ago, the margins probably would have been only $35 to $40k. This is due to RE appreciating quicker than building costs. Given rates on their way up and appreciation slowing, I bet 12 months from now the margins will be much lower. As I mentioned earlier, it depends on the current market conditions. You need to constantly due the analysis to stay in tune. I'll even run my own numbers on lots in the area that other GC's are developing, just to keep up with the market.
Good luck, Mark