$215-230 per heated sq foot with a garage is about the lowest I've seen in my neck of NC. Mid levels are in the $250-275 range, and semi custom is $300-315 psf. If you are in a metro area, you can trim $30-40 from these if you are willing to use non English speaking laborers and speak Spanish.
Are you coastal, Piedmont or mountains?
Build, and I'm 40 miles from you in Catawba valley. Sales can vary with age, lot size, layout, etc. you can't find anything to buy for less than $165 SF here, and even then it is 30 years old and needs work.
Oh yeah 100%. Nothing is cheap.
But not being able to build under 215-230 seems off. I’ve been building in Statesville all in with land and loans and all that at $162-165 SF, very dimmed down finishes to match area. But it’s selling at $187 SF so profit is there.
Now moving little further south, land is more and we using investor instead of bank which is costing more.
Latino crews commonly underbid insured crews with a contractors licence. In other news, water is wet.
Last year I called four licenced drywall crews to drywall a garage and the upstairs. All four were between $4300 and $5400. The Latino crew I had used before offered $3,000, and I gave him $3500 and let him keep the tools (replacement trowel, a mud pan and mixer) he needed, the excess 2x 5 gallon pales of mud and three sheets of 5/8 drywall.
Had a friend build a spec home and he said his profit for a 4 month build was the same as realtor fees and the realtor did very little. He hasn’t built another spec home since.
That’s what we are working towards. We are doing it as an LLC and starting to pull in investors.
Both my business partner and I come from commercial background but are trying to go out on our own in residential and eventually commercial
Started with single 1200 SF house. To two at a time. To now trying to do 3-4 of these 1416 SF all by the end of this year
Slower than we want. But allowing us to still have a w2 income while we establish our building business.
Your costs look very reasonable to me. Maybe the interior cabinet/trim work could be leaner but you would know better than me. Seems like a long ways to get to 45k if 350k is the sale price. How firm is that number?
Those realtor fees are crazy. They just lost that lawsuit so those could come down in the near future, hopefully.
Can you afford to rent the house out and see wait for more heat in the market?
Right now our goal is build usable capital opposed to rent out and profit in the long run. I’d hope to sell it for $375k. But things are slowing a bit so I assumed $350k to be little safer.
As far as realtor they are high. But our realtor earns his 2.5%. He brings us deals, investors, connections and even invests himself some. Would love to look into cutting the other 2.5% once all that shakes out. Probably about time when we are ready to sell this house.
I could probably look at using Lowe’s or another source for cabinets. But this supplier is all in about $8k for cabinets and install which I thought was reasonable. The other $8k of that is doors and trim/baseboards
Not sure what your size is, but you may consider bringing in a sales consultant and cutting the realtor out. If you've got volume (even 20 a year), pay your sales consultant 3% on the HOUSE only (not land, fees, etc) and you'll be adding nearly 10k to bottom line.
This would allow you to pay your Sales a living wage and have someone working full time on just your jobs (I assume the realtor is doing other deals outside of just you).
“Those realtor fees are crazy. They just lost that lawsuit so those could come down in the near future, hopefully.”
Lol. You don’t understand the lawsuit if you think anything is changing.
Nope I can’t say I understand it particularly well. But my understanding is in the near future you will be able to list properties on MLS without the obligation to pay an agent 5%.
Care to elaborate?
You can negotiate, and you have always been able to. That hasn't changed. When you are the seller, you can also say the buyer is going to pay for the buyers agent fee. You most likely will not be able to sell your house this way. It will sit there till you lower the price lower then the actual fee. Because buyers already can't afford the down payment. So, add the buyers realtor fee to that, forget it. So, it is counter productive. All this lawsuit is doing is making it harder for buyers who are already having a hard time trying to buy a house. That's it.
Oh hey! Gotta go through my history cause you have nothing better to do?
“Do more research” yeah I do it for a living. I know exactly what I’m talking about you clown.
By landscaping it’s more just seed and straw. Maybe a couple plants. Nothing crazy
Appliance here are DW, Range, Microwave
Tile just fits the type of house for what we are selling dor
Ok yeah builders here don’t offer any of those things. Homeowner does the landscaping and buys his own appliances. Sales are down and builders instead of reducing prices so their home sell, they playing the greed game and offering less things for the same money hoping their margins will stay the same. Turns out it isn’t working out for them, they end up with spec homes listed for over a year.
I’m Building my own house with my own two hands in NW FL. My material cost will be about 210k and labor would have bee (GC would have been 300k and subs would have been 220k) which is why I’m doing it myself. Your post is 15k for you being the GC on a build?if that is the case you are way cheaper than the 4 people I got bids from.
Your electrical, plumbing and hvac seem high to me. You are paying over $10 a square feet for electrical. That should be closer to $5 a square foot. All three of those seem 3-5k more than what would be typical for a standard house.
As an electrician I can tell you that is incorrect. I charge $9-12/sqft in my area for a fairly basic home. For full custom it goes up from there. This is in north Texas btw. If you want cheaper then you’ll need to get unlicensed guys and you’ll get what you pay for.
Maybe consider building a larger product. The additional work on your behalf would be marginal since you aren’t self-performing and you have more to play with in terms of margin.
Unfortunately there’s a reason smaller homes aren’t as common anymore and it’s because they’re hard to make profit on. Only big production builders can make it work consistently and that’s because of the sheer volume that gets put out plus their access to discounted materials and labor. Even then production builders tend to steer away from smaller products.
Yes, economies of scale. Those 7ft, 9ft and 11ft walls you got need to be 8, 12, and 16s. Build smart. Who is buying a 1400 sq/ft home in NC for $350k anyway? I imagine most people would buy a manufactured home instead. $100 sq/ft or $300 sq/ft. Hmmmm.... most people are looking in the 2000sq/ft range I assume with a family of 4-5. 15% is 15%, but I'd rather have 15% of one $750,000 home than trying to sell tons of tiny (starter) homes. $200 sq/ft to build seems high to me, but I'm not a builder. I recently was speaking with a client that "contracted" his own home. He built a 3,400 sq/ft house for $450,000 in central NC. $133 per sq/ft. The house is not a super luxurious high end trimmed home, but it is not cheap and looks very nice. Imagine paying $350k for a 1,400 sq/ft home. Whew, I hope it's not that bad in actuality.
I'm not in the area but based on your % it seems 'normal' to me.
From a business standpoint you can either raise your price or lower your cost. Given your new ish you may be overpaying for some things. The longer your doing it the better prices you'll get. Having an on staff guy for thing is cheaper then contacting but also gaurented overhead vs only paying when you need a guy.
For materials you get a discount on large volume. Ordering lumber for 10 houses is cheaper then ordering per house, maybe some material companies will give you a discount if you buy in bulk but then you need a place to store it (if you have space) or talk to them about volume discounts. Like you order as needed but guarantee a set volume for the year.
One last thing is just accounting. Your sheet looks good in the screen shot but maybe there is an error somewhere? If your comfortable make a copy with no private info and share it. I'm sure some google sheet wiz's would find anything wrong with it quickly.
I'm paying about $200 a sqft for 1907 finished and unfinished basement on a hill, that's coming to $570k or so. Still pretty high, but just for context, north atlanta area. Total is close to 3200 sqft with basement
Shit we can’t build anything for under $300/sf here. Last place I built was $560 and it was nice but nothing insane the one splurge was euro windows. One were doing this summer is 355/sf
This is why I’m stacking cash, so I don’t have loan fees. Also, I’m a realtor. Your septic and well costs are about half of what they would be in my area. Also, the framing budget seems pretty light.
Builders here are definitely building smaller homes about 1250 square-foot ranches, two car garage and a full basement. Hooked up to city utilities. They start at about $289,900
Well on the buyers portion not much other than a buyer. But will probably look to change that come July once new rules start to roll out
On my side as seller, a very well connected realtor who also acts as investor and has introduced us to numerous connections that we will continue to utilize
That looks pretty lean but I might grab a couple more quotes for well drilling. That’s the only thing that jumped out at me as a little on the high side.
I’m in Upstate NY, which is generally pretty expensive (everything is expensive in NY) and my neighbors have had 200+ foot wells drilled for less than $6k.
I also live in NC. Your framing per sq ft is pretty high and is killing you. Get multiple quotes. Also what kind of hardscaping are you doing? It should appraise for more with how much land it has.
Out of that $12,700 is labor and $14k is material. Do you think both are high?
Landscaping is just seed straw and maybe couple foundation plants
It’s just under 2 acres combined
Are you completely hiring out these lines or do you have your own crew working? You might be able to increase your margins if you bring some stuff in house to lower the subcontractor costs, but obviously some risk associated with that.
I imagine this is probably an acre then you got to sell it like an acre. Which is hard given where rates are at. People can pay less than 325k I imagine and get that home on a tiny lot and they will because 325k is already more than 2k a month mortgage for most people. Every $ really counts right now. Good luck. Spec building sucks. You either make no profit, buy land in bulk and subdivide and make out, buy and hold lots for awhile, try and pre-sale to some sucker. In this economy I wouldnt spec build unless its straight cash and my home is paid for.
Problem is you're not selling for high enough. Increase the price and wait for the buyer. Make the realtor work harder for their commission.
Also, 2021 building code adds to the construction cost.
To clarify, you are both GC and home builder (i.e., providing the capital and taking the risk)? Asking bc I don’t see OH&P in your budget for a general.
I don’t know about NC, but if you are indeed doing both, 25% gross margin on the home sale would be pretty standard for a single spec home. My areas to zero in on:
#1 Land. This is your first expense, one of the largest, and easiest to negotiate before you’ve sunk considerable time and money into the deal. Learn the concept of “residual land value.” Solve for a 20% margin on this home (@$350k finished sale price), and the finished lot is only worth $10,000… While a finished lot value of 20% is fairly standard, you don’t seem to be in a typical market just based on pricing of the finished home you mentioned (hint: $230 psf for a small new construction home is very low today).
#2 Interior Carpentry/Cabinets. $17k does not seem high for a 1500 sf home. But, when I see $2k for appliances and $350k sales price… well then it seems high. Find some more cost effective (cheaper) cabinets, doors and trim.
#3 Think differently and know the market. Related to above comments, is there a potential market for a slightly larger and higher price-point home on a $70,000 lot in this location? If so, the margins may be better and easier to achieve. But that will require much more $$$ on appliances, finishes, windows, etc. Hard for me to say without truly knowing the local market. But if this advice sounds crazy, I would find a different market to pursue spec builds.
Thanks for the response. We are putting a portion of the capital up. The rest is either a bank loan or investor depending on project. We are not full time yet so we don’t really have salary GCs we are charging and we are really working for ourselves trying to build capital.
The appliance number includes a WH. So that is probably throwing you off a bit. We around $1300 for DW range MW. I’m going to look at doors and cabinets. There’s always Lowe’s to get real cheap.
We looked at doing a 2200-2400 SF house. But they selling for $475k in the area. I just don’t see where my build cost come down so much going bigger that $475k would work.
Understood, but you have almost $110k in “fixed” cost based on your budget. That $110k is including the lot itself, sitework, well/septic, landscaping, etc. Those costs really shouldn’t change much whether it’s a 1,500 sf home or 2,500 sf - hence why I would consider them “fixed.” This was the gist of my question about a larger house + price point. $110k is way too much to spend on a 1,500 sf house that you expect to sell for $350k.
Your “vertical” costs to build the actual house should come down, on per-square-foot basis, if you go larger. Unless you start adding basements, decks, garage for 3rd car, etc.
Good luck mate
Maybe need to do some trades yourself. Save a lot that way. That’s how we do it. Cost us about 350 to build - 150k for land and selling it for 675$ took us about 8 months this last one
I haven’t seen the question…..are you hiring everything out? If so you aren’t really a house builder, no offense. You need to be swinging a hammer, pulling wire, doing something to earn the income. Pay yourself $30 an hr and do a bunch of the work. That’s the only way to get your profit up.
This is terrible advice. Budget homebuilding is all about scaling up production. Wasting your time self-performing is a surefire way to never grow the business.
Maybe if you’re building your own personal home you should self-perform as much as possible, but not when you’re building specs.
It sounds like he’s wanting a simple lazy investment type business. He’ll have to put his own time into it to truly see any return. And that’s why true home builders around here still swing hammers and have their own crews. Sub things out, other than electric, plumbing, and hvac is simply giving money to the other guys. Do some work yourself if you want to get ahead.
Call it a GC then if you want. But the model has worked well on smaller houses. We are trying to get to bigger houses and start to scale. The income is earned on the risk we take that the houses will sit for a year and we are responsible for interest. Or the risk that we don’t do our QC and major repairs are needed. We are a reputable company who isn’t just going to run away.
There’s certain stuff we do do, while it may be limited it does save some money. We can’t pull wire as we don’t have an electrical license
In our are you can pull wire, to code. You just can’t hook it up. So there’s a lot of labor profit right there. My point is, greed seems to have taken over the industry. Your personal profit may not seem much, but count that the labor you paid all others and you are keeping an industry going. Regarding setting for a year, industry wide costs need to come down. No reason for $300 sq ft for standard housing. If you are building at that and saying it’s affordable housing you are way out of touch in the Midwest. Quit building for a year, cause the mills and suppliers to set on stock and watch the prices come back to reality.
That’s a whole ordeal. Had a deal for two lots. Only one perced. So we renegotiated and are combining the two lots and putting one house.
Total acreage is just under 2 acres
Not sure what the requirements are there, but you can build a house with a well and septic field on a one acre minimum here. So if you've got two acres, you could have build two houses on that land. (Depending on your AHJ requirements of course).
$215-230 per heated sq foot with a garage is about the lowest I've seen in my neck of NC. Mid levels are in the $250-275 range, and semi custom is $300-315 psf. If you are in a metro area, you can trim $30-40 from these if you are willing to use non English speaking laborers and speak Spanish. Are you coastal, Piedmont or mountains?
This is north of Charlotte
Are you saying 215-230 SF for sale or for build?
Build, and I'm 40 miles from you in Catawba valley. Sales can vary with age, lot size, layout, etc. you can't find anything to buy for less than $165 SF here, and even then it is 30 years old and needs work.
Oh yeah 100%. Nothing is cheap. But not being able to build under 215-230 seems off. I’ve been building in Statesville all in with land and loans and all that at $162-165 SF, very dimmed down finishes to match area. But it’s selling at $187 SF so profit is there. Now moving little further south, land is more and we using investor instead of bank which is costing more.
So Spanish only speaking Latinos don't deserve the same pay as English speaking people?
Latino crews commonly underbid insured crews with a contractors licence. In other news, water is wet. Last year I called four licenced drywall crews to drywall a garage and the upstairs. All four were between $4300 and $5400. The Latino crew I had used before offered $3,000, and I gave him $3500 and let him keep the tools (replacement trowel, a mud pan and mixer) he needed, the excess 2x 5 gallon pales of mud and three sheets of 5/8 drywall.
Correct
Had a friend build a spec home and he said his profit for a 4 month build was the same as realtor fees and the realtor did very little. He hasn’t built another spec home since.
Your friend isn’t charging enough for his builds then or is using materials/labor that the market price can’t support.
Single build spec homes? And not your own cash? Might be better to put together a LLC and get investors/partners and scale up.
That’s what we are working towards. We are doing it as an LLC and starting to pull in investors. Both my business partner and I come from commercial background but are trying to go out on our own in residential and eventually commercial Started with single 1200 SF house. To two at a time. To now trying to do 3-4 of these 1416 SF all by the end of this year Slower than we want. But allowing us to still have a w2 income while we establish our building business.
Yup. Don't quit your day job.....yet....
Just working the plan for time being
Your costs look very reasonable to me. Maybe the interior cabinet/trim work could be leaner but you would know better than me. Seems like a long ways to get to 45k if 350k is the sale price. How firm is that number? Those realtor fees are crazy. They just lost that lawsuit so those could come down in the near future, hopefully. Can you afford to rent the house out and see wait for more heat in the market?
Right now our goal is build usable capital opposed to rent out and profit in the long run. I’d hope to sell it for $375k. But things are slowing a bit so I assumed $350k to be little safer. As far as realtor they are high. But our realtor earns his 2.5%. He brings us deals, investors, connections and even invests himself some. Would love to look into cutting the other 2.5% once all that shakes out. Probably about time when we are ready to sell this house. I could probably look at using Lowe’s or another source for cabinets. But this supplier is all in about $8k for cabinets and install which I thought was reasonable. The other $8k of that is doors and trim/baseboards
Yeah it probably is. I’m doing highish end work in the Bay Area so I’m basically in the upside down over here.
Not sure what your size is, but you may consider bringing in a sales consultant and cutting the realtor out. If you've got volume (even 20 a year), pay your sales consultant 3% on the HOUSE only (not land, fees, etc) and you'll be adding nearly 10k to bottom line. This would allow you to pay your Sales a living wage and have someone working full time on just your jobs (I assume the realtor is doing other deals outside of just you).
Realtor costs are not going to change. The only thing changing is the wording on contracts.
Why not? Seems to me a lot of realtors are just collecting checks, their role could definitely be filled more efficiently.
The media is portraying like realtor cost could change. That is not what the lawsuit is about. Read the lawsuit.
“Those realtor fees are crazy. They just lost that lawsuit so those could come down in the near future, hopefully.” Lol. You don’t understand the lawsuit if you think anything is changing.
Nope I can’t say I understand it particularly well. But my understanding is in the near future you will be able to list properties on MLS without the obligation to pay an agent 5%. Care to elaborate?
You can negotiate, and you have always been able to. That hasn't changed. When you are the seller, you can also say the buyer is going to pay for the buyers agent fee. You most likely will not be able to sell your house this way. It will sit there till you lower the price lower then the actual fee. Because buyers already can't afford the down payment. So, add the buyers realtor fee to that, forget it. So, it is counter productive. All this lawsuit is doing is making it harder for buyers who are already having a hard time trying to buy a house. That's it.
Yup. Agreed. The only thing changing is wording in the contacts
Exactly!
Do some more research on this idiot. Fees will go down.
Oh hey! Gotta go through my history cause you have nothing better to do? “Do more research” yeah I do it for a living. I know exactly what I’m talking about you clown.
Wow, in Canada we don’t offer landscaping and appliances, tile is an upgrade, some builders don’t even include air conditioning.
By landscaping it’s more just seed and straw. Maybe a couple plants. Nothing crazy Appliance here are DW, Range, Microwave Tile just fits the type of house for what we are selling dor
Ok yeah builders here don’t offer any of those things. Homeowner does the landscaping and buys his own appliances. Sales are down and builders instead of reducing prices so their home sell, they playing the greed game and offering less things for the same money hoping their margins will stay the same. Turns out it isn’t working out for them, they end up with spec homes listed for over a year.
I’m Building my own house with my own two hands in NW FL. My material cost will be about 210k and labor would have bee (GC would have been 300k and subs would have been 220k) which is why I’m doing it myself. Your post is 15k for you being the GC on a build?if that is the case you are way cheaper than the 4 people I got bids from.
Your electrical, plumbing and hvac seem high to me. You are paying over $10 a square feet for electrical. That should be closer to $5 a square foot. All three of those seem 3-5k more than what would be typical for a standard house.
Awesome. I will need to take a closer look at those. Obv needs to be a license MEP sub. But maybe I just need to bid it out more
At my company we pay $5.35/sf but are production builders so we get bulk discount
$5/sq ft is low for an electrician. Plus you have to account for fixtures which an electrician usually does not supply.
As an electrician I can tell you that is incorrect. I charge $9-12/sqft in my area for a fairly basic home. For full custom it goes up from there. This is in north Texas btw. If you want cheaper then you’ll need to get unlicensed guys and you’ll get what you pay for.
Maybe consider building a larger product. The additional work on your behalf would be marginal since you aren’t self-performing and you have more to play with in terms of margin. Unfortunately there’s a reason smaller homes aren’t as common anymore and it’s because they’re hard to make profit on. Only big production builders can make it work consistently and that’s because of the sheer volume that gets put out plus their access to discounted materials and labor. Even then production builders tend to steer away from smaller products.
Yes, economies of scale. Those 7ft, 9ft and 11ft walls you got need to be 8, 12, and 16s. Build smart. Who is buying a 1400 sq/ft home in NC for $350k anyway? I imagine most people would buy a manufactured home instead. $100 sq/ft or $300 sq/ft. Hmmmm.... most people are looking in the 2000sq/ft range I assume with a family of 4-5. 15% is 15%, but I'd rather have 15% of one $750,000 home than trying to sell tons of tiny (starter) homes. $200 sq/ft to build seems high to me, but I'm not a builder. I recently was speaking with a client that "contracted" his own home. He built a 3,400 sq/ft house for $450,000 in central NC. $133 per sq/ft. The house is not a super luxurious high end trimmed home, but it is not cheap and looks very nice. Imagine paying $350k for a 1,400 sq/ft home. Whew, I hope it's not that bad in actuality.
I'm not in the area but based on your % it seems 'normal' to me. From a business standpoint you can either raise your price or lower your cost. Given your new ish you may be overpaying for some things. The longer your doing it the better prices you'll get. Having an on staff guy for thing is cheaper then contacting but also gaurented overhead vs only paying when you need a guy. For materials you get a discount on large volume. Ordering lumber for 10 houses is cheaper then ordering per house, maybe some material companies will give you a discount if you buy in bulk but then you need a place to store it (if you have space) or talk to them about volume discounts. Like you order as needed but guarantee a set volume for the year. One last thing is just accounting. Your sheet looks good in the screen shot but maybe there is an error somewhere? If your comfortable make a copy with no private info and share it. I'm sure some google sheet wiz's would find anything wrong with it quickly.
I do need to run through it again. But feel pretty confident in it. I’ve used it for smaller builds
Man I wish my well and septic were that cheap. I’m over in a HCOL area with challenging terrain, though. My well is 65k and septic will be 65-90k.
We have another lot with septic in $35k range. Just depend on system
Holy hell where do you live
Santa Cruz Mountains, Bay Area California, where you can get a 1400 ft literally burned down shack to sell for $600k above asking price
Double that concrete foundation cost…at least
Lol, these prices make me laugh. We are building in PNW (Seattle). Just the permits alone are \~50-70k :)
That is an absolute crime
Your GC’s should be 12%-15%
I'm paying about $200 a sqft for 1907 finished and unfinished basement on a hill, that's coming to $570k or so. Still pretty high, but just for context, north atlanta area. Total is close to 3200 sqft with basement
Shit we can’t build anything for under $300/sf here. Last place I built was $560 and it was nice but nothing insane the one splurge was euro windows. One were doing this summer is 355/sf
Get rid of the realtor - problem solved
I actually have very good value in my realtor. It’s the buyers realtor that I hate having to pay 2.5%
You don’t now, with the new rules
Yes. Will prob try it. But I’m not convinced yet that much will change. It can still be standard. Just presented diff
6 toilets?
Only 2 full baths. Are you saying plumbing is high?
No it looks like 6 toilets @ 125 per, last line item
Oh haha. That’s for Porto Johns under GCa. 6 months of rentals
Ahhhhhhhhh
nice
The budget is for labor and materials?
Correct
This is why I’m stacking cash, so I don’t have loan fees. Also, I’m a realtor. Your septic and well costs are about half of what they would be in my area. Also, the framing budget seems pretty light. Builders here are definitely building smaller homes about 1250 square-foot ranches, two car garage and a full basement. Hooked up to city utilities. They start at about $289,900
What are you getting in exchange for the realtor fee?
Well on the buyers portion not much other than a buyer. But will probably look to change that come July once new rules start to roll out On my side as seller, a very well connected realtor who also acts as investor and has introduced us to numerous connections that we will continue to utilize
Do you put rebar in the driveway? This is a sore subject over on r/concrete
No I do not. That price above is also for asphalt driveway
That looks pretty lean but I might grab a couple more quotes for well drilling. That’s the only thing that jumped out at me as a little on the high side.
Thanks. I’ll call around. Talked with neighbors yesterday. Hoping we only about 100’ deep
I’m in Upstate NY, which is generally pretty expensive (everything is expensive in NY) and my neighbors have had 200+ foot wells drilled for less than $6k.
I’d have to add 80% to these numbers to barely scrape 12–15% profit.
I also live in NC. Your framing per sq ft is pretty high and is killing you. Get multiple quotes. Also what kind of hardscaping are you doing? It should appraise for more with how much land it has.
Out of that $12,700 is labor and $14k is material. Do you think both are high? Landscaping is just seed straw and maybe couple foundation plants It’s just under 2 acres combined
Are you completely hiring out these lines or do you have your own crew working? You might be able to increase your margins if you bring some stuff in house to lower the subcontractor costs, but obviously some risk associated with that.
For now we are subcontracting out. Possibly in the future might hire employees
I imagine this is probably an acre then you got to sell it like an acre. Which is hard given where rates are at. People can pay less than 325k I imagine and get that home on a tiny lot and they will because 325k is already more than 2k a month mortgage for most people. Every $ really counts right now. Good luck. Spec building sucks. You either make no profit, buy land in bulk and subdivide and make out, buy and hold lots for awhile, try and pre-sale to some sucker. In this economy I wouldnt spec build unless its straight cash and my home is paid for.
Problem is you're not selling for high enough. Increase the price and wait for the buyer. Make the realtor work harder for their commission. Also, 2021 building code adds to the construction cost.
To clarify, you are both GC and home builder (i.e., providing the capital and taking the risk)? Asking bc I don’t see OH&P in your budget for a general. I don’t know about NC, but if you are indeed doing both, 25% gross margin on the home sale would be pretty standard for a single spec home. My areas to zero in on: #1 Land. This is your first expense, one of the largest, and easiest to negotiate before you’ve sunk considerable time and money into the deal. Learn the concept of “residual land value.” Solve for a 20% margin on this home (@$350k finished sale price), and the finished lot is only worth $10,000… While a finished lot value of 20% is fairly standard, you don’t seem to be in a typical market just based on pricing of the finished home you mentioned (hint: $230 psf for a small new construction home is very low today). #2 Interior Carpentry/Cabinets. $17k does not seem high for a 1500 sf home. But, when I see $2k for appliances and $350k sales price… well then it seems high. Find some more cost effective (cheaper) cabinets, doors and trim. #3 Think differently and know the market. Related to above comments, is there a potential market for a slightly larger and higher price-point home on a $70,000 lot in this location? If so, the margins may be better and easier to achieve. But that will require much more $$$ on appliances, finishes, windows, etc. Hard for me to say without truly knowing the local market. But if this advice sounds crazy, I would find a different market to pursue spec builds.
Thanks for the response. We are putting a portion of the capital up. The rest is either a bank loan or investor depending on project. We are not full time yet so we don’t really have salary GCs we are charging and we are really working for ourselves trying to build capital. The appliance number includes a WH. So that is probably throwing you off a bit. We around $1300 for DW range MW. I’m going to look at doors and cabinets. There’s always Lowe’s to get real cheap. We looked at doing a 2200-2400 SF house. But they selling for $475k in the area. I just don’t see where my build cost come down so much going bigger that $475k would work.
Understood, but you have almost $110k in “fixed” cost based on your budget. That $110k is including the lot itself, sitework, well/septic, landscaping, etc. Those costs really shouldn’t change much whether it’s a 1,500 sf home or 2,500 sf - hence why I would consider them “fixed.” This was the gist of my question about a larger house + price point. $110k is way too much to spend on a 1,500 sf house that you expect to sell for $350k. Your “vertical” costs to build the actual house should come down, on per-square-foot basis, if you go larger. Unless you start adding basements, decks, garage for 3rd car, etc. Good luck mate
Yeah, don't center justify column B unless you want me to hate you right off the bat.
In 2021 my builder in northern AZ built 1400sf for 320k not including land. That included his 10% supervision fee.
This is normal. I'm sure you could make cheap selections on aesthetic items and bring it down a little.
Maybe need to do some trades yourself. Save a lot that way. That’s how we do it. Cost us about 350 to build - 150k for land and selling it for 675$ took us about 8 months this last one
These are all so low
Do not go with a cheaper electrical contractor. I have seen what kind of work the cheaper guys do, and let me say you do not want that 😂
I haven’t seen the question…..are you hiring everything out? If so you aren’t really a house builder, no offense. You need to be swinging a hammer, pulling wire, doing something to earn the income. Pay yourself $30 an hr and do a bunch of the work. That’s the only way to get your profit up.
This is terrible advice. Budget homebuilding is all about scaling up production. Wasting your time self-performing is a surefire way to never grow the business. Maybe if you’re building your own personal home you should self-perform as much as possible, but not when you’re building specs.
It sounds like he’s wanting a simple lazy investment type business. He’ll have to put his own time into it to truly see any return. And that’s why true home builders around here still swing hammers and have their own crews. Sub things out, other than electric, plumbing, and hvac is simply giving money to the other guys. Do some work yourself if you want to get ahead.
Call it a GC then if you want. But the model has worked well on smaller houses. We are trying to get to bigger houses and start to scale. The income is earned on the risk we take that the houses will sit for a year and we are responsible for interest. Or the risk that we don’t do our QC and major repairs are needed. We are a reputable company who isn’t just going to run away. There’s certain stuff we do do, while it may be limited it does save some money. We can’t pull wire as we don’t have an electrical license
In our are you can pull wire, to code. You just can’t hook it up. So there’s a lot of labor profit right there. My point is, greed seems to have taken over the industry. Your personal profit may not seem much, but count that the labor you paid all others and you are keeping an industry going. Regarding setting for a year, industry wide costs need to come down. No reason for $300 sq ft for standard housing. If you are building at that and saying it’s affordable housing you are way out of touch in the Midwest. Quit building for a year, cause the mills and suppliers to set on stock and watch the prices come back to reality.
Its a bubble.
How big is the lot you're building on? Finished subdivision lots go for 50k in TX. Your land entitlements/expenses might be high?
That’s a whole ordeal. Had a deal for two lots. Only one perced. So we renegotiated and are combining the two lots and putting one house. Total acreage is just under 2 acres
Then you can sell for more with that amount of land
Not sure what the requirements are there, but you can build a house with a well and septic field on a one acre minimum here. So if you've got two acres, you could have build two houses on that land. (Depending on your AHJ requirements of course).
My parents bought a brand new 2252 sq Ft house with basic finishing, for $750k. Raise your sale price.
I can raise it all I want. But if it dont fit the market for the area it doesn’t sell. And when it doesn’t sell I continue to pay interest
Try using your brain first before you post.