Home Building

Hi,

Ok, this admit able is not my primary profession however being in the construction industry for 37 years, having a professional background in construction management and as a licensed engineering and building contractor since the early 90's I am pretty sure I know a little bit about this subject.

Last time I checked a home builder will average 11% to 14.5% profit after all costs. This means to build a home you must borrow and / or invest about 85.5% to 89% of the FMV of the home. Now this actually equates to a fair cost with carrying costs of about 80% of a new home. As closing costs and realtor fees equal roughly 8.5% to sell and transfer title which is paid at close of escrow!

Last time I checked you have to have experience and a track record with references to borrow money to build a home. Now if you don’t have a general contractors license and you contract for a general contractor to build your home you will be lucky to make 5% in profits after all costs!

Now you don’t just pop in and build homes as there is a lot to know and if you want outside money you’d better know the industry and have a defined exit strategy.

Now I have friends in the home building industry who have great knowledge and can clearly state it’s not as easy as it looks or everyone would be doing it.

             GR

What’s so hard about it?

I have an outside lender. I know where to get cheap land, and I can save money by doing much lake myself.

I can build a 4 bedroom, 2 bath for $80,000 in an area where they sell for $200,000.

What am I missing?

*lake = labor

that’s a perfect spot to get bigger business, what areas are you mostly covering?

Are you talking to me or to the person who started this thread?

I just look at average home values and build on land just outside the city.

I think I will build my first house outside Naples, FL.

Hi,

Actually in home building you will incur the following costs
  1. Land
  2. Plan Design Costs (Architecture)
  3. Survey Cost
  4. Blue Line Certification
  5. Soils Testing
  6. Permit Application Fee
  7. Permit Fee
  8. Special Assessment Fees
  9. Tap Fees
    A. Cost of Septic Field or Alternative Septic
    B. Cost of Well Drilling
    C. Cost to bring electric, gas, cable and phone from remote location
  10. Off site public works costs (Repairs to streets for water / sewer taps)
  11. Construction Loan Costs (Points, plan review, draw inspections, etc.)
  12. Interest on Construction Loan
  13. Management
  14. Marketing and Advertising
  15. Model Home Holding Costs
  16. Realtor Fees
  17. Closing Costs

And I actually forgot excavation and re-compaction costs.
And Environmental Compliance / Environmental Assessment.

         GR

I swear that you are overstating these costs.

There are ways to save, such as not using the contractor to do “cosmetic” things like painting, carpet, tile, cabinets.

Do them yourself. Save on labor.

But yes, if I could get a general contractor license, I could make some serious money.

$$$$$$$$$$$$$

Donald Trump.

I know the best places to build and there are alternative lenders that don’t require 2 years of tax returns.

Hi,

For construction cost data try RS Means as they are the foremost authority on construction costs and applications by state and the only construction cost data readily excepted by state and federal courts nation wide.

You can purchase RS Means construction cost data books at Home Depot or Lowes or directly at RS Means website.

www.rsmeans.com/Cost-Data
www.rsmeansonline.com
www.bnibooks.com/products/rs-means-cost-data
www.bnibooks.com/product/rs-means-building-construction
www.rsmeans.com
www.bnibooks.com/RS-Means-2015

Since I knew you can’t use google I made the connection for you!

                   GR

Shouldn’t I listen to what estimates I have gotten from actual contractors.

Hi,

It depends on whether you have supplied an accurate set of blue prints to bid from with a spec list of finishes or have supplied an accurate scope of work stating exact distances and locations and measurements of the work.

Someone going I think it will cost $3k without having accurate instructions to bid from is blowing smoke!

                 GR

I gave them a rough blueprint

If the contractor is going to eat up the profits, then how does ANYONE make money in home building?

Including large home builders. And don’t say financing because I’m paying cash.

There must be some “secret.”

Reading all these posts reminds me of when I was a depression era kid.

People talked then about :High Cost Dealer: work and “Shade Tree” mechanics cost.

Seems to me to be the case here.

One is looking at it from a professional quality point of view and the other is looking at it from a cheaper shade tree mechanic point of view.

Like the old Adage, " If you want good oats they are one price…Used oats are at the other end of the horse.:

Bill H, you are absolutely right! Good point.

It’s better get your home designed and customised according to your needs. Contractors should be assessed before giving work.