Well, since it has slowed down in the new construction market we have time now to get to the “rest” of the market. Builders that we don’t/can’t usually talk with. Man there are some builders out there getting some deals.
Talked with a builder that has projects in several cities in our markets. Every one has the same deal. $400 per house. That price (for us) might be OK for a smaller home (1000-1200 SF) But you get up to 2600 SF (thier largest plan) and you are getting killed big time.
For their (notice how I spelled it both ways so one of them is correct?) biggest plan we would be almost triple. At least 2.5 times that price. At that price the provider can only be working for minimum wage. But, they will find someone to replace him when he goes BK. The way of the world.
The good news is this guy is filled up on the builder and can’t go out to solicit new business. And he doesn’t have money to replace his equipment when it breaks down. With diesel @ $4.00/gal it won’t be long now.
Builders margins are built on the land buy. So why do the trades get beat up when the market goes soft?
Not mad or angry, just reflecting
Replies
Uh, er, $400 per house for WHAT?
Scrapr=construction site clean up
let me tell you the margins
lowballers
trash would equal 40-45% of gross
Fuel close to 20% (might be as low as 15% if using gas, not diesel)
Overhead lets use the insurance company "standard" 15%
can't pay a wage/hire someone with the 25-30% left
we have left out repairs for simplicity
i'm curous,is that a 1 time visit at the end to p.u all the trash lieing around or are you expected to come by the site as each sub finishes and clean up their mess and then come back 2 weeks later?
i don't no what your dump fees are but we at 28.00 a ton and i feel thats as cheap as it gets. larryif a man speaks in the forest,and there's not a woman to hear him,is he still wrong?
That is weekly (if not more) service
start to finish/Foundation to final move in
wood/cardboard/roofing/siding/trash
everything left at the site, maybe also including homeowners who may drop move in boxes on the construction pile
Tip fees at $65/ton in one local
$40 in another location
So for $400 you're suppose to haul ALL of the construction debris away from a house for the entire course of construction? That $400 is supposed to cover fuel, wages, P&O, and dump fees? If I've got that right, then that sounds simply ridiculous. I'd be thinking somewhere around $250 per visit! Around here a 30 yd can is almost $400 and that doesn't include any labor to fill it. Most houses (2000 sqft and up) would require two of them at a minimum to get through a house. When you show up, is it all in a pile for you or do you have to 'scrap out' the site....pick up scrap inside and out, sweep, etc?
So you were wanting to make money at this huh? Not at $400 I can tell you.
We looked at this at one time using dump trailers and couldn't see any money at all as the guys that do it I think (around here anyway) count on scraps and a few good items thrown away to resell and help out the profit. From my research (again in my area) it is full of guys in pickups that are happy making a hundred a day gross and a few freebies they can sell or use. DanT
You got it. We figure "about" 3 loads per 2000 SF home. At 20 yds ea.
Scrap is piled up in a garage or front yard.
That price is simply ridiculous. Laughable
At least they are making it up on volume. (lol)
And the $400 is for ANY size house. (they have like 6 plans) So if they decide to build 2600 SF homes instead of 1200 SF homes you are screwed and glued
The debris haulaway guys were one of the few guys making decent money in MI. He'd show up with 200k worth of equipment. I don't know what he was getting per house but I know he was making money. Bob's next test date: 12/10/07
Jim
Why do you think he was making money?
Big truck? = big payment
not that I am opposed to paying for a truck that makes money. But you can go overkill on it. One of our competitors did that a couple years ago. Got a Freightliner. Big truck. Shiny. Chrome.
But he spec'd it wrong. At least when I was asked to buy it from the bank it wasn't right for me.
Just like the framers that drive up in the F550 pickup trucks. 24 inch wheels. Chrome
Nice. But costly
I know he was making big money. He was running more than one 20 yard dump trucks, each with a trailer and bobcat on the back. The group of laborers would scour the jobsites filling the bucket. The laborer in the dump would stack everything very orderly to maximize the load and minimize the dump runs. They would sort all the steel and sell it for scrap. The owner built himself a very large new home. I think someone told me it was in the 10,000 sf range. A lot of the frame was salvaged lumber. This guy was doing real well. The ironic thing is that we investigated the business and I almost agreed to help fund a start up but decided at the last minute that I didn't want to spread myself too thin. Big mistake on my part. The numbers looked good then. I don't know how they are now. Bob's next test date: 12/10/07
If he built a 10k SF house he had nice margins
I'm not sure how that setup adds up to 200k. But sounds like he has it figured out.
Sorry Jon, Not going to Va. Diesel @4.00/gal will take me $1200 one way from PDX to VA. And I gotta get home too.
This isn't really a rant about lowball price schemes. Really the builders who dictate price. How did a builder come up with $400? Because someone somewhere sometime agreed to do it for that? And that now becomes "the price" for ever more forward. I guess if guys keep lining up to get paid at that price who am I.
When service A goes out of business he "sells" his truck to his friend/laborer/neighbor/framer/plumber and all of a sudden they are in business. And the cycle continues
Generally I have found that is isn't worth your time to talk with these builders. If you do happen to pick up some biz they are always shopping price. It's what was happening the other day. Builder says I'm happy............but............
He was throwing off buying signals like crazy. I guess I should call them bidding signals. (G)
We need the low price guys. Just so that there is a difference between us.
Edited 4/4/2008 9:51 pm ET by Scrapr
Don't feel bad Scrapr....the problem is the same all across the board. About once every couple weeks I get a phone call from a new contact, "Hey, I got your name from so and so. He's says you did a great job. What do you get a sqft?"
"For what?" is my standard reply. Or if I'm really feeling fiesty I'll ask, "How much does a car cost?" and laugh it off to try to get them to tell me a little bit about what they're trying to build. Some guys are too tight to even give up a set of prints for me to put together an accurate quote without "pre-qualifying" me to see if I'm in their ball park.
It's depressing if I think about it too much.View Image
It is during the recessions that the cleanup and framing guys get burned.
Last in...last to get paid...when houses aren't selling or selling near loss, it's them left with bag.
Texas still looking up?
L
GardenStructure.com~Build for the Art of it! Decks Blog
Yes, Austin is one of the places to be right now. Texas gained a couple hundred thousand jobs last year and many of them were in Central Texas. I'm not sure that construction is the place to be though. Only time will tell.
The illegals here have skewed the market place in a significant way. Labor brokers are everywhere. If the new administration actually does something about the illegals (I don't think they will), I think half the city might have to leave LOL! Bob's next test date: 12/10/07
I understand they are doing something about it...
They have been giving them permission to work on the sly for years now--
Best to keep working on the spanish!
LGardenStructure.com~Build for the Art of it! Decks Blog
It's not the language I object to, it's the level of craftsmanship that concerns me. I used to be a glorified babysitter when I supervised a crew of framers but this is taking that idea to a new level! The other thing that is disheartening is that a very high percentage of "skilled" tradesmen in this area have not had any formal training. They don't bother with technical information. Often they have worked a good portion of their careers in areas that don't require inspections or permits. They do things "like my grand daddy taught me". I think you get the picture. Bob's next test date: 12/10/07
Re. margins, everyone is in it to stay alive. Some people dont know how to figure out what their costs are till they run out of money.
In time, the low bidders will get in trouble unless they are very effecient and can make money at those prices.
I have seen contractors who were low bidders who were the most effecient of their trade and were the most profitable.
Re. builders making all their money off the land, I dont know where you read that, but that business plan wont work for long.
I worked for a national builder that paid top dollar for their land, bought it under conditional agreement with the developer, took posession of the lot after they had a customer and were ready to start construction. (paid retail ++ for land) and were an EXTREMELY profitable builder.
Oh, by the way, they still are profitable and still in the top 10 in the country and thank goodness I still own some ESOP Stock shares.
We all had better plan on being profitable on everything we do cause some jobs dont go as planned!
thats my 2 cents worth.
Wow, I would pay you $1,200 for a 1,200 SF house. We pay $400 for a 20 yard dumpster and $500 for a 30 yard. I think a 1,200 SF house would be three dumpsters easily.
Is VA in your service area?
Jon Blakemore
RappahannockINC.com Fredericksburg, VA
someone can always do something cheaper....
just a guess...
guy does most of the work himself,
might have a place to dump free... like a gulley on his own land (i've seen this)
might burn all the wood...
so he just might not have any dump fees... which wouldn't surprise me
and might not have any insurance... again would surprise me...
and he might be make'n money.... wouldn't surprise me
I have a friend in the garbage biz ... they pay to dump by the yard... he pulls his bins to his yard where they dump em all and crush, grind & sort out the metal... the ground wood he sells to someone for pennies but it doesn't go to the dump... the concrete he sells for pennies to the readymix folks who grind & reuse it... he stays competitive and makes money...
p
I used to drive by a place that ground up scrap construction wood and turned it into shredded mulch. They had a mountain of scrap that they pulled the fasteners out of and a mountain of shredded mulch, some colored, some plain.Down the road was a lanscape supply. I stopped in one slow day and the girl working the desk was chatty, giving away her wholesale pricing. She explained that the guy down the street was charging her more per yard for his product than her normal source. Her normal source only shipped large quantities downstate though. So, she bought plenty of the local overpriced stuff and sold a lot of it...at higher prices too than the other product. This is a case where the debris haulers were making a little on every aspect of the job. We looked into the purchase of one of those shredders and they could be bought for 125k back then. When we did our business plan research, we had the same idea: recycle everything. Back then, the builders were short labor so bad that they would hire anyone and didn't care how large the scrap piles were. They had some impressive scrap piles and often there would be 3-400 dollars of useable lumber in the pile! Bob's next test date: 12/10/07
this guys wood shreader sends the shreaded material thru a magnet after it's shreaded... they shread a ton of pallets... the crusher (500k used) they used for concrete does the same for the wire & rebar...
as it was told to me... the guys haul'n in the wood & concrete might get enough to cover fuel costs sometimes depending on the market they pay to "dump" it there for upto 25% of what it would cost em to take it to the dump... BUT they save in dump fees
p
I used to drive by a place that ground up scrap construction wood and turned it into shredded mulch. They had a mountain of scrap that they pulled the fasteners out of and a mountain of shredded mulch, some colored, some plain.
About 22 years ago, My dad came to me with a bunch of brochures about a trailer mounted tub grinder, waste containers and roll-off trucks.
He had a grand idea about putting "Our" containers on a site. One for wood only, one for Drywall and one for metals.
The drywall would get ground up and sold back to the drywall manufacturer.
The wood would get ground into mulch
The metals would be recycled thru a scrap yard.
I was working as a roofer then. Subbing from a big contractor and doing a few of my own. I thought dad was "F*&%^%$ insane" for wanting to make such a large investment in "Scraps"
Fast forward 22 years.
A friend of mine owns a scrap yard and some containers. Mostly metal.
The conversation comes around to "Dad's Plan" one day and he laughs. Few days later he drops off one of his trade publications with a lengthy article about a guy in his early 40's living a grand life because of his success running a business that owns grinders and dumpsters and trucks and................................Damn.....it's too painful to repeat again!!!!!
like a gulley on his own land (i've seen this)(quote)My neighbor (friend of mine) owns the turf (25 acres)next to mine........beautiful land, secluded old log house, barn, large cave spring............280 tires in the creek.....more junk buried in a ravine.The place was a virtual junk yard. Seems the old guy who once owned it let people dump there for a few bucks.These guys down here pick up junk (I pay 88.00 a year) and take it to their land and fill in ravines with it.....damnest thing you ever seen.
scrap is so high now... guys that use to crush and bury cars... are now dig'n em back up and haul'n in for scrap... friday we were clean'n up... we took in a load of alum and a load of steel... and got $717.00 not too bad... monday we'll haul another load of steel... some old motors & junk...
man it's hard on me... what others see as scrap... i see as my parts dept.
p