Hello everyone. I have a question hopefully someone can answer.
Three years ago I stopped working as a self-employed finish carpenter/home remodeler to follow my wife around the world in her job as a Naval physician. This next fall we will finally settle down. At that time I am planning to build new residential homes. I am currently trying to get all my facts straight.
Can anybody give me an approximate figure on the amount the builder gets from the sale of a house? I am looking at first building smaller homes (3br, 2 baths) around $150,000 in the Kansas City area. Assume that the house sells quickly with an agent and all work is done by subcontractors.
I realize that there are potentially many variables. I am just trying to get a rough figure for initial planning purposes.
Another question I have is: How much does the bank usually require the builder have in capital to build a spec house?
Any insights would be greatly appreciated.
Thank you, Greg.
Replies
Sorry Greg , but way too broad of a question to give an answer to. But I have a question for you. How did your wife manage to become a naval physican? Doesn't she ever get tired of belly buttons?? enquiring minds want to know
As others have said there are far too many variables to give numbers.. However I see a lot of fincial statements and the general rule seems to be around 20% .. Too often I've seen that Piffed away to nothing or worse. One local contractor hasn't shown a profit in twenty years. He dodges the IRS by having things in his kids name etc. thus on paper he owns nothing. Sooner or later the IRS will have him spend some time behind bars. Some contractors earn way above that but they seem to be able to controll everything to the nail and have been doing things for long enough that they know the pit falls..
Cash involvement..
It depends on your relationship with the bank.. 10 to 20% is required for those with less than sterling, long time credit relationship. Sometimes they let you pledge your assests in lue of cash..
Instead of starting out on your own, you might do a couple of projects with a contractor who is well known. Once you satisfy him he may do you the honor of introducing you to his banker and vouching for your abilities..
Ask Boss Hog.
:)
Well, ya know there can't be a thread on spec houses without me chiming in.................(-:
First read my Spec House from Hell thread.
Around here, I figure most guys are lucky to walk away with 5% on a spec house. If my Spec House from Hell sells tomorrow for the asking price, I figure I'll lose about $15,000.
If you have no prior building experience, and no business experience, and can't finance the project at least 50% with out of pocket capital, I wouldn't suggest doing it.
I think myself that we have more machinery of government than is necessary, too many parasites living on the labor of the industrious. [Thomas Jefferson, 1824]
you need to get a real estate agent such as my wife to do a CMA.....comparative market analysis to see what other houses have sold for in your area like yours.
BE well
andy
My life is my practice!
http://CLIFFORDRENOVATIONS.COM