I have a question of any of you guys that build a good number of homes each year. You build two homes next door to each other on identical lots. One home is 2800 sq ft, the other is 3800 sq ft. Assuming that both houses are the same construction and quality, do you make substantially more profit on the larger home ? Or do the increased costs of building the larger home offset the increased price ?
Thanks,
Bill
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Replies
This is a " How long is a piece of string?" type question. There are many many variables to this equation.
The bottom line is market forces. What are houses bringing in the area. It is easy to overcapitalize and build a bigger house. Try selling and you soon find yourself up the creek without a paddle.
However assuming market force is not an issue, I'll give some figures from my neck of the woods. Assuming this is either a spec or a contract.
Land $125,000
To have a 2800 sft house built on it $ 154,000 ( bare house no floor coverings no landscaping )
Selling price $ 330,000
A 3800 sft house will cost $209,000. Add on the land and you're up for $334,000 costs. However in this case you have reached market resistence and either won't sell , or will have it listed for a long time.
Having said all that, it costs me, as a Builder, less on a sft basis to build a larger house, than a smaller one. Therefore there is more profit in constructing a larger house, but a lot more risk in selling.
regards
mark
quittintime