Tuesday, August 13, 2019

Question of the Week - Your Net Profit

In the final analysis, how much NET profit after all taxes and expenses did you make on the last house you built?

  • Less than 1%
  • Between 1-3%
  • More than 3%
  • I really don’t know

Also tell us (Anonymously) if you are satisfied with that percentage


Anonymous said...

I made less than 2% on my last house. It used to be a lot more but it seems that the expenses keep going up after I sign the contract. How do I charge my customer for the price of my standard window or flooring going up 8-15%?

Coach, your question made me really look at my last house again. I sold it for $327,775. Not counting the small amount I pay myself every week which I expense, my business only made $6,077 on a house that sold for more than a third of a million dollars.

If a realtor sold a $237,000 listing they would make almost $20,000 and wouldn't have one tenth of the problems I had building it.

Tom Hardiman said...

How do you NOT charge your customer for the price of your materials going up? I think we are still stuck on "modular must be cheaper than site built" mentality. Good luck.

Anonymous said...

If you are building at the current mean average number of units for a small builder ( 5 homes a year ) close the doors and find something else to do in your life. Your business structure and contract agreements are not providing a sustainable lifestyle.

Tom I agree with your comment that may modular home builders think and act like we need to price below on your lot site builders when in fact we should be the same or slight premium based on delivery time from set to completion. Think about it most site builders are 20-30 days from foundation to dry in and we are 1-3 days in most cases. Sell the VALUES not the price.

Anonymous said...

Unfortunately as a consultant I've meet many builders who have no idea of their costs ( direct and indirect ) in the homes they build. When I was framing for the "tassel shoe" builders ( former Atlanta airline pilots ) they may not have known codes and requirements but they understood management and profits so they made sure that their bottom line after costs were 8-14% and in some cases higher. I,also, worked with the "pickup" builders who were happy they has money in the bank at the end of each week plus the ability to buy their toys for hunting and fishing. KNOW YOUR NUMBERS or FACE INSOLVENCY

Anonymous said...

The housing industry here in our mod valleys at least has massive areas of very low density populations, it is indeed semi-rural as is all threw most of the mid Atlantic ,the east in general and certainly also massive areas the northeast...Sooo..national, even regional numbers are grossly irrelevant....so as mentioned in these areas most all the carpenter-turned "builder" folks Ive found to be somewhat clueless..TOTAL cost-wise!!! And for a moment..Forget the hard cost thing, just for a moment..and forget those running increases you all site for a moment! The biggest gap I uncovered over the years in my scattered lot building era's bookkeeping.. was NOT hard cost!! ..it rather was the evasive indirects,the soft cost, the accurate costing of overhead..per unit, per winter, etc! Think about THAT for a moment if you wanta really stay in this business..Frankly, I find it humorous to hear complaints about the big bucks realtors make at your expense...been there too..and my experience was that sometimes nearly 50% or more of most of those BIG commission.. really went to evasive indirect,or the not so obvious soft costs! Thats were a professional homebuilder in this rural homebuilding industry needs a homebuilder savie CPA!, and not just once a year, or even just quarterly. Think about this one finally..way back when I built Canadian precut kit packages from Eastern Canada's Viceroy, I used there rural lake country Ontario in place cost sheet numbers ie in CDN dollars, and simply told the subs here that thats what you'll be paid and remember exchange was 125..AND rarely did I find even very experienced carpenter-framers,roofer, finish people who could actually do their own numbers or even it they kinda could, they really couldn't back them up..my late brother in law used to do all the costing for several of his HVAC client subs, as even they didnt know how to add..sad its it!