GC: Average Total Labor Cost on New Build

Lender · rate.bid · Member since 2022 · 324 posts · 62 votes

Question for the GC's out there... in markets such as Charlotte, Nashville, New Orleans, Orlando etc (Southeast), what would most GC's quote as a ballpark estimate for total labor cost (if owner is supplying all building materials) on a 1500-1800 sf new build. If contingent on actual floor plan, send a PM.

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Matthew Paul

Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes

Held hostage ? Price gouging schemes ? I dont think you know how a contracting business is run , the intent is to make a profit . Everything a contractor does has a mark up on it .

But I guess you are the guy who brings his own steak to a restaurant and asks how much just to cook and serve it ?

I have been in the contracting business 35 years , and the ONLY contractors that work without supplying materials do piece work for track builders . They dont leave a jobsite for years . If you have that much work , you could find subs for that , but not a GC .

Either way you go , the GC and the subs are still going to make the same amount of money in the end . You wont save anything . Probably will cost you more . And if you supply materials , you get no warranty .

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Frank Greg
OP
Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
3y

@Jay Hinrichs
Might be. Ballpark, what is your cureent target total cost per home as a % of the $650-900k sales price?
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
3y
Quote from @Frank Greg:

@Jay Hinrichs
Might be. Ballpark, what is your cureent target total cost per home as a % of the $650-900k sales price?
well i guess to figure out if our deal is a great deal is in the eye of the beholder and we feel it is for many reasons not just cost there are other considerations.
costs as you know have been all over the map going way up ( when lumber spiked) to back down like now.. And keep in mind there is land cost in that sale price which is a sunk price for us since we buy the dirt from the farmer entitle it and do the horizontal work then go vertical..
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Frank Greg
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Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
3y
@Jay Hinrichswell i guess to figure out if our deal is a great deal is in the eye of the beholder and we feel it is for many reasons not just cost there are other considerations.
costs as you know have been all over the map going way up ( when lumber spiked) to back down like now.. And keep in mind there is land cost in that sale price which is a sunk price for us since we buy the dirt from the farmer entitle it and do the horizontal work then go vertical..

Some certainly did get affected by the supply chain issues. If you are really trying to determine how your cost and margins fare compared to other builders, you had mentioned some of the national production outfits for instance as possibly benefiting from lower cost due to scale.

Below is financials from one of such entities so you can extrapolate the data to your specific case. The percentages should mirror most other builders as it covers 4 fiscal periods:

Without including any financing expense, they are at 82% (total materials and non materials cost), which obviously makes your financing rate and project duration, vital issues to get a good hold and control of. If the industry has an average materials cost at 70%, we may require 50% or less. In this case, Cost of Sales probably also includes land and not just materials.
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Jeffrey Stasz
Investor · Charleston , SC · Member since 2014 · 160 posts · 142 votes
3y
@Frank Greg

What an unusual conversation...but I'll play.

For background I am a GC doing infill rehabs and new builds in Charleston SC. Typical house is 800-2mm.

Only way I can really answer this is by going backwards.

So: Typically see labor as about 60% of a build. We aim for gross margins of 50-60% (Industry Standard) with net profit between 10-20%. We do under 5mm a year in gross revenue.

So to get "your number" take your materials total and multiply by 1.5 then use that as the base for your labor estimate. So the marked up number is your 40%. Infer your labor cost from there. How it breaks across trades is unknown.

I do agree with others here that this does not seem like a great approach. And for a seasoned developer to insist on cutting out the GC would be a red flag.

We no longer allow clients to be responsible for anything that goes into a house. Too many headaches and too much additional work for us as the builder.

Also...before you argue with me about the 50-60% markup please trust that I have done A LOT of diligence on this including getting access to many many many other companies books and working with coaches that have been in this industry for years. That is the number. How it get's computed varies.
Does this number come down with scale? Yes. Can it be as little as 2%? Yes. Does the owner of that 2% net profit contracting business already have a jet? Yes.

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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
Quote from @Jeffrey Stasz:

We no longer allow clients to be responsible for anything that goes into a house. Too many headaches and too much additional work for us as the builder.

Right. Nothing. All the client will do is screw up the job and then blame us for it...I used to try and ban them from the jobsite, but that is tough to do. Best if they go to Europe for the duration....
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Frank Greg
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Lender · rate.bid · Member since 2022 · 324 posts · 62 votes
3y

We were able to deduce costs based on the financials of other developers.

When we initially inquired about what other contractors margins and average labor costs were.. the conversation did seem to drift or focus on comments about which contractor would or would not work on a labor only basis which wasn't quite the question.

Its not if we are thinking about having the contractor source for materials -- its not an option. But they'll be retaining them on a limited basis to supervise project and personnel staff.
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Patrick Knapp
Contractor · Wake Forest, NC · Member since 2019 · 138 posts · 132 votes
3y
@Frank Greg
Prices are $175-250 on average in raleigh
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
3y
Just for labor?
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Franklin Carroll
Member since 2024 · 1 post · 1 vote
2y
No, Greg, Bruce is right.
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Caroline Gerardo
Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes
2y
@Bruce Woodruff what Frank wants is the price to hire guys standing outside of Home Depot at 5:30 AM. What you know is those guys don't have tools, a car, a license... Maybe they are okay to be watched while they work in the garden but don't have the leadership, knowledge, math, connections, skills... They cost $30 an hour now, was $20 before Covid. Owner needs to pick them up in his truck every day, pray that there are no parts to return needed and unavailable, watch for the health and safety of every grain of sand, serve food, motivate, problem solve and never cry.

Maybe Frank can find a GC who will do this. I expect the delays will mount unexpected costs and Frank will be hiring a series of GC's who lien the property after they quit.

How hot is it in Phoenix @Bruce Woodruff I moved to DC, having fun in the weeds of multifamily.

@Frank Greg Look for someone young and hungry. Pay them $180 an hour and monitor like a mom, and both the owner and contractor will learn.
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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
2y
@Caroline Gerardo - Great take as usual!
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Joshua VanName
Member since 2024 · 10 posts · 13 votes
2y
Quote from @Frank Greg:

@Bruce Woodruff:

Sounds like a personal problem. Owner doesn't have to explain why they are deciding to supply the materials. You know nothing about the project to be rambling about project success. Mistakes & Delays = Zero!

He is absolutely correct. Nothing but headaches. You sir are the one rambling.
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