Gross Margin Calculation for New Construction

[Devin James]

Gross Margin is an important calculation for developers/builders.

Gross Margin = Gross Profit / Revenue

We shoot for a 20% gross margin on our New Construction Homes

Real #’s:

Home Sales Price: $374K

• Closing Cost: $18,700
• Cost of Construction: $258K
• Land Cost: $30K

Gross Profit = $67K

$67K/$374K = 17.9% Gross Margin

Came slightly short of our goal of 20%

Homes Values and Build Costs are constantly fluctuating

I wish we had a crystal ball

[Robert Ellis]

Quote from @Devin James:

Gross Margin is an important calculation for developers/builders.

Gross Margin = Gross Profit / Revenue

We shoot for a 20% gross margin on our New Construction Homes

Real #’s:

Home Sales Price: $374K

• Closing Cost: $18,700
• Cost of Construction: $258K
• Land Cost: $30K

Gross Profit = $67K

$67K/$374K = 17.9% Gross Margin

Came slightly short of our goal of 20%

Homes Values and Build Costs are constantly fluctuating

I wish we had a crystal ball

 build larger homes. average new build in our market is 2200 square feet, 4 beds, 3 baths, 2 car garage and sells for 515k. construction costs lower if design is good and find the median or average home sale price and push that up. my guess is you built too small. 347k is cheap. we target 429-479k price range in columbus ohio for single family homes and also only purchase close to urban core where premiums are 20% higher and we build smaller like 1500 sq ft where price per square foot goes up.