Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
For well over 30 years we have done spec, new construction. From office buildings, office parks, subdivisions, office/retail condos, etc. We haven't really worked doing contract jobs for others. However; we have had people looking at our current projects, but needing a home in a different city, asking if we'd build for them.
We handle all of our preliminary design, etc. and use an architect and engineer to sign of on them, and then we sub out most of the other work, except dirt work we do ourselves.
How do you charge when doing a contract job, if someone purchases the land and wants to hire you to develop it for them (permitting, project management, etc.)
Contractor · Denver, CO · Member since 2009 · 399 posts · 166 votes
10y
There are several ways you could structure this.
1. Price it as a designer and price it as a General Contractor. Two separate contracts. Charge the retail price that they would purchase it for. Build the profit into your construction costs and get paid in normal draws as design and construction proceed. It's the benefit of pre selling a spec, but the headache of having the client on board from the beginning.
2. Another way would be to finance the build your self with a purchase contract to close a set amount of days after C of O. Then they close on the property. (not sure about this if they own the land?)
3. Charge a straight fee for your services plus the cost of work.
4. You could do a design build contract.
There's lots of templates out there. I would start with the AIA and Construction DOCs series. You can get both for free to review as drafts. I personally think they are both too cumbersome for single family residential, but that's just my opinion. How transparent you want to be with your costs is up to you.
Contractor · Denver, CO · Member since 2009 · 399 posts · 166 votes
10y
There are several ways you could structure this.
1. Price it as a designer and price it as a General Contractor. Two separate contracts. Charge the retail price that they would purchase it for. Build the profit into your construction costs and get paid in normal draws as design and construction proceed. It's the benefit of pre selling a spec, but the headache of having the client on board from the beginning.
2. Another way would be to finance the build your self with a purchase contract to close a set amount of days after C of O. Then they close on the property. (not sure about this if they own the land?)
3. Charge a straight fee for your services plus the cost of work.
4. You could do a design build contract.
There's lots of templates out there. I would start with the AIA and Construction DOCs series. You can get both for free to review as drafts. I personally think they are both too cumbersome for single family residential, but that's just my opinion. How transparent you want to be with your costs is up to you.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
10y
@Emilio Ramirez Thanks. When doing a subdivision it was basically like a spec. We had set plans, owned the lot, and built with the upgrades already included. We don't like to deal with upgrades unless it's absolutely necessary. Any upgrades we give to people at our cost, and don't upcharge like some people do, at least so far we never have.
We have also done commercial projects where it was a build to suit, purchased the land, and put the deal together and sold at a preset price.
I was curious how others change when acting as the General on a contract job. All of our stuff has been so intermingled (real estate brokers, contractors, developers all packaged together) that I'm not sure what it breaks out to for GC only. Does that make sense?
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
10y
I have a small experience with developers. But I'll share it. I had a road network contract before, then the developer asked me if I am able to build duplexes, gathered all heads and gave a go, long story short, got a contract for 4 duplexes, the contract I got was simple, separate contract for each duplex, and line item for class of work like a detailed SOV should, i have line items for foundation, framing, until painting and landscape, draws were weekly because I didn't trust the developer Fridays are inspections for % work complete and Tuesday was payday. On second round they hired our designers, architects, and estimators for their next batch, had a separate contract for it. I'd like a contract to be as clear as possible so clients can plug and play. aon the GC side changes are pre-determined mark-up on materials 15% (surcharge 15% also for removed scope, and +15% material handling fee/markup), then labor rates are pre-determined also 55/hr electrician/plumber 45/hr painter, etc. On the A&E side, I would dedicate/charge 1-2 person for the whole contract and projected hours of A&E, but I don't deal eith A&E works often, so my practices might be off-standard. Multiple contracts is my preference, one for A&E and one for GC. Not sure if that helps.
Contractor · Los Angeles, CA · Member since 2015 · 4k+ posts · 1k+ votes
10y
I asked the superintendent at site at one of my coty projects. They charge theirs at number of people at site and in the office.
On thing that came to my mind was reverse engineering it. If selling price is 2M, say you drop it to 1.9 less land less financing costs less everything else that the client saves or does not have to pay because they're not really going into sale process.
I'm doing more and more custom projects, it seems.
I did a lot of research and ultimately decided to build on a flat-fee model for ground-up houses. The fee has 2 levels, mostly depending on the size/cost of the final house. I charge 20% for change orders, but only do so on change orders with substantial impact. In other words, if the change order doesn't cause me more work I'm not going to charge for it, but if they want to move a wall that is already built, there will be a charge for it because they've changed the scope of the work and it requires more of my time.
This model immediately builds trust with my clients. They know what my fee will be and I have no incentive for them to spend more money. One of the things I require from them though is that pretty much all design decisions are made before we break ground. They can work through things like tile choices during construction, but we're not going to design a showcase staircase in the field like I'd do with a spec.
Contractor · Denver, CO · Member since 2009 · 399 posts · 166 votes
10y
GC only is still pretty vague. You could use all the structures I mentioned as a GC. Are you bidding plans and specs? Then it's your cost plus overhead plus your markup.
Is it more of a negotiated position? Are you providing preconstruction services? Then maybe you want to do cost plus a fee... or a guranteed maximum price.
Anyway you slice it you are going to have labor + materials + overhead + profit. How you structure it depends largely on your relationship with the client and their chosen project delivery method. Design-bid-build, design build, CM, CMAR, Cost plus a fee, T & M... etc.
If you're asking what the typical markup is, I can tell you anywhere from 2%-40% or higher. :) When I consider markup, I look at percentages, but ultimately I have to answer for myself, "What is the client willing to pay?" and "What is the minimum I'm willing to accept?"