Hey! I recently bought a book called "The Complete Guide to Contracting Your Home" by Kent Lester and Dave Mcguerty (link to book below). At the beginning of the book the authors claim you can save up to 42% when you build a home by acting as your own general contractor and real estate agent. The break down of the 42% is 7% real estate commission, 20% builder markup, 4% savings on material purchases, 2% cost saving construction, and 9% doing work yourself. From what I have seen most spec builders expect 15-20% profit on a build which is much lower than 42%. Does the up to 42% claim sound false or too good to be true? Any responses would be appreciated.
I would keep in mind that a good GC should be able to build at a much lower cost to help offset their markup. Their is an economy of scale involved, efficiency and buying power that a homeowner doesn't have, simply because they are not in the business of building, day in / day out.
Agree with Michael. Plus builders are getting closer to 10% these days. Not sure the savings are worth bearing all the risk and headaches.
I mean, it's possible, but...
1. (7%) Are you really going to buy something without a real estate agent?
2. (20%) Are you really going to save this? Or end up spending twice as much time as a GC would because you're trying to figure things out? I've never seen a builder markup over 15% anyway.
3. (4%) Material savings? You, the general consumer will not get any savings here. If anything the builders have developed relationships that provide bulk discounts. You'll probably pay retail for most materials unless you have a source.
4. (2%) Cost saving construction? What does that even mean? When you're not a GC who knows what they are doing I wouldn't put it past the subs to "convince you" that you need something you probably don't.
5. (9%) Doing the work yourself. Ok. You probably could do that one if you know how to paint / drywall / install cabinets / tile / lay floors, etc. etc.
My guess is that while this is all very appealing, you may save 9% or more but it may take you twice, or three times as long to finish.
What happens when a construction conflict arises and because you're not sure how to solve it, all your subs pull off the job until you figure it out. When you're ready to start again they say "Ok. But we have to finish this job now. We can be back in 6 weeks."
Find a good GC. They will be your best friend. Not sure how? Call some architects and ask who the good ones are.
42pct is pie in the sky. I own that book btw. I was a builder in Alabama before i took a job out of state.
Profit on specs is really dependent on market conditions at the time of sale. My last build was a 200000 project and I made 10k on it, of course that was 2008.
Thats absurd and totally unrealistic. At the end of the day if we can make 12% we are golden. National companies exceed 20+% but they also factor in development fees etc...
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