Every Contractor Is Treating Me As A Client And Not As Developer

CO · Member since 2014 · 166 posts · 44 votes

I'm currently trying to build my first infill spec home. I have most of my soft costs figured out and have a piece of land I'm ready to go under contract on and have vetted. I now need an estimate on the cost of what it would take to build the home I have plans for. This is where I'm having a problem.

I've contacted about 9 general contractors and home builders and they either don't respond or the bid they give me back seems to be priced as if I'm a client building a custom home (I guess I technically am). I make it clear that I'm an investor/developer looking to sell the home once it's built. The plans I have are simple. Cost-effective. I do tell them that I will be building several of these a year if this first home works out but still nothing.

I can see why they're charging me as if I'm a client building a custom home to live in because why should they lower their price just for me? They're getting plenty of business from custom clients so why take my work for less? I guess I'm struggling to find where I fit in here in terms of making a profit. Yes, ill be taking all of the financial risks but so are their custom clients.

How can I better approach these contractors to make it possible to use their services and still make a profit? Or am I just approaching the wrong ones?

Thank you all!

13 Reply

291 views

Most Popular Reply

Account Closed

Eastern Michigan · Member since 2018 · 81 posts · 144 votes

When you go to sell the house if an "investor" wants to buy it, despite no history of them being an investor or guarantee of future sales- are you going to lower you sales price? It would seem to be the same logic you are using on the contractors.

31 Reply

See this reply in the discussion

113 Replies

Jump to latestLatest

Sort by

Lynnette E.
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
5y
The only way you will get a profit on this situation on the first home is if you are building in an area where the home price will go up substantially during the time you are building it.
But, if you do one build and are not a pain customer constantly changing things, wasting the contractors time with questions or demands, he may give you a discount on a future house.
Then again, after one build you may never want to see that contractor again!
2 Reply
Atisha Fordyce
Rental Property Investor · Philadelphia, PA · Member since 2021 · 6 posts · 4 votes
5y
@Johnny L. Well if you won’t be able to turn a profit, it’s a bad deal. Lesson learned.
1 Reply
David Avery
Flipper/Rehabber · Phoenix Arizona · Member since 2020 · 1k+ posts · 686 votes
5y
Garden of the Gods, now that is a great subject and one of the most attractive, nature parks in the Nation.
We should talk about this.
Johnny, I would kick back for a couple months and reflect on the post you have been given by so many people with so much experience.
Just chill for a moment and think out your dreams to build homes!
Or you can hope that some very hungry contractor is going to knock on your front door with a truck
full of tools and equipment ready to start your developing dreams!
Contractors are busy and need to schedule your house in if you have everything they want to hear.
I really need some coffee right now!!
What they want to here!
Not a discount, not anything but a retainer and plans and let them do their job.
Good luck!!
1 Reply
Account Closed
Rental Property Investor · Brooke Park Drive · Member since 2018 · 1k+ posts · 2k+ votes
5y
You obviously didn’t read “never split the difference” or you would have negotiated them down by now
2 Reply
Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
5y
I once had a guy tell me he was building 10 houses , so he needs my cheapest price and I would get them all . I to;d him " Great you pay full price on the first 9 houses and I will do the last one at 1/2 price "
1 Reply
Nik Moushon
Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
5y
Originally posted by @James Hamling:
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
@Johnny L. What follows is coming from me as a GC/Builder with many years in development.

First advice, STOP calling yourself a developer! I guarantee it's making bad rapport right off the bat. If your talking to builders the way you are here, chanting "I'm a developer, developer, developer..... because I want to pay a GC to build 1 home". They are laughing at you inside, and outside the moment that phone hangs up.

A developer, develops, it's that simple. Your a client, your looking to build 1 home, that's NOT developing, not even close. Are you getting zoning approved? Installing roads, water & sewer laterals, negotiating utility easements, doing soil corrections, navigating environmental impact studies???? These are the things a DEVELOPER does, your just some guy asking a GC to build a home, that's a client. How you use that home we, GC/Builders across the world, couldn't care less. Sell it, burn it to the ground, run a hostel or brothel, it means exactly 0 to us.

Next problem, you trying to coax them with promises of all the work you will bringing, yet your only asking for 1 single property to be built, immediately the BS meter hits the ceiling for them and you just put yourself in the dog house, seriously. Do you know how many calls per week we get like that? We get conditioned that those blow-hards are waste of time. Now, not saying your full of it, I am telling you that's how you making yourself look. You'd be better off keeping it to the facts of "hey, I'm looking for the right builder to build my home, I got big hopes and dreams but for now it's just this 1 home".

Lastly, you gotta get real. GC/Builders are King Sh#t of Tu#d mountain right now, they don't need you or your work, they don't need anyone's really, they rule the day, fact. If your even just a somewhat ok builder your scheduled out at least a year in advance and turning down 19 projects for every 1 that you accept. Exactly how is it in their interest to take your build? That's the brutal truth of it that you need to answer, how is it in their best interest? Because your going to bring them a bunch more work, yeah your bringing sand to a beach, congratulations. No, you gotta make it work for them, it's that simple.

Your best option is to partner with a builder, give them a slice of that profit pie, as much as 49%. Fact is builders don't have endless ability to scale, labor is hard enough to get and retain to stay at size more or less scale up even 10%, yeah, good luck at that. And also, everyone IS trying to scale up, it's not that nobody wants to it's that the bodies simply are not there. So each builder is working on a calendar that has a certain capacity of builds, they are saying WHAT builds do I give a slot for, because each slot has 20 different projects begging to be it. Your best smartest move is to suck-up your pride and go kiss the ring, present the offer to be there 51% partner, put up all the capital so they will build the properties. On the upside there gonna not just build but will care about that build because it matters to them AND if you negotiate well you can get it done at net 0 so the 49% wont actually be a full 49% because your only paying cost or cost + overhead, no builder profit on build.

But seriously, do yourself a favor and please stop calling yourself a developer, it's nauseating. Developers work there arse off and take huge risk all to create a site from 0 that builders can than build upon, they don't do individual properties, they build SITES, neighborhoods, communities, cities.

Thanks for the reply! Ill definitely look into partnership route!
I appreciate it! From one developer to another ;)
I am a Builder, GC and Realtor, NOT a developer.... You, my friend, are as much a chimpanzee as you are a developer.

I agree with you the OP needs to stop calling himself a developer but...you dont need to be a jerk about it.
1 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
5y
Originally posted by @Nik Moushon:
Originally posted by @James Hamling:
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
@Johnny L. What follows is coming from me as a GC/Builder with many years in development.

First advice, STOP calling yourself a developer! I guarantee it's making bad rapport right off the bat. If your talking to builders the way you are here, chanting "I'm a developer, developer, developer..... because I want to pay a GC to build 1 home". They are laughing at you inside, and outside the moment that phone hangs up.

A developer, develops, it's that simple. Your a client, your looking to build 1 home, that's NOT developing, not even close. Are you getting zoning approved? Installing roads, water & sewer laterals, negotiating utility easements, doing soil corrections, navigating environmental impact studies???? These are the things a DEVELOPER does, your just some guy asking a GC to build a home, that's a client. How you use that home we, GC/Builders across the world, couldn't care less. Sell it, burn it to the ground, run a hostel or brothel, it means exactly 0 to us.

Next problem, you trying to coax them with promises of all the work you will bringing, yet your only asking for 1 single property to be built, immediately the BS meter hits the ceiling for them and you just put yourself in the dog house, seriously. Do you know how many calls per week we get like that? We get conditioned that those blow-hards are waste of time. Now, not saying your full of it, I am telling you that's how you making yourself look. You'd be better off keeping it to the facts of "hey, I'm looking for the right builder to build my home, I got big hopes and dreams but for now it's just this 1 home".

Lastly, you gotta get real. GC/Builders are King Sh#t of Tu#d mountain right now, they don't need you or your work, they don't need anyone's really, they rule the day, fact. If your even just a somewhat ok builder your scheduled out at least a year in advance and turning down 19 projects for every 1 that you accept. Exactly how is it in their interest to take your build? That's the brutal truth of it that you need to answer, how is it in their best interest? Because your going to bring them a bunch more work, yeah your bringing sand to a beach, congratulations. No, you gotta make it work for them, it's that simple.

Your best option is to partner with a builder, give them a slice of that profit pie, as much as 49%. Fact is builders don't have endless ability to scale, labor is hard enough to get and retain to stay at size more or less scale up even 10%, yeah, good luck at that. And also, everyone IS trying to scale up, it's not that nobody wants to it's that the bodies simply are not there. So each builder is working on a calendar that has a certain capacity of builds, they are saying WHAT builds do I give a slot for, because each slot has 20 different projects begging to be it. Your best smartest move is to suck-up your pride and go kiss the ring, present the offer to be there 51% partner, put up all the capital so they will build the properties. On the upside there gonna not just build but will care about that build because it matters to them AND if you negotiate well you can get it done at net 0 so the 49% wont actually be a full 49% because your only paying cost or cost + overhead, no builder profit on build.

But seriously, do yourself a favor and please stop calling yourself a developer, it's nauseating. Developers work there arse off and take huge risk all to create a site from 0 that builders can than build upon, they don't do individual properties, they build SITES, neighborhoods, communities, cities.

Thanks for the reply! Ill definitely look into partnership route!
I appreciate it! From one developer to another ;)
I am a Builder, GC and Realtor, NOT a developer.... You, my friend, are as much a chimpanzee as you are a developer.

I agree with you the OP needs to stop calling himself a developer but...you dont need to be a jerk about it.

As an old school Master Journey Carpenter I politely disagree. For those cut of our cloth, we first will take the time to help correct a person in nice PC manner. You do it a 2nd time, like "Skippy" did, on purpose to antagonize I might add, were gonna make it crystal clear, as I did. 3rd time, be good at ducking because a tool is flying through the air your direction.

0 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
5y
Originally posted by @Matthew Paul:
I once had a guy tell me he was building 10 houses , so he needs my cheapest price and I would get them all . I to;d him " Great you pay full price on the first 9 houses and I will do the last one at 1/2 price "

Lol.
Ya know, why is it people think that simply buying something from a GC should get you a discount? When you go to the grocery store do you say "hey, I'm gonna buy groceries here every week so how about you give me 25% off" or when you go to Applebee's do you tell them since your buying 4 dinners you need 10% off? I don't understand the disconnect in thinking home building and construction is some alternate universe of economics from virtually everywhere else you purchase anything in life.
Here is the insider information that all us GC's talk about when we get together, we laugh at you, seriously. We joke on how we will f-with you, that the second you start talking about all the "big" stuff your gonna do, we sniff you out in a second, so we will joke how we tripple prices and then "let" you chizzle us down to double, lol.
Developers, REAL developers, like Pulte Homes don't even play that annoying BS, and there like Zeus of home building. They give us an opportunity to bid a project, that's it, simple. We bid, they review, consider whats being offered for what price, make a choice and go forward. None of this "well, I'm gonna be king turd of poo mountain some day so how about you take $17.00 a day to make me millions, sound good" no, it sounds like your a moron and we have 0 interest working with morons because there checks bounce and you annoy us throughout the project with moron ideas and moron questions.
THATS the reality of it. We the trades-people know the dirty little secret that you need us, full stop. Without us you get exactly 0 done, make exactly 0 money. And feel free to use the CL tail-lighters, that's a-ok with us because not only will you be calling us back to do it but now it's even more to fix what those nimrods messed up and made worse.
If you want to get a GC on your side, show us respect, we eat it up like a fatboy on cake (I know, I am both the GC and fatboy, lol). Mutual respect and win-win. We will move mountains for those who we have mutual respect for, make the impossible happen time and time again.
Ok.... rant of the day, check. Back to business.
2 Reply
Nik Moushon
Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
5y
@Johnny L.

I wont waste time echoing what a lot of others what said but will add something new.
Even though this is not a development, you can still make money doing new builds, but you need to find ways to add value. Its incredibly hard right now to make money on new builds when you are just a client. Material costs are through the roof right now on pretty much everything. For example, a piece of wood sheathing went up $5 a sheet where I am at in just one month! So this material price increase have absolutely eaten ALL the profit margins that would be a typical in-fill build that you are doing. Even the demand from the housing shortage can't make up the difference.

First thing I would suggest, since you've invested a lot of time already into this specific lot (hopefully you havent bought it yet) is to look into Construction Consultants. The title is pretty broad title, so not every CC will do what you are looking for, but there are some that will act as a "partial GC". By that I mean they will act as a typical GC but will push some of the work on to you. For example, the one I am working with does all the typical responsibilities of a GC but leaves paying ALL the subs to me. This saves him time, over head costs and liability (so less insurance and risk). So he doesn't charge as much as a typical GC would. He also charged me a fixed fee instead of a percentage and does not charge for COs (Change Orders), which is where most GC will make extra profit and add more costs on to you. Now, I know what I'm doing so the changes I've made during construction (there are always some) have been minimal and mostly do to trying to have to cut costs in this market. I don't know if you'll find anyone like this in your area or not but its worth a look. Maybe you'll be able to find some profit margins...odds are they they wont be enough.

The next thing I would suggest is not building on this specific lot. It sounds like its a market value lot that is targeted to a person looking to build their family home. You need to find a empty lot that is way under market value or one that you can add value to. By that it usually means subdividing a lot. Be warned though, this is not cheap because it requires cash up front. But in this market, especially this market, developing or building anything is very difficult. Prices are all over the place for material and labor and basically impossible to nail down as they are changing daily. If you dont factor in a large enough profit margin or large contingency costs...you will get eaten alive.

Its not impossible to make money here. You just have to be even more cautious and extremely picky right now. Thats how its always been when your at the top of the market bubble....covid just made it worse.
1 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Nik Moushon:
Originally posted by @James Hamling:
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
@Johnny L. What follows is coming from me as a GC/Builder with many years in development.

First advice, STOP calling yourself a developer! I guarantee it's making bad rapport right off the bat. If your talking to builders the way you are here, chanting "I'm a developer, developer, developer..... because I want to pay a GC to build 1 home". They are laughing at you inside, and outside the moment that phone hangs up.

A developer, develops, it's that simple. Your a client, your looking to build 1 home, that's NOT developing, not even close. Are you getting zoning approved? Installing roads, water & sewer laterals, negotiating utility easements, doing soil corrections, navigating environmental impact studies???? These are the things a DEVELOPER does, your just some guy asking a GC to build a home, that's a client. How you use that home we, GC/Builders across the world, couldn't care less. Sell it, burn it to the ground, run a hostel or brothel, it means exactly 0 to us.

Next problem, you trying to coax them with promises of all the work you will bringing, yet your only asking for 1 single property to be built, immediately the BS meter hits the ceiling for them and you just put yourself in the dog house, seriously. Do you know how many calls per week we get like that? We get conditioned that those blow-hards are waste of time. Now, not saying your full of it, I am telling you that's how you making yourself look. You'd be better off keeping it to the facts of "hey, I'm looking for the right builder to build my home, I got big hopes and dreams but for now it's just this 1 home".

Lastly, you gotta get real. GC/Builders are King Sh#t of Tu#d mountain right now, they don't need you or your work, they don't need anyone's really, they rule the day, fact. If your even just a somewhat ok builder your scheduled out at least a year in advance and turning down 19 projects for every 1 that you accept. Exactly how is it in their interest to take your build? That's the brutal truth of it that you need to answer, how is it in their best interest? Because your going to bring them a bunch more work, yeah your bringing sand to a beach, congratulations. No, you gotta make it work for them, it's that simple.

Your best option is to partner with a builder, give them a slice of that profit pie, as much as 49%. Fact is builders don't have endless ability to scale, labor is hard enough to get and retain to stay at size more or less scale up even 10%, yeah, good luck at that. And also, everyone IS trying to scale up, it's not that nobody wants to it's that the bodies simply are not there. So each builder is working on a calendar that has a certain capacity of builds, they are saying WHAT builds do I give a slot for, because each slot has 20 different projects begging to be it. Your best smartest move is to suck-up your pride and go kiss the ring, present the offer to be there 51% partner, put up all the capital so they will build the properties. On the upside there gonna not just build but will care about that build because it matters to them AND if you negotiate well you can get it done at net 0 so the 49% wont actually be a full 49% because your only paying cost or cost + overhead, no builder profit on build.

But seriously, do yourself a favor and please stop calling yourself a developer, it's nauseating. Developers work there arse off and take huge risk all to create a site from 0 that builders can than build upon, they don't do individual properties, they build SITES, neighborhoods, communities, cities.

Thanks for the reply! Ill definitely look into partnership route!
I appreciate it! From one developer to another ;)
I am a Builder, GC and Realtor, NOT a developer.... You, my friend, are as much a chimpanzee as you are a developer.

I agree with you the OP needs to stop calling himself a developer but...you dont need to be a jerk about it.

I agree Nik! He seems to forget that he once was new at this as well and probably didnt use a term or two correctly! Its pretty funny actually!
0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @James Hamling:
Originally posted by @Nik Moushon:
Originally posted by @James Hamling:
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
@Johnny L. What follows is coming from me as a GC/Builder with many years in development.

First advice, STOP calling yourself a developer! I guarantee it's making bad rapport right off the bat. If your talking to builders the way you are here, chanting "I'm a developer, developer, developer..... because I want to pay a GC to build 1 home". They are laughing at you inside, and outside the moment that phone hangs up.

A developer, develops, it's that simple. Your a client, your looking to build 1 home, that's NOT developing, not even close. Are you getting zoning approved? Installing roads, water & sewer laterals, negotiating utility easements, doing soil corrections, navigating environmental impact studies???? These are the things a DEVELOPER does, your just some guy asking a GC to build a home, that's a client. How you use that home we, GC/Builders across the world, couldn't care less. Sell it, burn it to the ground, run a hostel or brothel, it means exactly 0 to us.

Next problem, you trying to coax them with promises of all the work you will bringing, yet your only asking for 1 single property to be built, immediately the BS meter hits the ceiling for them and you just put yourself in the dog house, seriously. Do you know how many calls per week we get like that? We get conditioned that those blow-hards are waste of time. Now, not saying your full of it, I am telling you that's how you making yourself look. You'd be better off keeping it to the facts of "hey, I'm looking for the right builder to build my home, I got big hopes and dreams but for now it's just this 1 home".

Lastly, you gotta get real. GC/Builders are King Sh#t of Tu#d mountain right now, they don't need you or your work, they don't need anyone's really, they rule the day, fact. If your even just a somewhat ok builder your scheduled out at least a year in advance and turning down 19 projects for every 1 that you accept. Exactly how is it in their interest to take your build? That's the brutal truth of it that you need to answer, how is it in their best interest? Because your going to bring them a bunch more work, yeah your bringing sand to a beach, congratulations. No, you gotta make it work for them, it's that simple.

Your best option is to partner with a builder, give them a slice of that profit pie, as much as 49%. Fact is builders don't have endless ability to scale, labor is hard enough to get and retain to stay at size more or less scale up even 10%, yeah, good luck at that. And also, everyone IS trying to scale up, it's not that nobody wants to it's that the bodies simply are not there. So each builder is working on a calendar that has a certain capacity of builds, they are saying WHAT builds do I give a slot for, because each slot has 20 different projects begging to be it. Your best smartest move is to suck-up your pride and go kiss the ring, present the offer to be there 51% partner, put up all the capital so they will build the properties. On the upside there gonna not just build but will care about that build because it matters to them AND if you negotiate well you can get it done at net 0 so the 49% wont actually be a full 49% because your only paying cost or cost + overhead, no builder profit on build.

But seriously, do yourself a favor and please stop calling yourself a developer, it's nauseating. Developers work there arse off and take huge risk all to create a site from 0 that builders can than build upon, they don't do individual properties, they build SITES, neighborhoods, communities, cities.

Thanks for the reply! Ill definitely look into partnership route!
I appreciate it! From one developer to another ;)
I am a Builder, GC and Realtor, NOT a developer.... You, my friend, are as much a chimpanzee as you are a developer.

I agree with you the OP needs to stop calling himself a developer but...you dont need to be a jerk about it.

As an old school Master Journey Carpenter I politely disagree. For those cut of our cloth, we first will take the time to help correct a person in nice PC manner. You do it a 2nd time, like "Skippy" did, on purpose to antagonize I might add, were gonna make it crystal clear, as I did. 3rd time, be good at ducking because a tool is flying through the air your direction.

Hahahahaha! Youre hilarious! Dont take yourself so seriously man, learn how to take a joke! 😂 There was a wink at the end of it for a purpose. Remember that you too had to start somewhere and most likely used plenty of terms wrong. So next time you tell a beginner or someone asking a genuine question that they're "nauseating" because they used one term wrong make sure you remember that you were a beginner as well.
Lighten up man! Life is great!!

0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Nik Moushon:
@Johnny L.

I wont waste time echoing what a lot of others what said but will add something new.
Even though this is not a development, you can still make money doing new builds, but you need to find ways to add value. Its incredibly hard right now to make money on new builds when you are just a client. Material costs are through the roof right now on pretty much everything. For example, a piece of wood sheathing went up $5 a sheet where I am at in just one month! So this material price increase have absolutely eaten ALL the profit margins that would be a typical in-fill build that you are doing. Even the demand from the housing shortage can't make up the difference.

First thing I would suggest, since you've invested a lot of time already into this specific lot (hopefully you havent bought it yet) is to look into Construction Consultants. The title is pretty broad title, so not every CC will do what you are looking for, but there are some that will act as a "partial GC". By that I mean they will act as a typical GC but will push some of the work on to you. For example, the one I am working with does all the typical responsibilities of a GC but leaves paying ALL the subs to me. This saves him time, over head costs and liability (so less insurance and risk). So he doesn't charge as much as a typical GC would. He also charged me a fixed fee instead of a percentage and does not charge for COs (Change Orders), which is where most GC will make extra profit and add more costs on to you. Now, I know what I'm doing so the changes I've made during construction (there are always some) have been minimal and mostly do to trying to have to cut costs in this market. I don't know if you'll find anyone like this in your area or not but its worth a look. Maybe you'll be able to find some profit margins...odds are they they wont be enough.

The next thing I would suggest is not building on this specific lot. It sounds like its a market value lot that is targeted to a person looking to build their family home. You need to find a empty lot that is way under market value or one that you can add value to. By that it usually means subdividing a lot. Be warned though, this is not cheap because it requires cash up front. But in this market, especially this market, developing or building anything is very difficult. Prices are all over the place for material and labor and basically impossible to nail down as they are changing daily. If you dont factor in a large enough profit margin or large contingency costs...you will get eaten alive.

Its not impossible to make money here. You just have to be even more cautious and extremely picky right now. Thats how its always been when your at the top of the market bubble....covid just made it worse.

Thanks so much for this response Nik! Really appreciate it!
I've been keeping an eye on costs and like you said it's crazy! Lumber is through the roof!
I'm definitely going to look into these types of GC's. I think taking some of the work and using them for consulting is a good partnership. Land has gone up 40% in the area in just the last 8 months! I'll be looking for more properties off-market and properties I can add value to!
All great advice. really appreciate it Nik!
0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Account Closed:
You obviously didn’t read “never split the difference” or you would have negotiated them down by now

Ill have to check that one out! Haven't read it yet! Thanks!
0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Lynnette E.:
The only way you will get a profit on this situation on the first home is if you are building in an area where the home price will go up substantially during the time you are building it.
But, if you do one build and are not a pain customer constantly changing things, wasting the contractors time with questions or demands, he may give you a discount on a future house.
Then again, after one build you may never want to see that contractor again!

Thanks Lynnette!
I appreciate your time and response!
0 Reply
Nik Moushon
Architect · Wenatchee, WA · Member since 2018 · 843 posts · 907 votes
5y
Originally posted by @Johnny L.:
Originally posted by @Nik Moushon:
@Johnny L.

I wont waste time echoing what a lot of others what said but will add something new.
Even though this is not a development, you can still make money doing new builds, but you need to find ways to add value. Its incredibly hard right now to make money on new builds when you are just a client. Material costs are through the roof right now on pretty much everything. For example, a piece of wood sheathing went up $5 a sheet where I am at in just one month! So this material price increase have absolutely eaten ALL the profit margins that would be a typical in-fill build that you are doing. Even the demand from the housing shortage can't make up the difference.

First thing I would suggest, since you've invested a lot of time already into this specific lot (hopefully you havent bought it yet) is to look into Construction Consultants. The title is pretty broad title, so not every CC will do what you are looking for, but there are some that will act as a "partial GC". By that I mean they will act as a typical GC but will push some of the work on to you. For example, the one I am working with does all the typical responsibilities of a GC but leaves paying ALL the subs to me. This saves him time, over head costs and liability (so less insurance and risk). So he doesn't charge as much as a typical GC would. He also charged me a fixed fee instead of a percentage and does not charge for COs (Change Orders), which is where most GC will make extra profit and add more costs on to you. Now, I know what I'm doing so the changes I've made during construction (there are always some) have been minimal and mostly do to trying to have to cut costs in this market. I don't know if you'll find anyone like this in your area or not but its worth a look. Maybe you'll be able to find some profit margins...odds are they they wont be enough.

The next thing I would suggest is not building on this specific lot. It sounds like its a market value lot that is targeted to a person looking to build their family home. You need to find a empty lot that is way under market value or one that you can add value to. By that it usually means subdividing a lot. Be warned though, this is not cheap because it requires cash up front. But in this market, especially this market, developing or building anything is very difficult. Prices are all over the place for material and labor and basically impossible to nail down as they are changing daily. If you dont factor in a large enough profit margin or large contingency costs...you will get eaten alive.

Its not impossible to make money here. You just have to be even more cautious and extremely picky right now. Thats how its always been when your at the top of the market bubble....covid just made it worse.

Thanks so much for this response Nik! Really appreciate it!
I've been keeping an eye on costs and like you said it's crazy! Lumber is through the roof!
I'm definitely going to look into these types of GC's. I think taking some of the work and using them for consulting is a good partnership. Land has gone up 40% in the area in just the last 8 months! I'll be looking for more properties off-market and properties I can add value to!
All great advice. really appreciate it Nik!

I think you misunderstood me(or I, you) but a Construction Consultant is different from a traditional GC. Dont go to any GC and ask if they are willing to be a consultant for you and have partial work...that will not end well.
1 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Jon Anderson:
Johnny,
You’re in a tough position. You have a number of hurtles to overcome. You are foraging into the wild. What I mean is experienced builders can smell a newbie a mile away. In today’s market they don’t have time or energy to hand hold.
Private message me and I’ll give you a quickie primer on what to say and how to say it. Also, let me take a peek at your plans and bid specs. If they’re junk, you will struggle... guaranteed. All I do is housing as an architect and my two sons are new & successful builders.
Best wishes,
Jon

Hey Jon! I appreciate your response! Ill definitely shoot you a PM. Thanks for your time and experience!

0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Nik Moushon:
Originally posted by @Johnny L.:
Originally posted by @Nik Moushon:
@Johnny L.

I wont waste time echoing what a lot of others what said but will add something new.
Even though this is not a development, you can still make money doing new builds, but you need to find ways to add value. Its incredibly hard right now to make money on new builds when you are just a client. Material costs are through the roof right now on pretty much everything. For example, a piece of wood sheathing went up $5 a sheet where I am at in just one month! So this material price increase have absolutely eaten ALL the profit margins that would be a typical in-fill build that you are doing. Even the demand from the housing shortage can't make up the difference.

First thing I would suggest, since you've invested a lot of time already into this specific lot (hopefully you havent bought it yet) is to look into Construction Consultants. The title is pretty broad title, so not every CC will do what you are looking for, but there are some that will act as a "partial GC". By that I mean they will act as a typical GC but will push some of the work on to you. For example, the one I am working with does all the typical responsibilities of a GC but leaves paying ALL the subs to me. This saves him time, over head costs and liability (so less insurance and risk). So he doesn't charge as much as a typical GC would. He also charged me a fixed fee instead of a percentage and does not charge for COs (Change Orders), which is where most GC will make extra profit and add more costs on to you. Now, I know what I'm doing so the changes I've made during construction (there are always some) have been minimal and mostly do to trying to have to cut costs in this market. I don't know if you'll find anyone like this in your area or not but its worth a look. Maybe you'll be able to find some profit margins...odds are they they wont be enough.

The next thing I would suggest is not building on this specific lot. It sounds like its a market value lot that is targeted to a person looking to build their family home. You need to find a empty lot that is way under market value or one that you can add value to. By that it usually means subdividing a lot. Be warned though, this is not cheap because it requires cash up front. But in this market, especially this market, developing or building anything is very difficult. Prices are all over the place for material and labor and basically impossible to nail down as they are changing daily. If you dont factor in a large enough profit margin or large contingency costs...you will get eaten alive.

Its not impossible to make money here. You just have to be even more cautious and extremely picky right now. Thats how its always been when your at the top of the market bubble....covid just made it worse.

Thanks so much for this response Nik! Really appreciate it!
I've been keeping an eye on costs and like you said it's crazy! Lumber is through the roof!
I'm definitely going to look into these types of GC's. I think taking some of the work and using them for consulting is a good partnership. Land has gone up 40% in the area in just the last 8 months! I'll be looking for more properties off-market and properties I can add value to!
All great advice. really appreciate it Nik!

I think you misunderstood me(or I, you) but a Construction Consultant is different from a traditional GC. Dont go to any GC and ask if they are willing to be a consultant for you and have partial work...that will not end well.

Sorry Nik! No I understood you as I've come across some of these companies in other states as I've researched it. They specifically advertise to do the type of work you mentioned!
Haha yeah it definitely wouldn't end well!
Thanks again!
0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Evan Polaski:
@Johnny L., as you note, unfortunately, you are a client.
How do you make money here? you subcontract everything to avoid the builder/gc markups, which often are 20% of costs or more. Find and manage foundation, framing, insulation, roofing, electricians, plumbers, drywallers, carpenters, flooring, HVAC, windows, etc on your own, and don't pay for someone else's time to do the same.
Many builders in this market are also doing their own spec builds. So their prices are accounting for their own time, costs, profit AND opportunity costs of delaying their own spec builds.

Hey Evan! Thanks for your response!
Yeah ive quickly found out either GCing the project myself as you mentioned or getting the land at a good value is the way to turn a profit in this situation!
Thank you for answering my actual question, as many thought I was expecting a discount from contractors. Which I wasnt. I was asking where the profit is in this scenario and you helped answer it!
So thank you!
1 Reply
James Hamling
Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes
5y
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
Originally posted by @Nik Moushon:
Originally posted by @James Hamling:
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
@Johnny L. What follows is coming from me as a GC/Builder with many years in development.

First advice, STOP calling yourself a developer! I guarantee it's making bad rapport right off the bat. If your talking to builders the way you are here, chanting "I'm a developer, developer, developer..... because I want to pay a GC to build 1 home". They are laughing at you inside, and outside the moment that phone hangs up.

A developer, develops, it's that simple. Your a client, your looking to build 1 home, that's NOT developing, not even close. Are you getting zoning approved? Installing roads, water & sewer laterals, negotiating utility easements, doing soil corrections, navigating environmental impact studies???? These are the things a DEVELOPER does, your just some guy asking a GC to build a home, that's a client. How you use that home we, GC/Builders across the world, couldn't care less. Sell it, burn it to the ground, run a hostel or brothel, it means exactly 0 to us.

Next problem, you trying to coax them with promises of all the work you will bringing, yet your only asking for 1 single property to be built, immediately the BS meter hits the ceiling for them and you just put yourself in the dog house, seriously. Do you know how many calls per week we get like that? We get conditioned that those blow-hards are waste of time. Now, not saying your full of it, I am telling you that's how you making yourself look. You'd be better off keeping it to the facts of "hey, I'm looking for the right builder to build my home, I got big hopes and dreams but for now it's just this 1 home".

Lastly, you gotta get real. GC/Builders are King Sh#t of Tu#d mountain right now, they don't need you or your work, they don't need anyone's really, they rule the day, fact. If your even just a somewhat ok builder your scheduled out at least a year in advance and turning down 19 projects for every 1 that you accept. Exactly how is it in their interest to take your build? That's the brutal truth of it that you need to answer, how is it in their best interest? Because your going to bring them a bunch more work, yeah your bringing sand to a beach, congratulations. No, you gotta make it work for them, it's that simple.

Your best option is to partner with a builder, give them a slice of that profit pie, as much as 49%. Fact is builders don't have endless ability to scale, labor is hard enough to get and retain to stay at size more or less scale up even 10%, yeah, good luck at that. And also, everyone IS trying to scale up, it's not that nobody wants to it's that the bodies simply are not there. So each builder is working on a calendar that has a certain capacity of builds, they are saying WHAT builds do I give a slot for, because each slot has 20 different projects begging to be it. Your best smartest move is to suck-up your pride and go kiss the ring, present the offer to be there 51% partner, put up all the capital so they will build the properties. On the upside there gonna not just build but will care about that build because it matters to them AND if you negotiate well you can get it done at net 0 so the 49% wont actually be a full 49% because your only paying cost or cost + overhead, no builder profit on build.

But seriously, do yourself a favor and please stop calling yourself a developer, it's nauseating. Developers work there arse off and take huge risk all to create a site from 0 that builders can than build upon, they don't do individual properties, they build SITES, neighborhoods, communities, cities.

Thanks for the reply! Ill definitely look into partnership route!
I appreciate it! From one developer to another ;)
I am a Builder, GC and Realtor, NOT a developer.... You, my friend, are as much a chimpanzee as you are a developer.

I agree with you the OP needs to stop calling himself a developer but...you dont need to be a jerk about it.

As an old school Master Journey Carpenter I politely disagree. For those cut of our cloth, we first will take the time to help correct a person in nice PC manner. You do it a 2nd time, like "Skippy" did, on purpose to antagonize I might add, were gonna make it crystal clear, as I did. 3rd time, be good at ducking because a tool is flying through the air your direction.

Hahahahaha! Youre hilarious! Dont take yourself so seriously man, learn how to take a joke! 😂 There was a wink at the end of it for a purpose. Remember that you too had to start somewhere and most likely used plenty of terms wrong. So next time you tell a beginner or someone asking a genuine question that they're "nauseating" because they used one term wrong make sure you remember that you were a beginner as well.
Lighten up man! Life is great!!

Well that's not accurate at all. I said your "chanting" of your a developer was nauseating, I never said you're nauseating so you can stop trying to flag all my posts under false complaints to remove them.
And no, I have never misrepresented myself in such a way, that's what it's called that you were doing, false or misrepresentation. I corrected you as did many others, to which you lashed back. Your not a developer, that is simple fact, and it's very apparent by your statements that it's an ego thing in calling self a developer in the context stated, which doing so, hyjacking that moniker, is denigrating to those who have earned the title Developer. As I pointed out, they work hard to achieve and retain that position, risk much. Words and terms matter.

0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Andrew Mellen:
@Johnny L. Keep looking for another contractor, maybe look for a younger one trying to make a name for himself you could grow with. Or start flat out ask them, if I pay your full price this time, and things work well, are you willing to give me a break ok future projects, and if so, how much?
One of my primary contractors started working for me when he moved into town, my other primary contractor I paid high prices to do jobs when I really needed them, then as the realationshio built over a few projects, I started giving them more and more and they discount their price for the constant work they don’t have to work for.

Thanks for your time Andrew!
It makes complete sense and is definitely something to look into. Thank you!
0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Louie Masters:
@Johnny L. First problem your on Colorado. I’d suggest building somewhere else. If that’s not an option be your own GC. However I think your still going to run I to issues getting the work done in a timely fashion.

Haha youre right Louie! That is my first problem! I appreciate your response!
0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @John Patterson:
@Johnny L.
I’ll be swift. I’m a builder and remodeler. My duties have placed me as the head estimator. You should pay a modern live estimator to build a new construction home with specific products in that home . You’ll be amazed how far off you are on budget and time( many materials are on back order - ie windows). Get all of your dominos in a row. Then Follow this like a road map for your next adventure. If a contractor sees you have plans and costs align he knows this will not be a 3 month drag.

Thanks John! I appreciate the advice! I can see especially in today's market why getting ahead on everything will be advantageous. Contractors are not looking for work! They have more than they could ask for.
Thanks again!

0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @Greg Dickerson:
The main question you are asking is how do you make money in this current environment. You need to buy or create the land at a price that the construction will deliver the profit at current retail pricing for new builds. You can push the market on the houses right now due to pent up demand especially if you have the right location and the right product. If you can get a GC on board the key will be delivering units while the market is hot so you can push value and make it up on volume however things can turn on a dime if rates go up so you need to be careful and make sure you have multiple exit strategies and perm financing in place if you don't sell.

Thank you Greg! That is my exact question!
I see what you're saying. I need to make my profit on the land purchase. That's where the profit is in this market. That answers my question perfectly!
My exit strategies will definitely have to be very clear. Thanks for mentioning that!
Thanks Greg!
0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @James Hamling:
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
Originally posted by @Nik Moushon:
Originally posted by @James Hamling:
Originally posted by @Johnny L.:
Originally posted by @James Hamling:
@Johnny L. What follows is coming from me as a GC/Builder with many years in development.

First advice, STOP calling yourself a developer! I guarantee it's making bad rapport right off the bat. If your talking to builders the way you are here, chanting "I'm a developer, developer, developer..... because I want to pay a GC to build 1 home". They are laughing at you inside, and outside the moment that phone hangs up.

A developer, develops, it's that simple. Your a client, your looking to build 1 home, that's NOT developing, not even close. Are you getting zoning approved? Installing roads, water & sewer laterals, negotiating utility easements, doing soil corrections, navigating environmental impact studies???? These are the things a DEVELOPER does, your just some guy asking a GC to build a home, that's a client. How you use that home we, GC/Builders across the world, couldn't care less. Sell it, burn it to the ground, run a hostel or brothel, it means exactly 0 to us.

Next problem, you trying to coax them with promises of all the work you will bringing, yet your only asking for 1 single property to be built, immediately the BS meter hits the ceiling for them and you just put yourself in the dog house, seriously. Do you know how many calls per week we get like that? We get conditioned that those blow-hards are waste of time. Now, not saying your full of it, I am telling you that's how you making yourself look. You'd be better off keeping it to the facts of "hey, I'm looking for the right builder to build my home, I got big hopes and dreams but for now it's just this 1 home".

Lastly, you gotta get real. GC/Builders are King Sh#t of Tu#d mountain right now, they don't need you or your work, they don't need anyone's really, they rule the day, fact. If your even just a somewhat ok builder your scheduled out at least a year in advance and turning down 19 projects for every 1 that you accept. Exactly how is it in their interest to take your build? That's the brutal truth of it that you need to answer, how is it in their best interest? Because your going to bring them a bunch more work, yeah your bringing sand to a beach, congratulations. No, you gotta make it work for them, it's that simple.

Your best option is to partner with a builder, give them a slice of that profit pie, as much as 49%. Fact is builders don't have endless ability to scale, labor is hard enough to get and retain to stay at size more or less scale up even 10%, yeah, good luck at that. And also, everyone IS trying to scale up, it's not that nobody wants to it's that the bodies simply are not there. So each builder is working on a calendar that has a certain capacity of builds, they are saying WHAT builds do I give a slot for, because each slot has 20 different projects begging to be it. Your best smartest move is to suck-up your pride and go kiss the ring, present the offer to be there 51% partner, put up all the capital so they will build the properties. On the upside there gonna not just build but will care about that build because it matters to them AND if you negotiate well you can get it done at net 0 so the 49% wont actually be a full 49% because your only paying cost or cost + overhead, no builder profit on build.

But seriously, do yourself a favor and please stop calling yourself a developer, it's nauseating. Developers work there arse off and take huge risk all to create a site from 0 that builders can than build upon, they don't do individual properties, they build SITES, neighborhoods, communities, cities.

Thanks for the reply! Ill definitely look into partnership route!
I appreciate it! From one developer to another ;)
I am a Builder, GC and Realtor, NOT a developer.... You, my friend, are as much a chimpanzee as you are a developer.

I agree with you the OP needs to stop calling himself a developer but...you dont need to be a jerk about it.

As an old school Master Journey Carpenter I politely disagree. For those cut of our cloth, we first will take the time to help correct a person in nice PC manner. You do it a 2nd time, like "Skippy" did, on purpose to antagonize I might add, were gonna make it crystal clear, as I did. 3rd time, be good at ducking because a tool is flying through the air your direction.

Hahahahaha! Youre hilarious! Dont take yourself so seriously man, learn how to take a joke! 😂 There was a wink at the end of it for a purpose. Remember that you too had to start somewhere and most likely used plenty of terms wrong. So next time you tell a beginner or someone asking a genuine question that they're "nauseating" because they used one term wrong make sure you remember that you were a beginner as well.
Lighten up man! Life is great!!

Well that's not accurate at all. I said your "chanting" of your a developer was nauseating, I never said you're nauseating so you can stop trying to flag all my posts under false complaints to remove them.
And no, I have never misrepresented myself in such a way, that's what it's called that you were doing, false or misrepresentation. I corrected you as did many others, to which you lashed back. Your not a developer, that is simple fact, and it's very apparent by your statements that it's an ego thing in calling self a developer in the context stated, which doing so, hyjacking that moniker, is denigrating to those who have earned the title Developer. As I pointed out, they work hard to achieve and retain that position, risk much. Words and terms matter.

Sorry if I misconstrued anything you said! I really do appreciate your time and advice. Thanks again James!

0 Reply
Johnny L.
OP
CO · Member since 2014 · 166 posts · 44 votes
5y
Originally posted by @George Munoz:
Why dont you offer an equitable deal? for the trial ? when you sell it....

Great idea George! Something to definitely look at!
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.