Builder's margin WA

[rooky]

Hi All,

Does anyone have ideam how much gross margin builders will be having for standard average spec homes - something like built by Commodore Homes, Blue print homes, impressions etc ? So entry level homes.

By gross margin i mean difference between what client paid and what it did cost the builder(including all ancilliary expenses like marketing, staff salaries etc.)

Rooky.

 

[westminster]

Around 20-30% I believe.

It doesn't mean you can build it yourself for 20-30% less though.

 

[rooky]

Around 20-30% I believe.

It doesn't mean you can build it yourself for 20-30% less though.

Thanks WM.

Yes, fully agree with you, we can't build ourself with that much margin. Otherwise, everyone will do ownerbuild.

I am getting a 4 X 2 home constructed by a friend. He has just started out as builder. He is civil engineer and built his own home. He may not be getting good deal for all materials but since he does not have any staff, its less overhead for him. Do you think he will be making 20-30% or less? He has given me quote similar to other established builder.

 

[bashworth]

Generally builders make a smallest margin on their basic build, but a much bigger margin on upgrades and variations.

This link gives a bit of background to builders and profitability: http://www.anewhouse.com.au/2013/09/understanding-builders/

 

[MTR]

Thanks WM.

Yes, fully agree with you, we can't build ourself with that much margin. Otherwise, everyone will do ownerbuild.

I am getting a 4 X 2 home constructed by a friend. He has just started out as builder. He is civil engineer and built his own home. He may not be getting good deal for all materials but since he does not have any staff, its less overhead for him. Do you think he will be making 20-30% or less? He has given me quote similar to other established builder.

You need to compare apples with apples, specifications of each builder, what they do and do not include???.

What I have found in my situation it is cheaper for me to get a designer to draw up plans and not use a spec builder. I shopped it around, various smaller builders in Perth, viewed their product and I have been able to get all the fruit, ie stone bench tops, high ceilings, jazz cornices throughout villas etc. Spec builders quotes I got 3 in total were more expensive and also the plans/designs were poor, I threw them in the bin they were that bad, which will in turn effect resale, less $ in your pocket.

 

[rooky]

You need to compare apples with apples, specifications.

What I have found in my situation it is cheaper for me to get a designer to draw up plans and not use a spec builder. I shopped it around, various smaller builders in Perth, viewed their product and I have been able to get all the fruit, ie stone bench tops, high ceilings, jazz cornices throughout villas etc. Spec builders quotes I got 3 in total were more expensive and also the plans/designs were poor, I threw them in the bin they were that bad, which will in turn effect resale, less $ in your pocket.

Thanks MTR.

Your suggestion seems logical. So far i was sticking with my friend only. But it does not hurt to get it quoted with other smaller builders. Can you suggest 3 good smaller builders whom i can give my design ?

 

[HD_ACE]

Try ventura id and even beacon.

Cheers

 

[svamin]

20-30% on the cost base (mind theily have access to bulk discounts on basic materials). Note though the fldealfault spec are crap asllesp on the low-mid category. Once you start to vary it, that's where their real profit kicks in. If for a basic standard home - go with the builder, if you want to get the max buck for your money and build a house to impress - get an owner building with PM or find a builder who can provide you the cover of his license (10-15% of spec + access to their discounts)

 

[mrdobalina]

Has anyone built with a builder on cost plus basis?

 

[Ausprop]

went to look at the new w&b display in mosman park / north fremantle yesterday. was really nice but at $1.29m... at 30% margin that equates to a fair bit of coin

 

[westminster]

went to look at the new w&b display in mosman park / north fremantle yesterday. was really nice but at $1.29m... at 30% margin that equates to a fair bit of coin

I was drooling over the pictures of that in the newspaper and then the web on the weekend. Pretty $$$$$$ for a 3 x 2 And I'm sure half the things in the display aren't included in that price

http://www.wbhomes.com.au/grayson

 

[westminster]

Has anyone built with a builder on cost plus basis?

I know some renovation places work on this but I know that banks don't like it. They want a HIA fixed price contract.

 

[mrdobalina]

I know some renovation places work on this but I know that banks don't like it. They want a HIA fixed price contract.

What if financing was not an issue?

If the builder is willing to work with a reduced margin for cost plus (say <15%), does the reduced cost offset the increased risk of cost overruns?

 

[Ausprop]

What if financing was not an issue?

If the builder is willing to work with a reduced margin for cost plus (say <15%), does the reduced cost offset the increased risk of cost overruns?

trouble is the builder makes more the more it costs you. there is no commitment to any pricing so you end up in a similar situation to OB where it just runs away from you

no easy answers.

 

[Colin Rice]

Can you suggest 3 good smaller builders whom i can give my design ?

1. Sovereign

2. Danmar

3. Allstyle

 

[Tim86]

It's not just the builders mark up that's expensive, they also don't try to find bargains like you might with diy. For example I purchased a new vanity for $700 from Gumtree as the person wasn't going through with their planned Reno. That vanity is normally about $1800. Throw a 30% builders mark up on top and the vanity now costs $2340. I also got a $3000 door for $200 and a $2000 door for $200. The builders mark up leaves you spending $6500 when the diy'er just spent $400... That's why diy is so much cheaper.

 

[rooky]

1. Sovereign

2. Danmar

3. Allstyle

Hi FMS,

Thanks for information.

 

[Aaron Sice]

I was drooling over the pictures of that in the newspaper and then the web on the weekend. Pretty $$$$$$ for a 3 x 2 And I'm sure half the things in the display aren't included in that price

http://www.wbhomes.com.au/grayson

Reza Khan designed that one - my ex-boss and mentor.

 

[Aaron Sice]

1. Sovereign

2. Danmar

3. Allstyle

i'd put Mario @ Allstyle in front of all those.

Mario is a tops builder and I can't recommend him highly enough.

 

[MTR]

It's not just the builders mark up that's expensive, they also don't try to find bargains like you might with diy. For example I purchased a new vanity for $700 from Gumtree as the person wasn't going through with their planned Reno. That vanity is normally about $1800. Throw a 30% builders mark up on top and the vanity now costs $2340. I also got a $3000 door for $200 and a $2000 door for $200. The builders mark up leaves you spending $6500 when the diy'er just spent $400... That's why diy is so much cheaper.

But Tim seriously, builders are not going to be running around trying to find you bargains, they are operating a business, imagine if they did this, instead of taking 6 months to complete a project it would take 2 years. If you want this then I guess you go owner/builder and subcontract the work out to save $ and that is if you get it right.

Fixed contract is important and shopping it around and comparing apples with apples one way of reducing the risk.