How much profit would a builder be aiming for?

[albanga]

Hey All,
I know this question is very vague but I am subdividing my land and thinking about selling the vacant block as opposed to developing it myself. I am however unsure about how a builder would go about doing a feasibility and from this work out how much profit they would be aiming for to make it worthwhile.

My numbers look like this:
Build Cost (I have been quoted about 350k) so if i use a rule of 20% markup then I would say a builder could do it for 280k.
I am hoping to sell the land for 260k including closing costs.
The builder then has holding costs and once completed agent fees for selling so let us say another 20k.
So they are at around 560k.
I anticipate the completed value at around 650k so if they were to sell it the profit would be around 90k but then ofcourse they need to pay the GST. I really have no idea how this works but I will use 30k

So my numbers have it at around a 60k profit. Happy for others to correct this!
But if I was at about the mark is this something builders would be happy with? Or would they be aiming for more given my sums do not add a safety net and 60k could end up being 30k.

 

[serendip]

Why assume a builder would do it? What about a block for someone to build their PPOR?

 

[albanga]

Why assume a builder would do it? What about a block for someone to build their PPOR?

Your absolutely right and an emotional purchase would probably be our best opportunity to achieve the value we want.
I do think realistically though a builder is going to be the target audience for the property though which is why I am just trying to get my head around the figures.

 

[SOP]

you are basing your calculations on a lot of variables.

If you are trying to work out the value of the vacant block why not just look at comparable vacant land sales in the area.

 

[albanga]

you are basing your calculations on a lot of variables.

If you are trying to work out the value of the vacant block why not just look at comparable vacant land sales in the area.

Unfortunately there are no comparable sales as this is an established area and this is not a common practice.
Anyone purchasing land in this area is buying run down houses on big blocks and knocking them down and subdividing and building.

I do appreciate what you are saying and agree there are a heap of variables to the situation. I just wanted to put it out there though no this forum and get an idea of what some builders on here would ideally aim for when performing a feasibility.

 

[westminster]

I wouldn't worry about builder's tax etc. I think a builder might be happy with 30% gross profit. They can worry about the NETT

 

[albanga]

Hey Westminster
Could I ask you personally since your a developer. If you were to take on a project then how much GROSS profit in an amount figure would you ideally be aiming for? Would 50k be appealing for example?

 

[chindonly]

Hey Westminster
Could I ask you personally since your a developer. If you were to take on a project then how much GROSS profit in an amount figure would you ideally be aiming for? Would 50k be appealing for example?

Not enough for the risk, I am guessing.