Browse Forums Building A New House 1 Mar 03, 2009 12:15 am Hi all I was told by a senior sale staff member that the profit that a builder makes per home is very low. On an average home 28Sq. Some are only making 10k profit. Some less. This is after wages and expences. Any builders, anyone, care to comment, trufully. I mean 10k profit per home, it sounds a bit low to me. As the price seems to keep going up, never down. I hear the same old stuff, the cost of steel, cement, petrol. How much of the house is made from steel, cement, who much petrol do they use to build a house. Also its funny how the price went up soon after the FHBG Boost was offered. What will happen if it goes off at 30 June. Will builders find a different job or go into retirment as the cost of building and owning a home are now getting prohibitive. Any comments please. Cheers KW............ “It's just as unpleasant to get more than you bargain for as to get less” George Bernard Shaw. When do you believe a salesman? 2Mar 03, 2009 1:14 am If a sales person told you, then it must be true!
I was once told by a new car salesman that he only made $50 per car and that it wasn't worth it. I felt so sorry for him, I didn't feel like bargaining and I bought the colour he recommended (OK that last bit about not bargaining is not exactly true). Re: Profit margin of builders 3Mar 03, 2009 3:45 am Depends if the wages are the owners' income too, hence wages + profit - then maybe... A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Profit margin of builders 4Mar 03, 2009 6:38 am I bought my plasma for $200 under their 'cost price'.
Its the oldest trick in the book to try and stop bargaining. Re: Profit margin of builders 5Mar 03, 2009 6:44 am It is true, very true. Builders make money from upgrades and from land... some are developers as well like Burbank, DFC & AVJ. Profit in building is tiny - and sometimes, like Wincrest it's not there at all.
Ed "ECOECO" At 'EcoEco', we design windows, we design the best windows, we do it for you, so that when you’re happy we are happy. Tel. 1800 326 326 Re: Profit margin of builders 6Mar 03, 2009 7:14 am I've been told that the profit margin on the base price of a home is very, very slim. But the profit margin on the upgrades and variations is very, very fat. I leave you to fend for yourself, figure things out yourself. Terrence Malick Re: Profit margin of builders 7Mar 03, 2009 8:36 am ed @ EcoClassic It is true, very true. Builders make money from upgrades and from land... some are developers as well like Burbank, DFC & AVJ. Profit in building is tiny - and sometimes, like Wincrest it's not there at all. Ed you know, I find this hard to believe, who would stay in business if they were not making money, I just don't see it. Builders going under, well every business has successful ones and not so successful ones, but I find it hard to believe that the whole industry makes little profits. THey may think they should earn more than they do, but don't we all! I'm going to go out on a limb here and say "I'm just not buying it!" why don't we put this all to rest and get some financial stats on some of the builders... A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Profit margin of builders 8Mar 03, 2009 8:40 am Annietom you know, I find this hard to believe, who would stay in business if they were not making money, That's easy - its called long term loss leader to make market share. Think Amazon.com, that company didn't make a profit for 7 years and even when it did the market was actually surprised that it did so so early. Now they are the dominant force in the market for online sales (at least in the UK and US) and a household name. Re: Profit margin of builders 9Mar 03, 2009 8:42 am OK lets say you earn $10,000 per house and you build 50 homes a year
After you have paid everyone, all your expenses your are left with $500,000 in your hand. Not a bad profit when you look at it like that is it? Take it down to 20 houses ($200,000) or up to 200 ($2,000,000). I would be pretty happy to make $10,000 per house ... wouldn't you? Re: Profit margin of builders 10Mar 03, 2009 8:45 am joeygbh Annietom you know, I find this hard to believe, who would stay in business if they were not making money, That's easy - its called long term loss leader to make market share. Think Amazon.com, that company didn't make a profit for 7 years and even when it did the market was actually surprised that it did so so early. Now they are the dominant force in the market for online sales (at least in the UK and US) and a household name. I know what you mean Joey, but they are not all first timers with a new idea YKWIM A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Profit margin of builders 11Mar 03, 2009 8:54 am Joles I've been told that the profit margin on the base price of a home is very, very slim. But the profit margin on the upgrades and variations is very, very fat. I'm quoting myself ..... but this is why!!!! No-one builds the base house.... the builders know this.... they make the money on the upgrades and variations. For every home that is close to base and they make minimal profit, there will be a home where they make a killing. Check the threads on here about the percentage many of us are adding to the base price.... 30%, 40%, 50% or more.... And this is why we as consumers need to avoid getting bogged down in what the "base cost" is or what an individual "upgrade price" is and worry about what the "total build cost" is. That's all we should be worrying about as consumers IMO. I leave you to fend for yourself, figure things out yourself. Terrence Malick Re: Profit margin of builders 12Mar 03, 2009 9:01 am Annietom I know what you mean Joey, but they are not all first timers with a new idea YKWIM Yeah, but you have to take a hit sometimes to maintain your market share too - if you do it for too long or over commit you get in to trouble as we have seen. I know I've taken on pro bono jobs just to keep my reputation up even though I've been in my business for 12 years and have no shortage of customers. Re: Profit margin of builders 13Mar 03, 2009 9:39 am joeygbh Annietom I know what you mean Joey, but they are not all first timers with a new idea YKWIM Yeah, but you have to take a hit sometimes to maintain your market share too - if you do it for too long or over commit you get in to trouble as we have seen. I know I've taken on pro bono jobs just to keep my reputation up even though I've been in my business for 12 years and have no shortage of customers. sure you're absolutely right, but what about those who are not in their "taking a hit" phase and are making normal profits - that's what I'm talking about, and anyways... I won't say who, but one of the major five big builders are family friends of ours, my father being their head accountant from when they started out small many many years ago. My brother works there full time for them now too... but anyway, these guys are wealthy - wealthy - wealthy - should I say it again - wealthy.... maybe the up and coming builders struggle, but the biggies, they got it all worked out! I say that because I know they are soooo wealthy - did i say that already??? but yes Joey, the smaller ones don't necessarily make heaps at first, but the industry as a whole, IMHO, does very nicely. Businesses that go under have more to do with bad management, rather than the fact that building does not make profits. A thankful person is a happy person. [/color]My hobby design blog: http://aviewondesign.blogspot.com/ Re: Profit margin of builders 14Mar 03, 2009 9:49 am Annietom Businesses that go under have more to do with bad management, rather than the fact that building does not make profits. That I can agree with and attest to where I work, two straight record revenue and profit years, but poor management has us against the wall only 9 months later. Cash flow is a major trap that most if not all business fall into at one time or another. I guess it is close to the negative gearing argument - why lose $1 to gain 35c back in taxes? To get capital gains that are taxed at the maximum marginal rate anyways? Doesn't make a lot of sense to me. Re: Profit margin of builders 15Mar 03, 2009 9:57 am Well the builders mark up on our house is 25%.. So.. I dont know how much their administration expenses or advertising expenses are.. But i'm pretty sure they make more than 10k a house. Re: Profit margin of builders 16Mar 03, 2009 10:29 am I guess they are allowed their "glitter" if they build say 1500 homes a year. Even at $10,000 profit per home you can still buy a lot of glitter for about $15,000,000.
They don't make huge profits on turnover on project housing, and they do refer to margins of 25% - that is margin, not profit. Out of margin comes all overhead and sales, leaving between 1% and 4% profit, fact. Land is big business and makes large profits - maybe $50,000 per block. Anybody successfully negotiated 5% off a base model home? I think not... Ed "ECOECO" At 'EcoEco', we design windows, we design the best windows, we do it for you, so that when you’re happy we are happy. Tel. 1800 326 326 Re: Profit margin of builders 17Mar 03, 2009 11:30 am I'd believe the low profits they make on the base plan house. Its the extras that seem to be unbelivable. How can they in some cases charge to you an upgrade that ends up more than RRP on the product.
profit on that !! (ricky gervais) Built 36sq Plantation "Retreat" on 4460m2 at Spring Mountain, Qld In Living and landscaping.. >>> ... http://retreatspring.blogspot.com Re: Profit margin of builders 18Mar 03, 2009 11:41 am ozzroo I'd believe the low profits they make on the base plan house. Its the extras that seem to be unbelivable. How can they in some cases charge to you an upgrade that ends up more than RRP on the product. profit on that !! (ricky gervais) People tend to forget installation costs when they see the base price. Sometimes that can add 100% on the base price. Think about when you get an aircon from Harvey Normans, what's the base price and installed price? Re: Profit margin of builders 19Mar 03, 2009 11:49 am I don't want to contradict anything that has been said, however to suggest builders make $10K profit on a home is ludicrous.
I have reliable information (a source) that at least 20% profit is being made on the home that I am having built. This home may not be representative of the typical home - I wouldn't know. It's a single story 26 squares. While I am not in the home building business, I would question the sanity of anyone who involves them selves in a business that does not drive at least 15% profit. That's just my 2 cents. Re: Profit margin of builders 20Mar 03, 2009 11:58 am franco I would question the sanity of anyone who involves them selves in a business that does not drive at least 15% profit. That's just my 2 cents. Over the long run yes, I'd do the same. You have to cater for the good and the lean times. Why would you go into business with all that risk for less than what you would earn by putting the same money in the bank? Look at your bill from the electricity company. It should detail the charges. You will need to do some estimating and some calculations. Then charge the… 8 4248 Site works are just about to start on our build with Blueprint in Midvale. viewtopic.php?f=31&t=106894 2 3953 Hi all, We are looking to build a new two storey house in western Sydney. Can anyone recommend a smallish builder to go with? We are trying to stay away from the big… 0 12140 |