Browse Forums Building A New House 1 Jun 18, 2008 4:48 pm Hi All,
We are about to sign a contract on the construction of our house. Our builder has included a 20% margin in the cost of the contract. Whilst the inclusion of a margin is normal, does anyone have any opinion on what a reasonable charge is? Is 20% too high? Thanks for your assistance Nathan Re: What is a reasonable Builder's Margin? 2Jun 18, 2008 4:58 pm Welcome to the forum!
25% seems to be a common figure when adding something on to a house - but Im not sure about what it would be on the whole contract amount? I wouldnt think most builders would dislclose their complete margin on the full job. Built Porter Davis "Dromana" 2007. Re: What is a reasonable Builder's Margin? 3Jun 18, 2008 5:02 pm Thanks for the reply Vanderlay,
Our builder has been up front and has disclosed that he has charged 20% as a margin across all his costs. I guess it sounds fair, but when you convert it to the fact he is going to make $65k from us...it kind of hurts a bit! Thanks again and I look forward to further comments from others. Re: What is a reasonable Builder's Margin? 4Jun 18, 2008 5:03 pm I think it depends on what you are getting. I've been thinking about this myself. I assume that the builder's margin includes:
1) Site supervision 2) Logistics (ordering parts and ensuring they get to site on time) 3) Insurance 4) Rework risk (during construction) 5) Funds put aside for 7 year structural guarantee 6) Rework risk (during defects period (1 month? 3 month?)) 7) Time for communicating with the customer Profit I would think that 20% is on the top end. I also wonder what happens if you upgrade from, say, a $100 toilet to a $900 toilet that requires the same amount of work to install. Does the builder just do it or charge you an additional $160 for the builder's margin, while doing no extra work? Of course there may be a fee for processing a variation. Interesting question and I look forward to what others have to say. Any builders out there that care to enlighten us? Demolition August 2009, Construction Started September 2009, Completed December 2010 Re: What is a reasonable Builder's Margin? 6Jun 18, 2008 10:55 pm Hi Willos74, don't know if this will make you feel better, lol, but our builder's margin is also 20% - I think it is pretty close to the industry standard.
In Casa's example we would pay have to pay the 20% on the cost of the toilet at the builder's trade price rather than the retail price eg. say on $800 rather than $900. This will mitigate the margin somewhat but usually won't eliminate the overhead altogether. 'We make a living by what we get, but we make a life by what we give.' - Winston Churchill Re: What is a reasonable Builder's Margin? 7Jun 19, 2008 9:47 am Thanks enigma_brennan,
It does make me feel a little better, I was going to try to talk him down a few percentage points, but I have started to get him to waiver margin on a few things that I am organising (ie flooring, kitchen upgade, roofing, tiles, etc). I think it might be more beneficial that way. To Casa2's point - yes it is levied across everything the builder pays for, so if we choose to upgrade our bath for instance, then we may the 20% on the cost (trade) of the new bath. We also pay the margin on the plumbers cost of installing it..which would be similar for both baths. Thank you to everyone for your assistance, and if anyone else has any comments I would love to hear them. Nathan Re: What is a reasonable Builder's Margin? 9Jun 19, 2008 12:27 pm Minx Apparently a builder should be earning at least 150k per year. Edit: This is for a small scale custom builder. The next question is how many houses can a builder build in a year. Then we'll have how much a builder should earn per house. As a rough guess, I'd say five houses per year, therefore $30k per house. If the average house costs $300,000 to build, then builders profit is 10% and the house is sold for $330,000. I'm assuing the builder does none of the construction but rather organises things (which is very hard!). Of course this is heavily depends on how many houses a builder can organise in a year and the average house price. Demolition August 2009, Construction Started September 2009, Completed December 2010 Re: What is a reasonable Builder's Margin? 10Jun 19, 2008 1:04 pm if it helps ours is also 20%
Anne Grandview 36 on Beautiful Bribie Site Start Dec 5th 2007 Projected completion May 12th 2008 NOPE Handover 24th June 2008 Moved in 11th July 2008 Wating on one final thing - Still - Oct 2009 Re: What is a reasonable Builder's Margin? 11Jun 19, 2008 4:50 pm ours is 25% in the contract.
BUT, from experience, after various investigateion, we found that for any changes you made, instead of charging 25% on top of the price difference, they charge a huge % of profit for the price of a brand new item...... this happend to our cornice upgrade, skirting board/architrave upgrade, toilet upgrade, kitchen sink upgrade, shower rose/head upgrade, shower screen upgrade....etc. we found it out by checking Bunning's, Reece and other suppliers, and in the end cancelled lots of them and only keep those that are difficult to do it ourselves after handover. Actually, the more investigation you did, the higher chance of you getting heart attack about how much you could have saved if you do it yourself... so, be careful! Re: What is a reasonable Builder's Margin? 13Jun 19, 2008 9:31 pm Our builder takes a 20% margin. They were up front with the figure before the contract.
I must say, that I think 20% is about right. I would hate to do their job. All the logistics & juggling of tradies. One tradie does not complete on time & 10 tradies need to be called & moved to another day. Deliveries cancelled & rebooked etc... We are loving living in our new home ! https://forum.homeone.com.au/viewtopic.p ... &start=315 Re: What is a reasonable Builder's Margin? 15Apr 18, 2018 9:40 pm Casa2 says "I also wonder what happens if you upgrade from, say, a $100 toilet to a $900 toilet that requires the same amount of work to install. Does the builder just do it or charge you an additional $160 for the builder's margin, while doing no extra work? Of course there may be a fee for processing a variation." $900 toilet will take more time and care to install than a $100 toilet and is a higher risk for the builder. What if it gets chipped? You can't replace it for $100 I think you are barking up the wrong tree. Builder's margin is for the builder alone and no one else business. If your builder is disclosing margin it's stupidity, my red flags would come up, what else is he stupid about? All you need to do is shop around for the best deal, do your diligence and then make sure that builder delivers what is in the contract. If you are talking about margin on variations then 20-25% is common. It may seem too high too you but if you are the builder then it is way too low. Your builder will make more money by shutting down your variations and taking on another job. Many big project builders know that and will tell you upfront they won't allow variations. Foremost Building Expert in Australia,assisting with building problems/disputes, building stage inspections,pre-contract review advice for peace of mind 200 blogs http://www.buildingexpert.net.au/blog Re: What is a reasonable Builder's Margin? 16Apr 25, 2018 8:04 pm building-expert Casa2 says "I also wonder what happens if you upgrade from, say, a $100 toilet to a $900 toilet that requires the same amount of work to install. Does the builder just do it or charge you an additional $160 for the builder's margin, while doing no extra work? Of course there may be a fee for processing a variation." $900 toilet will take more time and care to install than a $100 toilet and is a higher risk for the builder. What if it gets chipped? You can't replace it for $100 I think you are barking up the wrong tree. Builder's margin is for the builder alone and no one else business. If your builder is disclosing margin it's stupidity, my red flags would come up, what else is he stupid about? All you need to do is shop around for the best deal, do your diligence and then make sure that builder delivers what is in the contract. If you are talking about margin on variations then 20-25% is common. It may seem too high too you but if you are the builder then it is way too low. Your builder will make more money by shutting down your variations and taking on another job. Many big project builders know that and will tell you upfront they won't allow variations. A building margin is part of the contract price therefore needs to be disclosed in the contract. 20-25% is a standard margin Re: What is a reasonable Builder's Margin? 17Apr 26, 2018 6:29 am That is not correct Dr.Buildwell Builders margin is commercial in confidence secret never to be disclosed. I have been a builder for 50 years and no one has asked me about my building margin, if they did I would have told them politely that it is none of their business. Variation margin is another matter and is included in the standard contract and disclosed as a means contract management. Foremost Building Expert in Australia,assisting with building problems/disputes, building stage inspections,pre-contract review advice for peace of mind 200 blogs http://www.buildingexpert.net.au/blog Re: What is a reasonable Builder's Margin? 18Apr 26, 2018 7:55 am It is easy enough to work out building margins and the whole process can be automated if you 1. Own copyright of the Design & Engineering 2. Produce Complete quantities and data from your Plans & Models 3. Use Build data ie L/m & m2 from plans and L/m,m2,m3 from 3D Models 4. Use the internet to gather material prices and Labour time constants Finally use G Sheets and python ( Ie online spreadsheets & set user settings to Private) ... Try as they may builders and their lawyers can't shut down the sharing of Info & data on the internet Designer,Engineer (Civil,Const & Envir),Builder,Concrete & Masonry Contract.Struct Repairs Re: What is a reasonable Builder's Margin? 19Apr 26, 2018 8:08 am building-expert That is not correct Dr.Buildwell Builders margin is commercial in confidence secret never to be disclosed. I have been a builder for 50 years and no one has asked me about my building margin, if they did I would have told them politely that it is none of their business. Variation margin is another matter and is included in the standard contract and disclosed as a means contract management. It is correct in a Victorian domestic building contract . In a commercial contract I'm not sure It's even more so correct in a cost plus contract where the owner agrees to pay for the builders costs plus an agreed upon margin. Re: What is a reasonable Builder's Margin? 20Apr 26, 2018 8:13 am Dr.Buildwell building-expert That is not correct Dr.Buildwell Builders margin is commercial in confidence secret never to be disclosed. I have been a builder for 50 years and no one has asked me about my building margin, if they did I would have told them politely that it is none of their business. Variation margin is another matter and is included in the standard contract and disclosed as a means contract management. It is correct in a Victorian domestic building contract . In a commercial contract I'm not sure Even more so on a cost plus contract where the owner agrees to pay all costs plus an agreed margin. Seems good to me. I've been told $4-5k/sqm is reasonable in Perth. 2 11189 Hi Mofflepop, I would recommend finding a building designer to prepare plans, they should design to your specified budget. The benefit is you can tender the project out… 9 20434 |