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If a group of investors approached you to build homes
Posted on 1/16/13 at 2:19 pm
Posted on 1/16/13 at 2:19 pm
Spec homes. They want you to pick lot/subdivision to build in. Basically let you do what you want. What percentage do you charge them? Do you take a percentage of what the house sells for or a percentage of the build cost?
Posted on 1/16/13 at 2:25 pm to whit
Need way more details, but most contractors get paid a percentage of the construction price usually in the 10-20% range.
Posted on 1/16/13 at 9:31 pm to whit
I usually approach it with a % of the market value of the build. In this market though, I am pretty flexible and have built spec homes for investors for a flat fee if it is more than one home. I'm in talks at the moment about doing a few duplexes and that can go in a few more different directions.
This post was edited on 1/16/13 at 9:32 pm
Posted on 1/17/13 at 5:49 pm to whit
The only people that generally make money on these deals are realtors in my experience. Back in the robust market there was money, but now u basically have to find a good deal on a lot, keep costs low, and hope there is some meat on the bone after it sits on the market if there are holding costs.
Posted on 1/17/13 at 9:34 pm to whit
In my experience, North Alabama. Spec money is hard to get right now, so investors have more leverage. Generally speaking, the investor is taking the financial risk, the builder is taking the warranty/public risk.
You take sales price of the home, subtract all costs associated with the deal (including interest payments, loan acquisition costs, realtor fees, lot cost, etc.) Whatever is left (typically 15%-30% of the purchase price), is usually split 50/50.
As long as the contractor is a good builder and many warranty issues don't arise, it's generally a great deal because the contractor isn't taking on the financial obligation.
The biggest question is time on the market. The carrying costs can rack up over time, so if you have to sit on a house for a while, that 15%-30% shrinks a lot.
They're definitely not the "only" ones making money.....otherwise no one would do them. I've definitely seen it happen before, but I wouldn't consider it the norm by any stretch. They make money, until there's a better way, it's just a cost of doing business. The investor and the contractor should make significantly more money than the Realtor (each) in the deal, or there's something wrong.
You take sales price of the home, subtract all costs associated with the deal (including interest payments, loan acquisition costs, realtor fees, lot cost, etc.) Whatever is left (typically 15%-30% of the purchase price), is usually split 50/50.
As long as the contractor is a good builder and many warranty issues don't arise, it's generally a great deal because the contractor isn't taking on the financial obligation.
The biggest question is time on the market. The carrying costs can rack up over time, so if you have to sit on a house for a while, that 15%-30% shrinks a lot.
quote:
The only people that generally make money on these deals are realtors in my experience.
They're definitely not the "only" ones making money.....otherwise no one would do them. I've definitely seen it happen before, but I wouldn't consider it the norm by any stretch. They make money, until there's a better way, it's just a cost of doing business. The investor and the contractor should make significantly more money than the Realtor (each) in the deal, or there's something wrong.
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