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Started By
Message
How lucrative is owning a small residential construction company?
Posted on 4/13/18 at 11:18 am
Posted on 4/13/18 at 11:18 am
Let me preface this by saying I do NOT want to be a residential GC.
I will be self-contracting my house in a few years and am putting in my time researching and learning. I’m in the construction industry and know that I can handle this so I’m not to worried about that aspect. That being said, every resource I see claims that you can save a large percentage by self-contracting vs hiring a GC; I’d say on average the claims are 20%-30% (so let’s use 25% for this case). So on a typical $300k home the GC would make $75k. If you build 4 a year that’s $300k. There’s obvious expenses in owning a residential GC company (insurance, taxes, etc.) so you don’t clear $300k but even if I your expenses are 66% including your personal taxes, you’re taking home $100k. And I would assume 4 houses in a year would be pretty easy and 6-8 could be managed by a one man team (or one man with a general laborer). This doesn’t count the gravy-train that is Change Orders
What am I missing?
I will be self-contracting my house in a few years and am putting in my time researching and learning. I’m in the construction industry and know that I can handle this so I’m not to worried about that aspect. That being said, every resource I see claims that you can save a large percentage by self-contracting vs hiring a GC; I’d say on average the claims are 20%-30% (so let’s use 25% for this case). So on a typical $300k home the GC would make $75k. If you build 4 a year that’s $300k. There’s obvious expenses in owning a residential GC company (insurance, taxes, etc.) so you don’t clear $300k but even if I your expenses are 66% including your personal taxes, you’re taking home $100k. And I would assume 4 houses in a year would be pretty easy and 6-8 could be managed by a one man team (or one man with a general laborer). This doesn’t count the gravy-train that is Change Orders
What am I missing?
14
Posted on 4/13/18 at 11:21 am to poochie
(no message)
This post was edited on 4/13/18 at 11:22 am
Posted on 4/13/18 at 11:37 am to poochie
It's like any business. If you run it lean and run it properly you can make a damned good living.
BTW, there's no way in hell I'd run a company doing $1.2 million a year and only make $100k myself. I'm the person at risk in that situation with the most to lose so it stands to reason that if I do it right I should have the most to gain.
BTW, there's no way in hell I'd run a company doing $1.2 million a year and only make $100k myself. I'm the person at risk in that situation with the most to lose so it stands to reason that if I do it right I should have the most to gain.
Posted on 4/13/18 at 11:50 am to VABuckeye
quote:
So on a typical $300k home the GC would make $75k.
This seems like a big number to me. I just don't think there is that much margin.
Posted on 4/13/18 at 11:51 am to poochie
I used a GC for new construction 4.5 years ago. Best money I ever spent. Neither my husband or I had the time to spend overseeing every single sub....and my builder’s eye for quality & precision far exceeded my own. Depending on your profession and work schedule, you might not save as much as you think as a self-contractor, if managing the project cuts into your actual work time.
Posted on 4/13/18 at 11:59 am to hungryone
quote:
I used a GC for new construction 4.5 years ago. Best money I ever spent. Neither my husband or I had the time to spend overseeing every single sub....and my builder’s eye for quality & precision far exceeded my own. Depending on your profession and work schedule, you might not save as much as you think as a self-contractor, if managing the project cuts into your actual work time
How is this relevant?
Posted on 4/13/18 at 12:00 pm to achenator
quote:
This seems like a big number to me. I just don't think there is that much margin
I agree. I assume the 25% is greatly exaggerated. But that’s what the claims are.
Posted on 4/13/18 at 12:09 pm to poochie
quote:
What am I missing?
Nothing. You have it all figured out.
Posted on 4/13/18 at 12:15 pm to stout
: /
Clearly I don’t. My point is the claims of self-contracting savings must be greatly exaggerated. And if someone that has no experience hears that % they’re going to get screwed.
Clearly I don’t. My point is the claims of self-contracting savings must be greatly exaggerated. And if someone that has no experience hears that % they’re going to get screwed.
Posted on 4/13/18 at 12:23 pm to poochie
If someone thinks they can get materials at the same or a better price than a company that does $$$$$ with their suppliers they are mistaken. You may save money on labor but you're going to have to manage that labor and provide guidance and expertise which you may not have. There is also the value of your time that you'll be investing in the project instead of focusing on what makes you money. At least that's how I look at projects.
I agree that self-contracting claims are exaggerated.
I agree that self-contracting claims are exaggerated.
Posted on 4/13/18 at 12:41 pm to VABuckeye
Average should be around 10% markup for GC services.
There can also be hidden markups on material if they don’t provide receipts but that only starts to really matter when price starts going up.
It’s a capital intensive game where you can have substantial amounts of money tied up wiring to get paid or arguing about completion to get paid, etc. I have an acquaintance who switched from GC to roofing strictly Bc when he finishes a roof he gets a check right away.
I redid my house and hired a GC, he was about 8% on top of costs. I estimated it myself as well and requested his bid tab to evaluate (hand written) and he was very reasonable. We got 2 other bids from firms reccomended by architect that had a 25% and 45% markup from higher end well known builders. They had fancy spreadsheets and very professional word documents for their bids which looked real nice, but actual material and schedule were the same across all 3 - so only different was markup.
It can be lucrative, but if you charge outrageous prices you better be flawless.
If you have the time then self contract, but if not a GC is worth it.
I’m in heavy construction doing very large commercial, industrial and government so I’m very familiar with the business as well.
There can also be hidden markups on material if they don’t provide receipts but that only starts to really matter when price starts going up.
It’s a capital intensive game where you can have substantial amounts of money tied up wiring to get paid or arguing about completion to get paid, etc. I have an acquaintance who switched from GC to roofing strictly Bc when he finishes a roof he gets a check right away.
I redid my house and hired a GC, he was about 8% on top of costs. I estimated it myself as well and requested his bid tab to evaluate (hand written) and he was very reasonable. We got 2 other bids from firms reccomended by architect that had a 25% and 45% markup from higher end well known builders. They had fancy spreadsheets and very professional word documents for their bids which looked real nice, but actual material and schedule were the same across all 3 - so only different was markup.
It can be lucrative, but if you charge outrageous prices you better be flawless.
If you have the time then self contract, but if not a GC is worth it.
I’m in heavy construction doing very large commercial, industrial and government so I’m very familiar with the business as well.
Posted on 4/13/18 at 12:51 pm to poochie
I looking at doing this right now. I'm just tired of working for someone else. Custom homes are where the money is at. I want to build spec homes with a custom touch. Trying to not deal with owners, but also figure out if it can compete with the big spec builders like dsld and Dr Horton. Not trying to compete with them.
Posted on 4/13/18 at 12:52 pm to eng08
quote:
It can be lucrative, but if you charge outrageous prices you better be flawless.
Yep. Premium price better deliver a premium product.
Posted on 4/13/18 at 1:56 pm to VABuckeye
I knew a once succesful custom builder, Said his Fee was 10%
Also said you had to pay workmans comp upfront each year.
Wasnt cheap, like 20k plus
Also said you had to pay workmans comp upfront each year.
Wasnt cheap, like 20k plus
This post was edited on 4/13/18 at 1:58 pm
Posted on 4/13/18 at 2:21 pm to poochie
quote:
What am I missing?
Assuming that everything will go perfectly. My friend is currently self contracting a house, his second time doing this. The first one went smoothly the current one is a never ending nightmare. One of the bigger issues was after they poured the slab and the framers came in they discovered several drains had been positioned wrong by the plumbers. He admits he should have checked everything against the plans, but he was busy with his other business. He had to pay a crew to break up the slab to move the drains. This should have been on the plumbing contractor, but they wont return his calls, and he had no choice but to do it himself, or risk not having subs available if the schedule slips.
Posted on 4/13/18 at 2:50 pm to EA6B
quote:
Assuming that everything will go perfectly.
Agreed. Unless you are in the industry I would be very hesitant to start doing something like this on your own. I might work with a GC through a couple projects, develop the relationship, and then go off on your own once you have a little bit more experience.
Posted on 4/13/18 at 3:52 pm to poochie
quote:
How lucrative is owning a small residential construction company?
Can be a very good business. but its not a business that goes without cost or risk. STill responsible for warrantying the home etc and dealing with crazy people making their every desire and wish go smoothly.
It's also not about you the GC, its about the GC's stroke with all the subcontractors. That's the ticket.
Posted on 4/13/18 at 8:30 pm to poochie
Its 10% but be careful because its a subs market and construction costs are rising drastically. Do you work at the GC level or at the sub level currently?
Posted on 4/13/18 at 9:36 pm to PrettyLights
The income is proportionate to the difficulty stress, and risk of the job.
You can hire a Builder, and have a huge headache, or you can have it subd' out yourself and have a huge headache.
There are people in Baton Rouge building spec houses for 250,000, and selling them for 400,000.
You can hire a Builder, and have a huge headache, or you can have it subd' out yourself and have a huge headache.
There are people in Baton Rouge building spec houses for 250,000, and selling them for 400,000.
Posted on 4/14/18 at 9:17 am to poochie
quote:
What am I missing?
An actual business model and plan. Basically, everything.
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