How much profit do home builders make off of sold homes?

Question

Hi everybody-

I am looking into starting my own home building business but am trying to work with some numbers, specifically the average profit that self employed home builders can expect to make.

For example, if you sell a home for $400,000 how much was spent on the actual construction of the home and thus how much profit does the builder accrue?

Does anybody have any insight on this topic?

Thanks so much!

Kate

Answer 1

Over the past 15 years as a professional general contractor and builder in the Pacific Northwest, I have seen a huge change in the market. The actual cost of construction has gone way up, the cost of materials has gone up, and of course the regulations, permits, and System Development Charges have gone up, all eating into to the Value of a home. You can only sell a house for it's value in the market. Ten years ago, after paying my insurance, bonding and overhead, not including any payroll for myself, I was doing well to make about 10 percent on a house. Then factor in your time and your warranty of the home and 3 to 5 percent looks good.

Today, I am seeing everyone across the board expect home prices to drop by 10 to 15 percent over last year. I cannot afford to sell houses any more. I would have to pay people to buy a new house.

Answer 2

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