What is the profit margin on these new constructions?

Can you really look at it that way though? The value of that land is what makes most of the price. And they already own it. So they could go and sell it to another developer as well. So the profit margin is really sale price - (cost of labor/material + value of land)
 
I don't know about IP. For publicly trade builders, the GM is around low 20%.

YellowFever said:
Anyone know how much IP makes per UNIT of each home sold? 

Assume Petaluma res 1 sells for $830,000. 

How much of that $830,000 is parts, labor, and net profit?  We know the materials (wood) they get is probably wholesale.

Just how much are we GETTING SCREWED?  ;D

We know for a fact many of the subcons they hire are definitely undocumented with all them spanish signs on the site.

If I have to guess, I think they spend ~$200,000 in parts and labor and reap in $600,000.
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gm is 20% but doesn't include carrying cost/lead time and sg&a. . net tends to be around 6-10%. 

New Home Co. is the contract builder for IP and makes 6-8% per unit. 
 
LongIrvine said:
gm is 20% but doesn't include carrying cost/lead time and sg&a. . net tends to be around 6-10%. 

New Home Co. is the contract builder for IP and makes 6-8% per unit.
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Does anyone happen to know if all recent IP communities are built by TNHC? If not which ones? Do any other builders contract build for IP?
 
I would imagine their margins are hugely dependent on what options the buyers pick.... just looking at the pricing on builder upgrades their margins must be huge
 
An "old dog" in the new construction business shared with me his builders margin minimums. The tract he's recently moved to opened at about a net 25% margin with 17% being their floor. This may be due to the lower land cost where he's at today. I was astounded, but considering the source and their connection to their builder, I have to assume he was telling the truth. 

If someone has the time, isn't this data searchable through any publicly owned builders financial statements?

My .02c

SGIP
 
Soylent Green Is People said:
An "old dog" in the new construction business shared with me his builders margin minimums. The tract he's recently moved to opened at about a net 25% margin with 17% being their floor. This may be due to the lower land cost where he's at today. I was astounded, but considering the source and their connection to their builder, I have to assume he was telling the truth. 

If someone has the time, isn't this data searchable through any publicly owned builders financial statements?

My .02c

SGIP
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Yes, I looked at the margin's for Lennar and Tripoint. (See my post above)
 
Let me simplify your math here. Density is the paramount factor here. On one acre of land at $4m/ac. The total selling price of all homes must be double of the land price. The gross selling price therefore is $8m.

If the project is a 4pack green court at 10 units per acre the average selling price for each home is $800k. Take $800k divided by $400/sf then the house is about 2,000 sf

If the project is a 6pack green court at 12 units per acre then the average selling price is $666k. Take $666k divided by $400/sf then the house is about 1,666 sf.

If the project is a SFD at Orchard Hills like TNHC at 4 units to an acre then the selling price would be $2m for each home. Take $2m divided by $400/sf then the house is about $5,000 sf

The builder is limited to a profit of 6% in Irvine. This is low compared to other locations outside of Irvine. Anything more would line the pocket of the developer. Why would builders agree to this? If the economy tanks then the builder could return the unused land back to the developer. The builders do not have to come up with a big chunk of cash to buy the entire piece of land. They can buy a phase at a time to avoiding the carrying cost. The master developers also take care of all advertising's, community branding, directional signage and all utility and landscape improvements outside of the builders parcel. The risk is very low for builders but 6% margin is much lower as well after subtracting all builders overhead.
 
so who gets all the extra money once the builder hits the limit of 6% profit?  Or is it assumed that its always the land value that increases, and the builder just effectively pays more for the land to Irvine?
 
Isn't TNHC's contract essentially a a "cost plus" contract? Essentially all of their direct cost plus an allocation for G&A and then they tack on the 6% profit rate. If the contract didn't cover a G&A allocation it would not make sense
 
Found this document while looking for PS MR number (still looking!):https://emma.msrb.org/ER986115-ER771801-ER1173152.pdf

From page 171 there are cost breakdowns for new Great Park constructions. Looks like the builder's profit is at 7 or 8%.

And from page 169: "Based on surveys of builders, current profit requirements are typically between 8% and 12% of revenues, with occasional responses as high as 15%. These profit estimates are for projects that can be constructed and sold out in a two-year period.
Higher profits can be required for longer construction/sellout periods and riskier projects."

The report is put together by a third party appraiser so it may not be 100% accurate.
 
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