Hey everyone I am new to the forum but I was wondering what type of lot cost ratio everyone shoots for when building a home? I realize this will vary greatly from region to region but i am interested in hearing what everyone has to say.
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What do you mean by "low cost ratio"?
Are you referring to gross profit?
Jon Blakemore
RappahannockINC.com Fredericksburg, VA
I read it as 'Lot cost ratio' and I assume the inquiry is how much to pay for a lot as part of the whole budget?The heck, you say?
You know, I read it three times and every time I saw "low" not "lot".I guess the 14-1/2 hour day took it's toll.
Jon Blakemore RappahannockINC.com Fredericksburg, VA
I guess I should make it easier on all of us and call it land cost ratio. I wrote the post and had to look at it 2x myself. i was just wondering if everyone was paying 25% or 30% or 35% on average for their land with respect to the retail outsale of the total package.
thanks
I can't comment directly on land cost, but I can tell you that in large-scale residential development (mid-rise condos, etc), they look at construction costs (building only) as being somewhere between 40-50% of the sales price. If you take out a 10% profit, and around 10% for sales, marketing, etc., that leaves somewhere in the neighborhood of 30% available for developed land costs.
Of course, this may not apply to single-family so much, but it's the best response you've gotten so far ;)
Bob
The general rule of thumb that I have always heard is that the land (lot) cost should be between 1/5 to 1/6 of the total costs. Using that rule a house built on a lot costing $100,000 would sell for $500-600k. That's how we do it out in the sticks.
FF
it often depends on how good the lot is and the sale value of the other houses in the area
most of the builders we sell to figure it at 25% approx.
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