I own a vacant lot and have the opportunity here in Northern Virginia to purchase two more on my street.
My question is to those builders who have experience, what would be a reasonable cost savings to budget, on a percentage basis, if I was the build three houses on the three lots at the same time, versus just the one?
10%,,15%, 20%, 25%, 30%????????
For reference, I’m assuming each of the houses would be architecturally designed. The square footage would be around 2500 each. Building costs for one seem to be in the neighborhood of $600,000.
Thanks for sharing your experiences.
Replies
Ok, I'll start it:
All built more or less in parallel or serially?
Parallel
You'll save a little bit from three jobs running in the same neighborhood. With all three houses different, you won't get manufacturing efficiency. I'm thinking 5-10% over three individually contracted houses; it might go a couple points more if you're making simultaneous buys on HVAC and kitchen. Good luck
I'd be surprised if you saved much of anything. Materials and labor will be basically the same.
You might have some minor savings from things like excavation, as the excavators won't have to move their equipment in and out so much.
But you may spend more in interest. Your electrician won't be able to wire all 3 houses at the same time. So that nmay slow down productivity overall.
In some of the larger construction projects I've been involved in we've had a hell of a time getting into the job sites, as they have too many people there at one time. There's no place to park, and everyone is in everyone else's way.
Overall, I just don't see any potential for real savings.
NAHB list net profit in the neighborhood of 6 - 20% for custom builders.
Net profit are with all expenses covered. If I was presented with three homes to build, I think I could reduce net profit, (perhaps to 0) on one of the homes. Three starts with a 1 - 2 week stagger would be the key.
If net profit was 21% on each home, and one was built with 0 profit, the savings percentage for 3 homes would be a 7% average.
Perhaps a creative contract would work. Pay an experienced builder a construction management fee with reasonable profit. This would open all vendors and subs to negotiations by the builder and you for the three home package. Ive never done that for a whole home, but it occurs on every home we build in the homeowner allowance catagories. Our P & O, including allowance items management is not affedted if the HO buys his light fixtures for $2,800.00 or $4,200.00.
Edited 2/22/2007 2:59 pm ET by txlandlord
I would only expect to save anything on the hourly employees you have and only if you have good on site supervision.
I doubt any sub's will give you a break.
You can cut your overhead only if you can actually get them built faster.
Jason
Your porta-john rental fee would be reduced from $60/mo/house to $20/mo/house.
My point is that your savings for constructing multiple houses at once will be somewhat negligible. Definitely in the single digit percentage, probably in the low single digits.
Subs won't give you much of a discount, if any. To get that, you need to be able to promise (and deliver) x# of houses per month. You will save a bit on materials as there will be less waste, as materials can be moved from 1 house to the next. You won't save on material purchase. Again, you have to be WAY bigger than that to get a discount on building materials. The only real savings will be on construction management time sharing, but if you contract that out, your discount will be small. You won't save anything on permitting, or any of that.
As a point of reference I have 7 houses under construction right now. Also, I used to live in your area. If you are a rookie at this, I'd definitely advise against it. If anything, I'd say get the lots, build 1 and see how it comes out. Then go from there.
It seems like a lot of people think new home builders are raking in large percentage profits. I just don't see that happening. Not saying it doesn't, just saying it is very rare. I actually work for a builder but still have full responsibility for the budgets (except that losses don't come out of my pay). If the net profit is 10 or 15%, I have done my job very well. If my houses make 5%, then I did my job OK. Too much is controlled by the real estate market though. I still have friends that live up in that area, and I hear the market is somewhat slow right now.
Edited 2/23/2007 7:04 am ET by Matt
See, now you're making me jealous, because I pay $95 for a unit cleaned 2x per month and $170 cleaned 4x per month.