Home Forums Starting your journey How lucrative is a home building business?

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  • #999966
    JonJon1212
    Member
    • Total posts: 10

    Hello there. A few days ago my contractors they operate here at Mornington peninsula) finished building my house. I figured out that it is a pretty profitable business. Long story short, if the business provides sufficient cashflow wouldn’t it be a good idea to build houses for sale? Instead of getting all this pain in the glass doing custom build homes with so many specifications and ordeals?

    #1222081
    LucasArthur
    Participant
    • Total posts: 3,158
    JonJon1212, post: 268270, member: 116103 wrote:
    Hello there. A few days ago my contractors (Gilpip Homes, they operate here at Mornington peninsula) finished building my house. I figured out that it is a pretty profitable business. Long story short, if the business provides sufficient cashflow wouldn’t it be a good idea to build houses for sale? Instead of getting all this pain in the glass doing custom build homes with so many specifications and ordeals?

    Its not always about profit, and not all those ‘pretty profitable business’es are as profitable as you think once you are on the inside.. Maybe custom jobs are more lucrative, maybe they take more pride in their custom work and so forth.

    My biggest query, what calculations were involved to assess the profitability of the business model?

    Cheers

    #1222082
    RunicConvenience
    Member
    • Total posts: 186

    It sounds like napkin math is being used to consider this business and at the end of the day would your conceptual business survive an extended period of “no sales”, “delays” or property market sinks meaning the expected return from the project is less than you spent building the “design”.

    as your business concept sounds more like the process used by real estate flippers who rely more on booming prices and a bit of touch up work to make money.

    #1222083
    bb1
    Participant
    • Total posts: 4,472

    I think as the rest have commented, some maths without in depth knowledge is being used to say that it is pretty profitable, hey maybe it is, but then again maybe it isn’t and they are drowning in debt.

    It’s a bit like when people ask me my hourly rate or get a quote on a job that only takes them an hour, the response is often ”how much”, but people forget all the hidden costs associated with running a business.

    You may be looking at it just at the cost of materials and labour, but you can add mega dollars behind that for business running and on costs.

    Enjoy your napkin maths

    #1222084
    Paul – FS Concierge
    Moderator
    • Total posts: 3,115

    Hi And Welcome to Flying Solo [USER=78709]@jonjon[/USER] .

    It is great to have you!

    Cheers

    #1222085
    JonJon1212
    Member
    • Total posts: 10

    Thanks Paul. Great pleasure to be here :)

    #1222086
    JonJon1212
    Member
    • Total posts: 10

    So no business owners who operate in the niche of building houses to give a precise answer?

    #1222087
    Paul – FS Concierge
    Moderator
    • Total posts: 3,115
    JonJon1212, post: 269357, member: 116103 wrote:
    So no business owners who operate in the niche of building houses to give a precise answer?
    You probably will not find precise answers here.

    10-30% would be standard but as you may have read, many builders have gone bust over the years so for that group, <0%.

    There is considerable risk in the building industry.

    Our member [USER=38207]@Greg_M[/USER] would know a lot about this.

    #1222088
    LucasArthur
    Participant
    • Total posts: 3,158
    JonJon1212, post: 269357, member: 116103 wrote:
    So no business owners who operate in the niche of building houses to give a precise answer?

    No offence, you ask if a builder can give you a prise answer, and yet i am not really sure what you are asking. Your question reads:

    JonJon1212, post: 268270, member: 116103 wrote:
    Long story short, if the business provides sufficient cashflow wouldn’t it be a good idea to build houses for sale? Instead of getting all this pain in the glass doing custom build homes with so many specifications and ordeals?

    a: Is your question about operating a business with good cash flow?

    or

    b: something about glass doing custom build homes with specs?

    If its a, cash flow isnt all that business is about – what happens when a global pandemic hits and you have no cash flow?

    or if its b, maybe some builders like the complex and finishing unique homes.

    Sadly, not all answers fit into one box.. and not all will agree with each other… Although a question i may have is are you a builder? and why are you pondering such a thought, is it crucial to you starting a business a present or operating an existing one? or what are you actually looking to answer – or wha are you wanting to do with the answer? this may help some of the replies, if any come forward.

    #1222089
    bb1
    Participant
    • Total posts: 4,472
    LucasArthur, post: 268274, member: 34537 wrote:
    I
    My biggest query, what calculations were involved to assess the profitability of the business model?

    Cheers

    I’m still very interested in the OP’s answer to this question

    #1222090
    Greg_M
    Member
    • Total posts: 1,691

    I ignored this post when it first appeared mainly because it included a link to a particular builder, which is completely irrelevant to the question asked…so I assumed it was designed to get a traffic bump for the site in question.

    My opinion hasn’t changed, only a dill would be even contemplating entering speculative building in the current climate unless you had many years experience and probably an existing land bank in an exclusive market niche area…and a pile of cash to carry a project indefinitely.

    The demand for housing has been underpinned by immigration for a long time now, can’t see that demand returning any time soon.

    Apart from that, the cost of purchasing existing housing will soon fall below the cost of production as distressed mortgagee auctions get cranked up…existing housing in good areas will be too cheap to compete against with new builds.

    My experience from past recessions is, that the smart money will come back into the market and buy and build (what they want) but not until they’re sure every contractor out there is hemorrhaging financially and pricing accordingly.

    #1222091
    bb1
    Participant
    • Total posts: 4,472
    Greg_M, post: 269361, member: 38207 wrote:
    I ignored this post when it first appeared mainly because it included a link to a particular builder, which is completely irrelevant to the question asked…so I assumed it was designed to get a traffic bump for the site in question.

    QUOTE]
    It’s definitely a dodgy post trying to get business, and the fact they refuse to ask questions. But knowing that links are no follow it’s a waste of their time anyhow. But the strange thing is admins let it be, even though it’s self promotion.

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