% profit on new build properties.

chucknorris

MrsTinks wrote: »

Developers and large builders will have different numbers as they will be offering guarantees and warranties for the first x number of years that they need to either insure for or self insure for in the profit margin of the sale price.

Some builds will have a higher margin than others based on luck, some will be "loss leaders" but will probably bring in business through reputation or high profile in press etc. There is no easy answer for exactly what the profit margin is likely to be for every developer on every site as well as the longer term margin if providing warranties as a company vs a private build and then sale as seen if that makes sense...

Of course they will also have contractors at bulk rates most of the time that you won't have access to...

But you can't price luck, I'm a chartered quantity surveyor and I priced it to the best of my ability at the time of doing so. There will be a target developers profit as I outlined above, in the original land residual valuation calculation. Of course they it be subject to variance, but every land residual calculation that I have done both in industry and at the university for lectures, happened to be 20%. So to answer the OP's question, there isn't going to be anything better than 'approximately 20%'.

The costs won't alter the profit percentage, that too is also built into the calculation as a cost, if you have higher costs, it simply means that the max bid value for the land is reduced, rather the developers 'target' profit (at the residual land value calculation stage). Obviously if costs subsequently increase later that will eat into the developer's profit, but the target developer's profit would still have been 20% (but simply not achieved).

EDIT: Of course don't forget, whilst costs can be climbing upwards of where they were originally estimated, so can valuations too (i.e. better sale prices) and although they do very occasionally correct and fall, in the main, they increase.

steampowered

Barratt's operating margin last year was 14.78%.

Berkeley Home's operating margin was was 24.51%.

Taylor Wimpey's operating margin was 20.21%.

Those are all listed companies so you can look up their financials online. A rough 20% average sounds about right.

chucknorris

steampowered wrote: »

Barratt's operating margin last year was 14.78%.

Berkeley Home's operating margin was was 24.51%.

Taylor Wimpey's operating margin was 20.21%.

Those are all listed companies so you can look up their financials online. A rough 20% average sounds about right.

Operating margin isn't the same as developer's initial target profit, for a number of reasons, (but it is interesting to note that they are not that far away from 20%), this will explain the variance:

Historically 'achieved rates' would have varied for the following reasons:

1. Costs would have varied from initial estimates.
2. Selling prices would have varied from initial estimates.
3. Some of these figures will include contracting (not pure developer) profit.

I am probably going to have to bow out now, because I am not getting paid for this, and I don't tend to do lecture/work for free, unless they are for dog rescue centres. This is actually what I do, so it is the same as working.

daveyjp

20% has also been acknowledged as the acceptable profit level during planning appeals.

AG47

There is a property building bubble in the uk

marathonic

AG47 wrote: »

There is a property building bubble in the uk

The exact opposite actually. There's a housing shortage.

beefster

Hence I believe I may get planning permission when I would not have even tried previously. There seems to be a positive move to allow developments within limits in my area. The limits seem to have been reduced of late though.


Thanks for all the info. A lot to take in for a beginner! However 20% was what I was thinking at the start and that seems to be repeated. If I can develop on the land I own around my home and keep my home it could be lucrative. Possibly provide homes for my children or at least a more secure future financially.... kids living on the door step could mean bags of washing on the door step lol.


Still lots to learn.

chucknorris

beefster wrote: »

Hence I believe I may get planning permission when I would not have even tried previously. There seems to be a positive move to allow developments within limits in my area. The limits seem to have been reduced of late though.


Thanks for all the info. A lot to take in for a beginner! However 20% was what I was thinking at the start and that seems to be repeated. If I can develop on the land I own around my home and keep my home it could be lucrative. Possibly provide homes for my children or at least a more secure future financially.... kids living on the door step could mean bags of washing on the door step lol.


Still lots to learn.

One thing to consider would be to build for yourself, and dispose of your existing home (no capital gains tax)