Washington DC/Baltimore

[DCbuyer]

I had tried to find a builder to build some houses in NoVA and DC and just cannot believe what prices people are asking (flat lot, with utility onsite, etc). The prices quoted for medium finishes (nothing fancy) are between 140-220/sf!!!!!!!!!!!!

I cannot  believe it will this costly to build new houses here, particularly considering the so called "Luxury" homes in Mclean or Great Falls are mostly selling $250-275/sf range. Considering the lots are generally $600k or above, I cannot believe people can make any money doing new construction in NoVa (unless he can get the lots cheap, which are impossible unless he's a big developer). 

Why are the builders so expensive? Why are the luxury homes so cheap? 

[philip-gvinter]

Unfortunately the $140-$220 per square foot price seems about right for what a bulder will charge to do work in this area. Have you also priced how much a modular would cost? Remmeber the small builder doing one-off construction does not have the same economy of scale and ability to negotiate prices with suppliers that the larger builders doing luxury constructions will have. Also keep in mind that the luxury builder is making money on the development of the land whereas the builder you are looking to engage would only have his work to mark up in order to earn a profit.

[DCbuyer]

Actually I believe it's a misconception to believe that larger builders have much economy of scale. In a lot of these cases, GCs do not want to buy materials themselves--they will only compile the numbers from subcontractors. The larger the subcontractors, the more overhead it has and such increase in overhead will eliminate any savings that may be brought about by the lower prices they may get (if any). I think most would say the larger the builder, the most expensive the construction cost will be. 

[pea_soup]

Correct me if I'm wrong - assuming no mark-up on the land, the numbers you cite seem to produce gross profit margins of 15% to above 20%. What gross profit margin do you need? 

[DCbuyer]

How did you calculate it? Some additional charges are:

1. architectural fee (5-10% of construction cost)
2. 5% commission on the sale price
3. Site preparation 
4. Recordation tax on both ends
5. Insurance
6. Interests and Points
7. Appraisals

In addition, did you use the average number in the range I listed? Pls share. And what if the market drops 5%?