Is there profit in being a GC and building?

[Jerry Callow]

Hello - I have few friends that are buying empty lots around us, playing a role of GC to build a house (have learned it over the years with education and experience) and sell it. I have few questions

1. Approximately what % of sale price do GC's make? The location would be Northern California within 100 miles of Bay Area? I hear 20-25% is that correct number?

2. How do you learn to be a GC? Are there schools or books? The goal is to buy a fixer / upper and try to update and sell before building from scratch. What is the general learning path?

3. Is there money in building and selling individual properties as GC if you factor in holding cost, etc?

[Bruce Woodruff]

You need to get a GC license in Cali to do this. You can only play Owner/Builder on your own primary residence. So your friends are flirting with trouble. From CSLB:

This section defines what an owner-builder is and the laws surrounding the practice.

• An owner-builder is what the term indicates: a person owns the property and acts as their own general contractor on the job, and either does the work themselves or has employees (or subcontractors) working on the project.
• The work site must be their principal place of residence that they have occupied for 12 months prior to completion of the work.
• The homeowner cannot construct and then sell more than two structures during any three-year period.

Getting a GC license and going Legit is pretty difficult. First you need 4 years of Journeyman level experience and a licensed GC to sign that paper for you. Then the test is a bear in Cali, only 12% pass rate...harder than Bar Exam. Then getting legal requires Liability Insurance, Bond, Workers Comp , Etc.

If you do all this, you will probably lose money the first few years while you learn the ropes....but after that you can expect to make about 20% for Overhead And Profit . Your profit will be a little more than half, so on a $800k new build, you can expect to make $80 - $100k. For a years work.