Gross Margin Calculation for New Construction

[Devin James]

Gross Margin is an important calculation for developers/builders.

Gross Margin = Gross Profit / Revenue

We shoot for a 20% gross margin on our New Construction Homes

Real #’s:

Home Sales Price: $374K

• Closing Cost: $18,700
• Cost of Construction: $258K
• Land Cost: $30K

Gross Profit = $67K

$67K/$374K = 17.9% Gross Margin

Came slightly short of our goal of 20%

Homes Values and Build Costs are constantly fluctuating

I wish we had a crystal ball