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All Forum Posts by: Devin James

Devin James has started 120 posts and replied 490 times.

Post: Gross Margin Calculation for New Construction

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303
Quote from @Jaycee Greene:
Quote from @Devin James:
Quote from @Jaycee Greene:
Quote from @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

 Hey @Devin James. Did you do a variance analysis for this new build?


I had to look up what "variance analysis" meant.

If I understand the question correctly, you're asking "What went wrong to not hit our 20% target?"

The answer is cost of construction came up slightly, and prices came down slightly.


Ding ding! Were there any "intangible" value created through this build that wouldn't be reflected in the numbers? An example would be that you kept your crew working rather than laying them off. Another would be you are building other units next door/nearby and you can chalk this build up to the "learning curve".

I didn't see a CFO on GLH or GLC's website, but I'm sure you have someone doing this type of financial analysis for your developments? Most CFO clients that I work with that are new construction/home builders usually target a 20%-25% gross margin as they usually have to deliver high teen returns to their investors.


Great question. I would argue that there's intangible value in every deal!

One of our Co-founders is an excel wizard. Duke MBA. So we treat him as our CFO. But since we are still small, we (the ownership) don't have any set titles as of now.

Post: Gross Margin Calculation for New Construction

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303
Quote from @Jaycee Greene:
Quote from @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

 Hey @Devin James. Did you do a variance analysis for this new build?


I had to look up what "variance analysis" meant.

If I understand the question correctly, you're asking "What went wrong to not hit our 20% target?"

The answer is cost of construction came up slightly, and prices came down slightly.

Post: Gross Margin Calculation for New Construction

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303

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

Post: New Home Buyers are Strapped for Cash

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303
Quote from @Patricia Steiner:

There are several lenders who offer low/no closing cost options for first time homebuyers. Some costs are eliminated (such as 'soft charges') while others are accounted for in the interest rate.  And, it's amazing how many closing costs are junk fees that we as investors need to pushback on paying for ourselves and our clients. There simply are too many people attempted to get their hands in our pockets.  The industry is long overdue for an overhaul.  


 Interesting perspective

Any examples of the junk fees you see? We may need to switch lenders.

Definitely too many hands in our pockets...

Post: New Home Buyers are Strapped for Cash

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303

We've sold 65+ homes and the biggest request we get from our Buyers is help with closing costs.

Most of our deals we're providing anywhere between $5K-$10K to help Buyers offset the cash requirement to purchase a home.

Even in today’s "high" interest rate environment, many Buyers prioritize closing cost assistance over an interest rate buydown.

This speaks volumes about the challenges Buyers are facing when it comes to saving enough cash to purchase a home.

It’s a reminder that understanding what Buyers need most is key to creating deals that work for everyone.

Post: Time is of the essence - Im currently learning an expensive lesson

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303
Quote from @Nick Rutkowski:
Quote from @Devin James:

Im currently learning this lesson with New Builds that have taken twice as long to complete than anticipated.....

Finishing a Real Estate project ASAP is critical because...

1) Holding Costs add up quickly

- Loan Interest

- Property Taxes

- Insurance

2) Investor Capital

- Our financial projections are dependent on how fast we can turn our investors capital. If we can complete projects faster, we increase IRR and build trust.

3) Market Risk

- The longer it takes to complete a project, the more exposed you are to market fluctuations.

This goes for all things Real Estate - BRRRRs, Flips, New Builds, Rehabs, etc.

Real Estate is a wild ride


 I feel your pain, I've had this happen many times where the project is twice as long. Hopefully you have a better streamlined build on the next one.


Its a part of the process

We'll be more efficient as time goes on

Thanks for the feedback! Always good to know you're not the only one, haha!

Post: Time is of the essence - Im currently learning an expensive lesson

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303
Quote from @Jay Hinrichs:

we ran into this in FLA  a few years back when I had 4 starts and I exited that market..

permits  sub base all pretty tough for someone who is not there and already knows the systems hands down and has a devoted loyal sub base.. thats the key in my mind.


For sure! 

And it is very market dependent. 

In 1 market, for a SFH, permitting is 2 months with a 5 month build time.

In another market, permitting is 5 months with a 8 month build time for the same home.

Post: Time is of the essence - Im currently learning an expensive lesson

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303

Im currently learning this lesson with New Builds that have taken twice as long to complete than anticipated.....

Finishing a Real Estate project ASAP is critical because...

1) Holding Costs add up quickly

- Loan Interest

- Property Taxes

- Insurance

2) Investor Capital

- Our financial projections are dependent on how fast we can turn our investors capital. If we can complete projects faster, we increase IRR and build trust.

3) Market Risk

- The longer it takes to complete a project, the more exposed you are to market fluctuations.

This goes for all things Real Estate - BRRRRs, Flips, New Builds, Rehabs, etc.

Real Estate is a wild ride

Post: To those who consider themselves very wealthy, is wealth worth what is takes?

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303
Quote from @Corey Conklin:

@Devin James

I think another question you need to consider is “why do you want to be wealthy?”

Some people like to have freedom to do what they want, some like to buy fancy cars, some don’t want to have to work for someone else, some want to prove they can go from nothing to something, some are just competitive. There are numerous reasons why people want to be wealthy.

I think your “why” is an important factor to consider when asking was building your wealth worth it.

I wouldn’t call myself “wealthy” by comparison standards, but I’ve made a lot of progress on net worth over the last 5 years. It’s taken a lot of work, and a lot of lessons learned. It hasn’t been easy, that’s for sure.

I’ve sacrificed a lot of time with my family, my overall physical fitness has diminished as I no longer work out 6 days a week, and my social life is pretty much nonexistent.

So, trust me, I’ve had multiple times that I’ve asked, “why am I doing this?” At times it seemed logical to just cash in what I had built or scale back and take away the stress but then I remember my “why”.

Having a strong “why” and purpose to what I’m doing keeps everything into perspective. My “why” makes the pursuit of wealth worth the sacrifice.


 Definitely! My wife and I do this exercise every year. "What do we want our life to look like in 10 years?"

Through this, we find that what we want doesn't require tons of $$$. It helps us focus on whats truly important.

Post: To those who consider themselves very wealthy, is wealth worth what is takes?

Devin James
Posted
  • Developer
  • Orlando, FL
  • Posts 499
  • Votes 303
Quote from @Carlos M.:

It's absolutely a case by case basis. IT really depends on how much you sacrificed to achieve the wealth and what you do with it. I have met a handful of wealthy individuals and they are miserable. All they care about is their wealth. Their health isn't important, they don't go out and make memories and they have next to zero relationships. In my opinion that life wouldn't be worth the sacrifice. My wife and I grew up in extreme poverty and had our daughter when we were 17 and still in high school. We decided to invest into real estate in our early 30s. We worked our W-2 and did real estate for 10 years. During that time it was not uncommon to miss holidays, b day parties, work 14 hour days 7 days   a week. That was our sacrifice. Now we are 16 years into it and have an 8 figure net worth. My wife and I work about 1 hour a day and spend most of our time on health. My wife's mother ended up having a massive brain tumor last year and we were able to be there for her every single day. We spent weeks in different towns to be with her while she was having, and recovering from surgery. My father passed away very suddenly last year. I am able to spend how ever much time I want with my mom helping her get through this. We are spending every other weekend in Virginia as that's where my 4 month old grandson lives. My wife will also travel down alone to spend a week at a time with our daughter and grandson. Truthfully I haven't done much in the business since my dad passed as I'm still mourning his passing. At this point we NEVER miss a holiday, wedding, b day party or anniversary. We spend our summer weekends on our boat down at the bay surrounded by friends and family. I also mentor 7 friends, family (free). My best student  crossed the 1 million mark in net worth and he is in his early 30s! This is what makes me happy! Soooooo, If you ask me if it was worth the sacrifice, I would say absolutely! I would do it all over in a second. I couldn't imagine telling my mom I can't afford to help you, or my wife not being able to be there for her mom, or not being able to see my grandson when ever we want. Now it's truly about helping and making memories with friends and family, helping them grow in health and wealth,  and working on our health daily. We are also planning to start spending winters in warmer climates... I have never been more content with my life. 


 Thank you for your story and vulnerability! This is exactly what I was looking for with this post. Seems like you have a good balance that I strive for.