Results 1 to 6 of 6

Thread: Home build in CRESTWOOD - RECORD high costs

  1. #1

    Default Home build in CRESTWOOD - RECORD high costs

    I am considering a new, custom build home in Edmonton - Crestwood neighborhood. I am surprised how much developers are charging. For example, a custom, 3300 sq foot home just sold for $2.5 million by a local infill developer (this is a record price in West Crestwood). This translates to a build cost of $750 per square foot. Given this particular lot sold for $700k (tear down of an old house), this means the new homeowner paid the builder $1.8 million for the home construction itself, excluding the land value.

    This seems REALLY expensive, even for a very high end home. How does the average custom developer/builder price homes - do they work as cost-plus to show where your money is going, or is a flat fee? Obviously they need to make a buck, but $1.8 million for 3300 sq foot building seems like at least a $500k markup!

  2. #2

    Default

    If I'm looking at the right house, it sold for $2,450,000. It's 3700 sqft above grade with a fully finished basement. Total finished sqft could be estimated around 5,377 sqft. The lot sold for $724,000. If you do the math it's around $320 per foot not including the lot price. With high end finishings and considering triple garage, its not that crazy.

  3. #3
    C2E Hard Core Contributor
    Join Date
    Apr 2007
    Location
    Edmonton
    Posts
    3,855

    Default

    It's not based on costs, it's based on what the market will pay. And in this case, the market says it's a 2.5M house.
    If the lot was 724K, and it's just a replace/rebuild (rather than split), then there's no utilities connection fees.
    Demo and lot clearing would run 15-20K
    Design fees for a house like that, maybe 5-8K
    A finished basement in that size, in those finishes is probably 160K
    Then 3300 SF above grade at 300/SF is about right.
    I don't know the house, does it have a detached garage? That could be another 60-75K depending on size and finishes.
    Landscaping another 40-80K, again depending on finishes.
    Prices above don't include GST, that's 120K
    If through a realtor, that's probably 70K in fees
    If a spec home by the infill builder, there's probably 50-60K in carrying interest charges.

    Add that up, and assuming it's sold through a realtor, that's 2.26M in costs.
    So they profit 240K. Now the build costs probably include a 10% markup and a management fee already, so the builders profit is probably closer to 335K.
    15% margin on a 2.3M investment? In a price demographic that doesn't sell quickly and where buyers are very finicky about what they want?
    I'd say that's an OK profit, not great.

    Infill builders (if building for a client who has a draw mortgage) will generally do cost plus. Figure cost plus 10%, with an additional 30K management fee. Some might do cost plus 15% with no mgmt fee. Some might do fixed price but I can guarantee the cost will end up higher because they're taking risk.

  4. #4

    Default

    Quote Originally Posted by nobleea View Post
    It's not based on costs, it's based on what the market will pay. And in this case, the market says it's a 2.5M house.
    If the lot was 724K, and it's just a replace/rebuild (rather than split), then there's no utilities connection fees.
    Demo and lot clearing would run 15-20K
    Design fees for a house like that, maybe 5-8K
    A finished basement in that size, in those finishes is probably 160K
    Then 3300 SF above grade at 300/SF is about right.
    I don't know the house, does it have a detached garage? That could be another 60-75K depending on size and finishes.
    Landscaping another 40-80K, again depending on finishes.
    Prices above don't include GST, that's 120K
    If through a realtor, that's probably 70K in fees
    If a spec home by the infill builder, there's probably 50-60K in carrying interest charges.

    Add that up, and assuming it's sold through a realtor, that's 2.26M in costs.
    So they profit 240K. Now the build costs probably include a 10% markup and a management fee already, so the builders profit is probably closer to 335K.
    15% margin on a 2.3M investment? In a price demographic that doesn't sell quickly and where buyers are very finicky about what they want?
    I'd say that's an OK profit, not great.

    Infill builders (if building for a client who has a draw mortgage) will generally do cost plus. Figure cost plus 10%, with an additional 30K management fee. Some might do cost plus 15% with no mgmt fee. Some might do fixed price but I can guarantee the cost will end up higher because they're taking risk.
    Very good analysis.

  5. #5

    Default

    Keep in mind that area is primo real estate zone and has been for 30 years to my memory, so nobleea is correct. It is no different than areas like Beverly Hills, and Bell Air in Los Angels. As long as people want to be part of the status quo, it could rise even further.

    @David, what is the lot size there that you looked at.
    " The strength of a man is in the stride he walks."

  6. #6
    Addicted to C2E
    Mr. Reality Check

    Join Date
    Mar 2006
    Location
    Edmonton, Alberta
    Posts
    11,945

    Default

    also keep in mind that there seems to quite a focus on what the developer/building is charging for the end product but not much on his input costs which include the previous homeowners sale of the lot to him for 700k. my guess is there's a lot more margin than 15% in that 700k sale than there is in the builder's 2.5m.

    everyone seems to want everyone to be more realistic/fair in what they're prepared to sell for until, of course, it's time for them to sell whatever they own.
    "If you did not want much, there was plenty." Harper Lee

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •