Do builders negotiate?

Discussion in 'Development' started by Jmillar, 24th Sep, 2017.

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  1. Jmillar

    Jmillar Well-Known Member

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    Hi guys,

    Possibly a dumb question but I'm building for the first time (medium sized builder, probably using one of their designs but it might be customised to suit my block). It will be a budget build (ie circa $250-300k for dual key and full turn key (incl fencing, landscaping, letterbox etc etc) in QLD.

    With builders how much wiggle room is there usually in their prices? I don't want to squeeze them so much than I become a difficult customer but also don't want to accept the first price.

    Thanks!
     
  2. Sackie

    Sackie Well-Known Member

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    Unless you are doing a really large project with a builder or have a solid reputation with them for repeat business, you wont have much leverage. The best way to get a builder to budge on price is to have other quotes that you can use, and even then you wouldn't want them to back themselves into a corner too much. Their financial viability and survival is in your best interest while building with them.
     
    Joynz likes this.
  3. Big Daddy

    Big Daddy Well-Known Member

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    Depends on the market. Lots of room for negotiation (or price match) with builders in Perth. Be careful as lot will price match to get your business and then sting you with unwarranted blowouts in site works or other related costs once you have signed their contact and handed over a large chunk of cash.
     
  4. Big Daddy

    Big Daddy Well-Known Member

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    Even if you smart enough to have no preliminary costs are you still willing to let the builder walk halve way through a project if you get hit with these bogus variations? The time delays and added costs of getting another builder in half way through will be enormous. Also forget about suing them, you won't have a case.

    Find a trustworthy builder and pay a fair price.
     
  5. Tenex

    Tenex Well-Known Member

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    Where in QLD?

    At present builders in Brisbane metro are going belly up so your concern should be the financial position of the builder rather than the negotiation.

    As a general rule of thumb, project builders are cheaper than smaller builders but they dont allow too much customization.

    Why not research project builders and see if there is a design they have that you may like and then do your due diligence?

    If you want to go with private builders then shop around. If you are in Brisbane then the property market isn't going anywhere so you should be in a reasonably good position to negotiate.

    Depending on your expectations and size of the build, 300k is not too far off for a vanilla single home.
     
  6. MTR

    MTR Well-Known Member

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    Hi Jmillar
    As you been posting about your strategy/direction, I would be keen to know why you have gone down this road
    Care to share some numbers, I assume it is a cashflow play?

    MTR:)
     
  7. Jmillar

    Jmillar Well-Known Member

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    Whoops I missed this one, sorry!

    I had a block sitting there which I paid $250k for last year (with a house) and is subdividable. The house at the front is old and decrepit, so I figured it makes sense to subdivide the site and build on the rear. I can then keep the rear and then sell off the front block with the house. The rear site will be positively geared which helps serviceability but will have a lot of depreciation (I'm on high income) and will make $100k+ equity in the process. Also it's in an area I believe will continue to have growth (one of the better areas near Ipswich).

    Some rough numbers:
    Purchase Price: $250k + closing costs
    Subdivision Costs: $75k
    Build Costs for the rear block: $300k incl holding costs etc, full turn key
    Total Costs: $625k

    I can then sell the front block w/ house for $300k+, and the new dual key at the rear will be worth $475k+ and rent for $580/week (8% return on costs to subdivide and build). Also allows me to get rid of the older property which costs more to maintain, and retain newer assets (less headaches, better tenants etc).

    Initially I started the process because I was bored and wanted something to do, and also wanted to learn the subdivision and building process, but the numbers also make sense. I'm using conservative numbers above.

    Once I get this one underway I'd like to find other projects to roll into. I'll probably do 1 or 2 more smaller ones before moving into something a little bigger.

    Thoughts?
     
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  8. Scott No Mates

    Scott No Mates Well-Known Member

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    Are you being a bit optimistic? Unless there's been massive increase in the land value, changes to the LEP preventing any more of these developments etc, how can the value of the front house & block after subdivision be worth more than the original?

    Nor does it makes sense that the new house is only worth $475k being build $300k + subdivision $75k + land $125k + profit. :confused:
     
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  9. Jmillar

    Jmillar Well-Known Member

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    I bought the site well (off-market) and it was pretty thrashed. I spent about $10k renovating as well. Multiple agents have told me $300-340k for the front site recently. I'm not banking on a large profit for the front site, I'm happy to break even (after selling fees, legals, SD etc).

    What doesn't make sense re the rear? The build cost is under $300k so I'm overestimating that. Subdivision also likely to be less than $75k. At a conservative $475k end value that's $100k profit (plus whatever I get from the sale of the front block).
     
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  10. Tom Rivera

    Tom Rivera Property Manager Business Member

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    99.9999% of the time the builders wont budge on price, and they generally don't have a huge profit margin themselves.

    However, when it comes to Dual-Occupancy homes, the agent gets a HUGE chunk of commission and will sometimes negotiate. The builders pay up to $35,000 to the agents on these builds.....!

    Also, not sure how much wriggle room you've slipped in there but you shouldn't be paying $300,000 for the dual-key build in Ipswich. Assuming a 210m2 3/1 turn-key with a decent specification (stone tops, quality fittings, led lights, etc.) you should be paying about $275,000. If you have it stripped out you could pay under $270,000, but I wouldn't recommend doing that.
     
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  11. Jmillar

    Jmillar Well-Known Member

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    Thanks a lot Tom.

    I'm dealing direct with the builder so no commissions there thankfully!

    Yep I've actually had quotes of $250-260k but was working off $300k to be very safe. Have you been involved in many builds? If so, would love to hear your recommendations on builders and get your thoughts on my quote when I get it!

    Cheers everyone. Appreciate the comments and always happy to be challenged/queried to make sure I haven't missed anything!!
     
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  12. Coastal

    Coastal Well-Known Member

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    I find trades that don't negotiate.

    I kind of feel bad asking if its 1 job

    If you do more work with them, they will look after you.

    I just did some work on a Brisi Property where one quote came in at $4000 and the other came in at $1300 by a person with a shed load more experience and nice person in general. I did not ask for a discount but that it different a $250k project.

    Could you ask for more inclusions within your price?
     
  13. Tom Rivera

    Tom Rivera Property Manager Business Member

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    We've worked with (almost) every builder in QLD who builds Dual-Occ's, and we also build them ourselves (we're not always competitive though, it depends on the specification). I'd love to have a chat and take a look at where you're at with it.
     
  14. Jmillar

    Jmillar Well-Known Member

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    Legend, will send you a PM mate!!
     

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