In my work with builders, I'm often asked questions (not exactly but to illustrate the point) like:
- I want to build spec in a certain size and price range. How much can I spend on the lot?
- My cost of materials is so much per square foot. I'd like to build on a lot that I own but want to stay at a certain price. What should the size of the home be?
- I know my lot cost, cost to build, and size. What should the final selling price be.
Being something of a numbers guy I did the algebra and came up with these formulas:
Where: S = Final Selling Price
A = Living Area
P = Gross Builder Profit & Marketing
C = Cost of Materials, Labor & Financing per square foot Living
L = Lot Cost
L = (1-P)S - CA
A = (S - SP - L)/C
S = (CA + L)/(1-P)
I've created an Excel spreadsheet which uses these formulas to calculate the missing value.
Example #1
Example #2
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