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Builder Algebra

By
Real Estate Agent with Realty Executives South Louisiana

In my work with builders, I'm often asked questions (not exactly but to illustrate the point) like:

  1. I want to build spec in a certain size and price range.  How much can I spend on the lot?
  2. 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?
  3. 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

Comments (3)

Art Hotes
Transaction Realty - Medina, OH
CNE, e-PRO

Nice Don!

Do you mind sharing that spreadsheet?  I work with a custom builder here in Ohio and I'd like to see if I can use it for my application.

Thank you!

Art Hotes ~ RE/MAX Classic
ahotes@remax.net

 

Oct 24, 2007 06:27 PM
Don Stern
Realty Executives South Louisiana - Baton Rouge, LA
Greater Baton Rouge Real Estate
Art, I don't mind sharing at all.  I'll e-mail it to you.
Oct 25, 2007 01:30 AM
Art Hotes
Transaction Realty - Medina, OH
CNE, e-PRO
Thank you, sir!
Oct 25, 2007 02:28 AM