What is Builder's Target/Fair Margin?

[MrRee]

What is the typical builder's target margin %? Put another way, what % of a THB 10,000/sqm project budget is typically considered a fair profit after materials (at cost) and labor? Also, what is typically considered a fair mark-up % over cost on builder supplied materials? Thanks in advance for the feedback.

[Perota]

What is the typical builder's target margin %? Put another way, what % of a THB 10,000/sqm project budget is typically considered a fair profit after materials (at cost) and labor? Also, what is typically considered a fair mark-up % over cost on builder supplied materials? Thanks in advance for the feedback.

Actually it depends how much you're willing to pay for its job. In most of the cases you can buy the materials yourself, so you can save the mark up here.

So now we're talking only about the builder remuneration. The best way to get the best price is to ask different builder to give you a quote. But make sure he will be able to do the job. One of the problem we had in Thailand was the lack of expertise of the workers, a lot of good will but no or very little professional knowledge.

A few points to check : does he have his own team ( + ) or does he hire cheap migrant workers (-), does he have his own tools (+) or does he need to rent them on a job basis (-). Ask to visit similar project he did in the past, meet the customer, take the phone number and then find an excuse to come back and ask for further opinion when the builder is not here.

My last personal advise : never work / rely on family members. If things don't go the way you expect, you will have much more freedom to express your "feelings" if the builder is a complete stranger rather than a family member. But I know on this point a lot of people won't agree with me.

[mooncake]

It used to be around 25% - normal market condition
50% - during the real estate boom
15%, 20% max - nowadays.... if you can unload it

[splitlid]

35% is your standard profit margin, some work on less some on more.

[mooncake]

35% is your standard profit margin, some work on less some on more.

tough in today market condition at 35%, unless you got good deals on labor parts, coz of high inventory out there at the moment.

[splitlid]

^100% agree,

unfortuneately getting a builder to cut his profit margin causes lots of problems. the main one being quality.

[mooncake]

^100% agree,
unfortuneately getting a builder to cut his profit margin causes lots of problems. the main one being quality.

still possible to maintain the quality,
1- most builders have NO JOB!!!!....they will most likely be agreeing on anything, as long as he won't lose the money and fair enough...coz he knows in today market, the job is hard to come by.
2- if there is the clause of the acceptible standard must be approved by you in the contract at the beginning, before the payment of that phrase, or specific job(s) is to be paid out.

Those are just a few leverages you have.

what is typically considered a fair mark-up % over cost on builder supplied materials? Thanks in advance for the feedback.

10-15% should be the max - afterall he has to spend... the time, driving around, taking care the billings, and gasoline cost, etcs...in getting the materials for you.

[Perota]

It seems we're not talking about the same thing.

Could MrReee let us know what he wants to build and where, the rules may differ, but I find weird to negotiate a % of anything you don't really control, why not a fix price, especially if your goal is to cut costs.

[mooncake]

Rarely any construction comes with fixed price, even fixed price project does usually involve in some sort of modifications as the project is progressing along. That modifications, many times, could become the killer cost for you and disgruntle issue between you and your builder, if there is no some sort of control instrument before the part starts.
In order to have a fixed price project, you /the op has to know “exactly” what he wants before the signing of the contract to begin. And most inexperienced person will have a hard time deciding everything (in the nitty gritty details) waaaaay ahead of time.

That’s why you just got to have a good/reputable builder and a good signed contract, esp the unit cost of the “will be modification(s) “….between you and your builder.

[Perota]

^^^
I definitively agree with the reputable builder, but could you explain how does the "control instrument" works ? I'm really interested because our house will soon need a complete renovation and I'm bit tired to play the bad guy when my wife realizes the "Thai way" is not working anymore.

[Smithson]

My last personal advise : never work / rely on family members. If things don't go the way you expect, you will have much more freedom to express your "feelings" if the builder is a complete stranger rather than a family member. But I know on this point a lot of people won't agree with me.

I think it depends and has a lot to do with your relationship with the Mrs.

We have our own business and due to previous experience, family members are never employed.

But for construction we've been very happy with family, I pay the uncle very well, but I don't have to supervise and worry about all the rip offs.

To be honest I think locals who you don't know will rip you off quicker than family, but there's also a good chance that the family aren't up to the job, even if they're honest.

Beware of builders who are quick to come up with a figure, claim to understand everything you say and never ask questions.

It seems that a large percentage of farang have a fallout with the builder and sack them in the early stages.

[lob]

if you think your good at QA , work out the materials costs and the labour costs should be 50% of material costs, ie one third of completed costs, the builder should/will factor in his % in the labour costs, correction, land costs should be in this equation too. simple init.

[mooncake]

^^^
I definitively agree with the reputable builder, but could you explain how does the "control instrument" works ? I'm really interested because our house will soon need a complete renovation and I'm bit tired to play the bad guy when my wife realizes the "Thai way" is not working anymore.

The details should be in the contract signed by both sides before any works to begin.
It needs to be spelt out exactly….What type of work, detail, acceptable standard/workmanship, method of payment and when….etcs

As for method of payment on any extra works and modifications….it needs to be in writing and agreed upon by both parties beforehand as how the said work(s)/change order will be charged…..fixed price, or material+labor hourly, for example

In the construction business,...don't ever set yourself up with…just a hand shake or verbal agreement….if you want to avoid the future dooms day for many headaches, and when those builders will pickpocket you dried.

[Humbert]

10 - 15% is normal profit margin after labor and materials. You need to put the Scope of Work in writing. You need to negotiate a payment schedule. Usually the contractor will want 10-25% upfront. 10-15% should be held until the work is completed and all the defects are taken care of.

[Smithson]

Regarding percentages, contracts etc. Are ppl getting their info from Thai practices or from back home?

For example, how many Thai builders are normally have a Scope of Work or extra works/modifications in writing?

[Perota]

I definitively agree with putting everything on writing and to transfert the last payment only after all the defects have been corrected but I still don't really understand why people care about the builder profit margin. Unless you're a professional, it's safer to negotiate a fix price than a % of something you don't really control / understand.

The only way MrRee's post makes sense is he himself intend to be the builder and he is checking how much he should mark up for his job.

[Smithson]

10% - 15% sounds too low, if he made a mistake in the quote or ran into problems, the builder could easily end up loosing money.

[splitlid]

some contracts will come with a boq. that includes all materials/site works/profit margin.
this has been prepared by the architect for the owner.

this is given to the builders to prepare the quotes.

its usually more prevailent in larger more expensive builds.

[dirtydog]

20 percent is normal profit margin for normal construction work, govt contracts it works down to around 15 percent if it's all above board, ie building schools etc, obviously on houses nowadays with the availability in Thailand of luxury products that 20 percent could come down quite a bit on a lot of the stages of work, ie a 120,000 jacuzzi with 15k baht water heater the contractor aint going to make 27,000baht for the few hours it takes to install them.

[Humbert]

Regarding percentages, contracts etc. Are ppl getting their info from Thai practices or from back home?

For example, how many Thai builders are normally have a Scope of Work or extra works/modifications in writing?

Of course they do. Somchai the poo lup mau with a couple of workers will not be able to work under those conditions but professional contractors will. We design banks and telecommuncations shops and the profit range is 10-15% for the contractors chosen by the owner. I am talking about projects which have gone out for tender not negotiated prices.

[MrRee]

Thanks for the feedback thus far. Some replies are exactly the information I am looking for. Some replies are waaay off the page. All are greatly appreciated.

In response to the questions as to why I am inquiring, there are many reasons. One of them is to take some of the hassle out of negotiations; and as any good negotiator knows, that starts with knowing what is fair. Nobody (should) get nickled and dimed or raped if everyone knows from the outset what is fair. The object should be to pay what is fair, not the least possible, and certainly not tourist prices.

My take on spending: You should get what you pay for and pay for what you get.

My take on fixed pricing: Great if everything goes your way and/or according to plan, but TIT. A change, event, or non-event which increases builder's cost usually throws that or quality out the window (for practical purposes and reasons).

My take on contracts: Thai law says written is the only enforceable contract. The practice on site is verbal. So, write up a contract for the big ticket and important things, and verbal the unimportant minor things (buyer subjective).

In response to the what area question: $ per sqm vary, but the % target profit should scale regardless of area.

Please keep the various comments coming as they are all valuable. I could not find good info on the subject; and I am sure it will also be appreciated by others searching weeks, months, or years from now.

[dirtydog]

The main problem I see, is 1 I doubt you know what materials and quantities will be needed, ie how many bags of cement and how many pieces of rebar for say 1 of the footings as an example, or 2 on meterage cost you have no idea of how many meters perday is going to be done per person say on brickwork, so basically you are wasting your time going down this avenue, easiest is just to get 3 or more quotes and go from there.

[MrRee]

The main problem I see, is 1 I doubt you know what materials and quantities will be needed, ie how many bags of cement and how many pieces of rebar for say 1 of the footings as an example, or 2 on meterage cost you have no idea of how many meters perday is going to be done per person say on brickwork, so basically you are wasting your time going down this avenue, easiest is just to get 3 or more quotes and go from there.

Ah, my friend. You are on to another subject different from the original post. The original post is asking "How much does a builder expect to make?", which is a different question entirely from "How much should a buyer pay?".

[dirtydog]

^Then this thread would probably be better off in a business forum rather than a construction forum.
Bit like complaining about the price of tinned tuna at tescos in a fishing forum.

[Smithson]

The main problem I see, is 1 I doubt you know what materials and quantities will be needed, ie how many bags of cement and how many pieces of rebar for say 1 of the footings as an example, or 2 on meterage cost you have no idea of how many meters perday is going to be done per person say on brickwork, so basically you are wasting your time going down this avenue, easiest is just to get 3 or more quotes and go from there.

Ah, my friend. You are on to another subject different from the original post. The original post is asking "How much does a builder expect to make?", which is a different question entirely from "How much should a buyer pay?".

Discussion always varies from the original post, it's normal.

To answer your question, a 'fair price' is whatever the two parties agree on.

A builder is like anyone else in business and will quote based on how difficult he thinks the job is, how much he thinks the customer will pay, how much work he has at present and how much another builder will charge.

It's not a maths quiz.