Quote:
Originally Posted by Bill14564
So some WAGs on numbers:
Commercial: 7,000,000sqft * $30/sqftyr = $200M/yr
Development: 3,000homes/yr * $400,000/home * 15%profit = $180M/yr
Using those guesses, commercial wins but certainly not "by far."
|
On the development side profit seems about right. The largest residential builder - DR Horton reported net income of 18%. Lennar the second largest reported a net income of 11%. Both use their own agents to sell their homes.
On the commercial side they're not making $30 a square foot. They're probably grossing more per square foot but they've got to write off the cost of building, interest, real estate taxes, INSURANCE, common area maintenance, overhead, personnel so their profit margin is considerably less. BUT the profit is like an annuity - comes in year after year building each year as rents are raised and more footage is added. Rent always increases faster than costs since the mortgage (principal and interest) is fixed.