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Question DetailsAsked on 12/3/2016

what is the labor percentage cost to building a 5000 sq ft home.

Is the labor a third of the cost of the total project to build a home? or is labor and material a 50/50 split. There are no subcontractors involved we actually do the job from digging the foundation to the landscaping. Its a turn key deal.

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Here is a link to probably the most authorative and up-to-date new home construction cost breakdown, from the National Association of Home builders - so from mostly larger multi-home development builders, so probably a bit higher on the materials % than individual builders only doing one or two homes at a time.


https://www.nahbclassic.org/generic.a...


Generally, for tract homes labor runs typically right around 50% of the home CONSTRUCTiON cost - not taking into account the 30-40% of total home sale price that goes to financing, land purchase, permitting, administration, architect, etc - the non-construction costs that commonly cause people to seriously underestimate total construction cost.


For prefab or cookie-cutter homes sometimes swings to about as much as 60% materials and 40% labor due to slap-dash and run labor methods and generally simple designs, and for single-home and custom construction companies more commonly closer to 40% materials and 60% labor - as high as 30/70 for some homes with a lot of labor intensive work like a lot of decorative plaster or hand-cut inlay patterns and such. And, up to 70/30 split the other way with some (mostly very high end) homes with a lot of imported materials or factory/manufacturer custom-built materials like crystal glass or Carrera marble columns and walls, half-million $ chandeliers, housewide custom cabinetry built off-site, etc.


On custom homes the mix gets wacky sometimes because a lot of the total project "labor" cost may actually be embedded in manufactured materials that include a lot of labor effort but "offsite" and paid for in the materials cost so not counted as "labor" - which could swing the cost the other way if the construction of the custom items was done on-site. Take a $30,000 custom full-wall hardwood entertainment center/display shelving console unit - could be as much as say about $29,000 "materials" and $1,000 on-site labor if built off-site by a custom woodworker or cabinetry and just moved in in sections and bolted together (or even $30,000 / $0 if the "materials" supply contract with the cabinetry shop included installation in the furnished price) - or could be say maybe $3,000 materials and $27,000 labor if custom built and finished on-site - which alone could cause a 5% swing in the materials to labor ratio for a half million $ home, for example.


It is never safe to assume a percentage, because a lot depends on the particular contractor and the design and on the subcontractor mix - and if he uses a lot of subs the extra 10% or so additional profit for the subs which is inherent in that does not neccessarily end up evenly distributed between materials and labor. Some contractors (or contracts) load overhead and profit across the board, some weight some or all of it more to labor or to materials, so just the contractor or sub or specific contract accounting and billing method can easily make a difference of 10-20% in the split. For instance, I worked with several government agencies and at least 2 architects's contracts that allowed only a 10% markup on materials invoice amount - no other allowance for labor for picking it up or handling it, no overhead allocation, no profit other than what could fit in the 10% - so that artificially drove the materials portion of those jobs down substantially and labor percentage way up. Some contractors also load as much overhead and profit into the materials as possible, to front-load those in the project schedule - deliver most of the materials early in the job (say as soon as the garage is done for storage) and you have bumped as much as 20-30% of your total payment months towards the start of the job if materials are paid for as purchased or delivered to the jobsite, rather than as built into completed phases of the work. had one contractor front-load over $20 million into a major highrise job that way - he leased a junky parking lot across the street and got it written into the contract so that property was considered part of the jobsite (legitimately, because there was no work storage or office space at the tight downtown construction site) - then had essentially ALL the steel and a lot of the piping and ducting and such delivered and stored there and shrunk-wrapped or tarped before the very deep and large basement was barely started - frontloaded the $20 million in materials and related overheads and profit about 2 YEARS earlier than it normally would have been paid.


You say YOU are the contractor - so instead of assuming a percentage, you should be looking at your materials and labor estimated costs, overheads, admin costs, profit margin, etc and computing the bid amount based on what you think it will take YOUR company to do the job. The roughly 50-50 or 40/60 or 60/40 numbers should not be used for anything other than maybe a very crude cross-check to be sure you have not forgotten or double counted major $ amounts. But as your company does jobs, that sort of statistic is something you should keep track of both as a function of the different general types of job, and also how it progresses over time (usually lower percentage labor as a company get more experienced with they type of work it regularly does, but can go other way like if a company gets unionized say) - THEN, for similar jobs done by your company with or without subs, the historic percentages FOR YOUR COMPANY might start to have some meaning and be usable for rough ballpark guesstimate estimates - but never in lieu of deliberate bid preparation.

Answered 1 year ago by LCD




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