ᐅ How much savings on building materials can effectively serve as near-wholesale equity?
Created on: 11 Feb 2022 00:07
J
Johnny82
Hello forum,
we are currently gathering information about building a house.
Today I learned something about employee conditions:
I recently started working for a company that, among other things, also deals a lot with building materials, and I can get the materials at the wholesale cost + x% + VAT.
I am not involved with the building materials department, but I share an office with two ladies from that department. Today I asked one of them how it would work if I wanted to build a house, etc.
She said that it’s not a problem for the tradespeople if you supply the materials yourself. It’s basically the exact same materials from the same source, and it probably reduces coordination efforts for the tradesperson. She also said something like, “I’ll handle teaching them if needed!”
So let’s just take that as a fact for now.
My mother works in the Black Forest region for a landscaping company that belongs to a construction company which also builds single-family homes. Their structural construction manager estimated around 600,000 euros for a turnkey house with 140-160 sqm (1500-1700 sq ft) of living space.
We’re currently using this figure as a rough benchmark.
On the landscaping side, materials are charged to the customer with an XX% markup. Let’s assume the structural construction company applies a similar markup and that this is standard in the market.
I am aware of the values for X% and XX%. (I don’t want to sound mysterious; it’s just to avoid a situation where a tradesperson shows up at my colleagues’ work tomorrow saying, “You sell your employees materials at XX% less than what you charge me!” and causes a fuss. Some of you might be able to guess which company I work for.)
What materials are available through my employer:
Everything for the shell construction, windows, doors, flooring, insulation, paints, plaster, gypsum, stairs, bathroom fixtures, everything for interior roof finishing, etc.
I’m not sure if we have the following:
Plumbing materials (pipes for water supply, heating, etc.), electrical installation materials, heating systems/heat pumps.
BUT: We have a building services installation team (three-digit number of employees, so a large team) covering heating/water/air/electricity (including photovoltaics), so this kind of equipment should be available to order.
What we don’t have:
Wood (e.g., beams) for the roof frame itself and “decorative” wood—meaning not the aesthetically visible wood, but only things like battens and similar.
So, long story short, here is my question:
Is there a factor or rule of thumb to estimate how much cheaper the 600,000 euro house would be if I got the materials basically at wholesale cost plus x% plus VAT?
Or maybe something like: If the house costs 600,000 euros, the shell costs 100,000 euros, and of that 30% is material costs? Something along those lines?
And similarly for other trades.
And one more question, even though it might be a bit early for this:
What might be roughly saved if you did the following work yourself:
Painting inside and outside
Laying flooring yourself in the bedroom, three children’s rooms, hallway on the first floor and second floor, basement (so more the “non-public” areas)
Roof interior finishing
My brother-in-law is a master painter and also does external insulation and possibly plastering; he would probably be available at a reduced rate.
I know a lot of “ifs” and “buts,” but rough estimates would be helpful for now.
If we were building in the Black Forest, I would:
Not have the employee purchasing conditions
Only have one brother-in-law with limited skills nearby
But have a friend who could possibly handle the electrical work
And an acquaintance for gas, water, and pool technology
Possibly, the landscaping could be cheaper through my mother’s colleagues
Due to the distance, my own work would probably be limited to painting inside and laying floors in areas where they are not urgently needed (so manageable), and eventually doing the roof interior finishing. Basically a fully turnkey project otherwise.
I’m trying to convert these differences into a monetary amount or at least get a feel for it.
Thanks for your insights!
we are currently gathering information about building a house.
Today I learned something about employee conditions:
I recently started working for a company that, among other things, also deals a lot with building materials, and I can get the materials at the wholesale cost + x% + VAT.
I am not involved with the building materials department, but I share an office with two ladies from that department. Today I asked one of them how it would work if I wanted to build a house, etc.
She said that it’s not a problem for the tradespeople if you supply the materials yourself. It’s basically the exact same materials from the same source, and it probably reduces coordination efforts for the tradesperson. She also said something like, “I’ll handle teaching them if needed!”
So let’s just take that as a fact for now.
My mother works in the Black Forest region for a landscaping company that belongs to a construction company which also builds single-family homes. Their structural construction manager estimated around 600,000 euros for a turnkey house with 140-160 sqm (1500-1700 sq ft) of living space.
We’re currently using this figure as a rough benchmark.
On the landscaping side, materials are charged to the customer with an XX% markup. Let’s assume the structural construction company applies a similar markup and that this is standard in the market.
I am aware of the values for X% and XX%. (I don’t want to sound mysterious; it’s just to avoid a situation where a tradesperson shows up at my colleagues’ work tomorrow saying, “You sell your employees materials at XX% less than what you charge me!” and causes a fuss. Some of you might be able to guess which company I work for.)
What materials are available through my employer:
Everything for the shell construction, windows, doors, flooring, insulation, paints, plaster, gypsum, stairs, bathroom fixtures, everything for interior roof finishing, etc.
I’m not sure if we have the following:
Plumbing materials (pipes for water supply, heating, etc.), electrical installation materials, heating systems/heat pumps.
BUT: We have a building services installation team (three-digit number of employees, so a large team) covering heating/water/air/electricity (including photovoltaics), so this kind of equipment should be available to order.
What we don’t have:
Wood (e.g., beams) for the roof frame itself and “decorative” wood—meaning not the aesthetically visible wood, but only things like battens and similar.
So, long story short, here is my question:
Is there a factor or rule of thumb to estimate how much cheaper the 600,000 euro house would be if I got the materials basically at wholesale cost plus x% plus VAT?
Or maybe something like: If the house costs 600,000 euros, the shell costs 100,000 euros, and of that 30% is material costs? Something along those lines?
And similarly for other trades.
And one more question, even though it might be a bit early for this:
What might be roughly saved if you did the following work yourself:
Painting inside and outside
Laying flooring yourself in the bedroom, three children’s rooms, hallway on the first floor and second floor, basement (so more the “non-public” areas)
Roof interior finishing
My brother-in-law is a master painter and also does external insulation and possibly plastering; he would probably be available at a reduced rate.
I know a lot of “ifs” and “buts,” but rough estimates would be helpful for now.
If we were building in the Black Forest, I would:
Not have the employee purchasing conditions
Only have one brother-in-law with limited skills nearby
But have a friend who could possibly handle the electrical work
And an acquaintance for gas, water, and pool technology
Possibly, the landscaping could be cheaper through my mother’s colleagues
Due to the distance, my own work would probably be limited to painting inside and laying floors in areas where they are not urgently needed (so manageable), and eventually doing the roof interior finishing. Basically a fully turnkey project otherwise.
I’m trying to convert these differences into a monetary amount or at least get a feel for it.
Thanks for your insights!
Basically, you can do the following.
You find four Croatian construction professionals. There are plenty of them available there. You bring them to Germany and arrange accommodation, like an apartment or a room. Then you register a small business and employ the Croatians locally. They will then officially build your house. Alternatively, if they have a Croatian company, they can work here legally as well.
They are skilled workers who usually know how to do everything. It is important that at least one of them speaks German. In winter, they also have time because many prefer to stay at home and work in tourism during the summer. But in winter, they often look for work.
After that, you buy your materials and arrange for the machinery, which can all be rented, etc.
This way, you could probably build very cost-effectively while maintaining good quality. I estimate that a decent house can be built for about 200,000 euros.
An electrician drives a taxi in the summer and rents out holiday apartments downstairs. In winter, he charges 50 euros per day for his work.
He is a self-employed master electrician in Croatia. I know several construction companies here that work with Croatians, Bosnians, or Albanians.
Of course, this is not a solution for everyone, but it can be done.
To come back to the question: material markups of 100% are not uncommon. Often even higher. Much higher.
A normal cost calculation is very rare. That is also why everything is so expensive.
A few years ago, a typical electrical distribution system cost about 10,000 euros. Today, the electrical designer (planner) already receives 20,000 euros before any work has been done. This nonsense keeps growing. The energy consultant still gets 10,000 euros, and the architect also demands a large fee.
But all this money is not invested in the house itself. In the end, the cheapest materials are used and paid for at a high price. That is the reality.
You find four Croatian construction professionals. There are plenty of them available there. You bring them to Germany and arrange accommodation, like an apartment or a room. Then you register a small business and employ the Croatians locally. They will then officially build your house. Alternatively, if they have a Croatian company, they can work here legally as well.
They are skilled workers who usually know how to do everything. It is important that at least one of them speaks German. In winter, they also have time because many prefer to stay at home and work in tourism during the summer. But in winter, they often look for work.
After that, you buy your materials and arrange for the machinery, which can all be rented, etc.
This way, you could probably build very cost-effectively while maintaining good quality. I estimate that a decent house can be built for about 200,000 euros.
An electrician drives a taxi in the summer and rents out holiday apartments downstairs. In winter, he charges 50 euros per day for his work.
He is a self-employed master electrician in Croatia. I know several construction companies here that work with Croatians, Bosnians, or Albanians.
Of course, this is not a solution for everyone, but it can be done.
To come back to the question: material markups of 100% are not uncommon. Often even higher. Much higher.
A normal cost calculation is very rare. That is also why everything is so expensive.
A few years ago, a typical electrical distribution system cost about 10,000 euros. Today, the electrical designer (planner) already receives 20,000 euros before any work has been done. This nonsense keeps growing. The energy consultant still gets 10,000 euros, and the architect also demands a large fee.
But all this money is not invested in the house itself. In the end, the cheapest materials are used and paid for at a high price. That is the reality.
@Durran In my opinion, you tend to exaggerate quite a bit here, but based on my experience, I can now confirm that something like this can actually work.
I have recently found a few Albanian workers for tiling and painting preparation. They are friendly, do decent work (not perfect, but so far no German tradesperson has been perfect for me either), and are very affordable.
However, you either need to know someone who can coordinate these workers a bit in their native language and also understands construction to some extent. Also, keep in mind that there is no warranty in this case. That’s something to consider.
I have recently found a few Albanian workers for tiling and painting preparation. They are friendly, do decent work (not perfect, but so far no German tradesperson has been perfect for me either), and are very affordable.
However, you either need to know someone who can coordinate these workers a bit in their native language and also understands construction to some extent. Also, keep in mind that there is no warranty in this case. That’s something to consider.
A
Alessandro11 Feb 2022 11:21Why is there no warranty? You must be doing this on an invoice basis, right?
If you hire them, you have no warranty. If it is a company from Croatia or Albania, you might have legal warranty, but enforcing it is unlikely. My guys will probably fix any issues that come up, but strictly speaking, I’m not sure if they will still be reachable in six months.
P
pagoni202011 Feb 2022 12:21Tolentino schrieb:
If you hire them, you don’t have any warranty coverage. If it’s a company from Croatia or Albania, you might technically have legal warranty rights, but enforcing them is nearly impossible.
My guys will definitely make repairs if something comes up, but strictly speaking, I’m not sure if they’ll still be around in six months. I do have a warranty, but based on my experience so far, I sincerely hope that situation doesn’t occur.
I’m not exaggerating. All my reports are based on relevant experience. No one is born a builder. Even skilled workers these days don’t necessarily have in-depth technical knowledge. You can hire a general contractor who ends up sending only an Albanian construction crew to the site, despite charging a high price.
In that case, I might as well hire them myself.
I had to cover very large roof areas with beaver tail tiles. The roof frame was finished, but some rain was leaking into the house. Money was tight, as usual. So, what to do? There was an ad on eBay Classifieds from roofers in Poland looking for work. I called a Hamburg number, sent pictures, and they gave me a price. Labor only, since I already had most of the materials. The job was urgent, it was early November.
So on Sunday evening, two roofers from Poland showed up. They had about 100 kilograms (220 pounds) of potatoes, a few jars of bigos, and some tools in their car. They slept in the house. They were there for three weeks and did everything perfectly. The local roofers were amazed at how well they worked, especially the valleys and details. They got free beer and cigarettes, and the price was great.
It was definitely risky since there was no experience or references. Some things, like flashing chimneys with slate, were new to them. But we managed to do it exactly as I had envisioned.
Today, with a German company, I would have had to pay ten times as much. I’ve now done a total of 500 square meters (5,382 square feet) of roofs, all with beaver tail tiles. That’s enough for me.
Besides, when you drive through the Polish countryside, you really feel sorry for yourself. The quality of houses there is incredible. So even the Poles are skilled builders, as are the Croats. In tunnel and bridge construction, almost all workers are Croatian. What they have built in Croatia itself is amazing. You can drive 400 kilometers (249 miles) of highway in 3 hours without encountering a single construction site, bump, or pothole. Compared to that, we are a developing country.
And how many people end up in legal disputes over warranty issues with local companies? It’s very rare that the contractor shows up within two days to fix something or admits to poor workmanship. The chances that the Albanian crew will do proper work are actually much higher.
In that case, I might as well hire them myself.
I had to cover very large roof areas with beaver tail tiles. The roof frame was finished, but some rain was leaking into the house. Money was tight, as usual. So, what to do? There was an ad on eBay Classifieds from roofers in Poland looking for work. I called a Hamburg number, sent pictures, and they gave me a price. Labor only, since I already had most of the materials. The job was urgent, it was early November.
So on Sunday evening, two roofers from Poland showed up. They had about 100 kilograms (220 pounds) of potatoes, a few jars of bigos, and some tools in their car. They slept in the house. They were there for three weeks and did everything perfectly. The local roofers were amazed at how well they worked, especially the valleys and details. They got free beer and cigarettes, and the price was great.
It was definitely risky since there was no experience or references. Some things, like flashing chimneys with slate, were new to them. But we managed to do it exactly as I had envisioned.
Today, with a German company, I would have had to pay ten times as much. I’ve now done a total of 500 square meters (5,382 square feet) of roofs, all with beaver tail tiles. That’s enough for me.
Besides, when you drive through the Polish countryside, you really feel sorry for yourself. The quality of houses there is incredible. So even the Poles are skilled builders, as are the Croats. In tunnel and bridge construction, almost all workers are Croatian. What they have built in Croatia itself is amazing. You can drive 400 kilometers (249 miles) of highway in 3 hours without encountering a single construction site, bump, or pothole. Compared to that, we are a developing country.
And how many people end up in legal disputes over warranty issues with local companies? It’s very rare that the contractor shows up within two days to fix something or admits to poor workmanship. The chances that the Albanian crew will do proper work are actually much higher.
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