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Entrepreneurial Profit

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Riick

Elite Member
Joined
Aug 14, 2007
Professional Status
Certified Residential Appraiser
State
Delaware
I saw what they call an UGLY HOUSE yesterday, refinance, has been run ragged over the years.
Needs renovation, not that it will get it.
I do have one comp that's interesting: Nearby "Model-Match" - severely fire-damaged.
After insurance paid off - it was Sold (I'll consider that a duress sale), then renovated to C2 condition & resold.

I have a good idea what renovation cost for the subject would be.

Question - If you gave the renovation to a General Contractor, what typical percentage profit would he be looking for?

Question - Would you consider /think that profit to be the same as Entrepreneurial Profit ??
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
Incentive is minimum expected, which here would run 7 - 10%. EP would be (currently) about 20%...which is moderately high.
 

AMF13

Elite Member
Joined
Jan 24, 2002
Professional Status
Certified Residential Appraiser
State
California
I do have one comp that's interesting: Nearby "Model-Match" - severely fire-damaged.

Your house must be a real junker, comparing to fire damaged. :leeann2:
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
From talking with flippers, 20-25% given the risk factor
 

Meandering

Elite Member
Joined
Feb 26, 2006
Professional Status
Real Estate Agent or Broker
State
Pennsylvania
Seeing about 20% and over, here.
 

Gobears81

Senior Member
Joined
Nov 7, 2013
Professional Status
Certified General Appraiser
State
Illinois
Question - If you gave the renovation to a General Contractor, what typical percentage profit would he be looking for?
I've seen 5% - 10%, but a contractor in the area would probably provide a better estimate than I for this market.

Question - Would you consider /think that profit to be the same as Entrepreneurial Profit ??
No. The above is a builder's fee. One would typically expect additional compensation for the monetary outlay and entrepreneurial coordination, which falls into the entrepreneurial incentive category. Of course the builder and owner/ prospective purchaser could be one and the same. I've seen EI range from 0% for special-use and some owner occupied properties to a pretty exorbitant percentage. There is somewhat of a highest and best use component in determining EI, such as recognizing whether the most likely purchaser is a flipper or an owner occupant. A flipper that knows the market will often not make improvements unless it results in a healthy return, whereas an owner occupant may be willing to remodel even in cases where it is marginally feasible to do so.
 
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