Construction Management Fee – What is a Good Rate to Charge?
Minimum Bottom Line Profit Should Average 9.4%!
For Trades & Subcontractors, at Least 11%
After Income Taxes Are Paid!
Charging a construction management fee is one of several different construction production styles. The most common is the traditional build and sell style. Here the contractor puts up the capital to build the house and sells the house while under construction. A common term used with this style is ‘Spec’ house. Another style involves shifting ownership of the project to the buyer upfront and the contractor merely runs the project, i.e. ensures it is built properly. This is referred to as a management fee style of construction. The typical contract is between an owner of a lot and a contractor. The owner is willing to fund the project through completion and pay a contractor a flat percentage of the cost of construction as a fee for managing the project. The contractor brings his license, experience and subcontractors to the job to build the home for the owner.
With the construction management fee style, the question for the contractor is: what is reasonable and fair rate to charge as a percentage of costs to build the home? This article explores how to
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