Contractor vs. Developer: Understanding the Key Differences

Introduction

• Overview of the difference between a property developer and a building contractor.

Property Developers

• Definition: A property developer is an individual or company that takes a piece of real estate and builds structures for resale or rental.
• Example: Companies like Lennar Builders buy property, subdivide land, build houses, and complete neighborhoods for resale.
• Types of Development:
  • Residential: Building and selling houses.
  • Commercial: Purchasing and renovating buildings for resale or leasing.

Building Contractors

• Definition: A building contractor is a company that performs the actual construction work.
• Roles in Construction:
  • Involves carpenters, plumbers, framers, and general contractors (GCs).
  • A general contractor manages the entire construction process, including acquiring blueprints, permits, and overseeing construction.

Relationship Between Developers and Contractors

• General contractors typically work for developers to construct homes according to the developer’s plans.
• Contractors submit bids to developers detailing plans, timelines, and costs.
• Upon approval, the contractor begins construction, hiring subcontractors (plumbers, electricians, etc.) as needed.
• Payment Structure:
  • General contractors are paid for their work.
  • Developers recover their costs (land, construction, holding fees, taxes) and earn a profit upon resale.

Overlap in Roles

• Some general contractors may also be property developers and may hold a general contractor's license.
• Developers may undertake some project management aspects but usually focus on financial and business development.

Further Engagement

• If you have questions about property development, click the link below for more information.
• Live one-on-one consultations are available with licensed experts in various fields, including real estate, insurance, and business development.

Conclusion

• Encourage audience interaction: Questions and comments can be submitted through the link below.
• Highlight the availability of expert consultations for deeper understanding.

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So what is the difference between a property developer and a building contractor? Well, a property developer is a person or company who takes a piece of real estate—a piece of land—and builds some structure on it for the purpose of reselling or renting. For example, a developer might be like Lenar Builders. They own real estate, they buy property, they subdivide it, they build houses, they finish a neighborhood, and they resell these homes. A property developer could be a commercial developer where they buy a building and they rehab it, add to it, put on new features, and then resell or lease it. A developer is more of a financial structure of business development.

A building contractor is a company that actually does the work. Think about carpenters, think about plumbers, think about framers. A general contractor is the company that does the whole job. If you build a house, you hire a general contractor (a GC), and they put together the house. They need blueprints, plans, permits, and all the things that go into it, but they're not the developer. Some developers are also general contractors, but for the most part, they're two different entities.

The general contractor usually works for a developer to build a house to the specs of that developer's plans. They also usually put in a bid to the developer that says, "Look, here's the plans, here's the timeline, here's the fit and finish and all the fixtures; here's our bid for building this property, this house, this commercial development," and the developer will approve the bid. Now the general contractor goes to work. The general contractor probably hires subcontractors like the plumbers, electricians, framers, and paving contractors, and they'll put together that structure for the developer.

When it's done, the general contractor gets paid, and then the developer takes all their costs involved: the cost of the land, the cost of construction, the cost of their holding fees, and any other taxes, and then they resell it for a profit. The general contractor gets paid for their project; the developer gets paid for profit on top of the cost of putting together that property. So again, some general contractors are also developers. They may build a spec house or build on speculation, and some property developers also have a general contractor's license, so they can do some of these things. But for the most part, they're not the ones who actually put together all the timelines of the construction process or the project management that a GC would do.

Hopefully, that answers the questions. If you have more questions about property development, you can click our link below. Thank you for watching another video at ActualHuman.com and Describe.TV. Remember, if you have questions or comments about our videos, put them in the link below.

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