#44 [2026 | New Construction Investment] What were the contents of the proposal and negotiations that secured favorable terms from the builder?
Last time,
after the builder went bankrupt,
I wrote about the reasons for choosing a new builder.
This time,
I will write about the contents of the proposal and negotiations
that secured favorable terms from the builder.
What kind of mindset do I use
to negotiate construction costs and terms?
I would like to introduce this based on actual examples.
I do not haggle over construction costs
I do not haggle over construction costs.
Even so,
the construction cost (per tsubo) is significantly lower than the market average,
and I am able to engage in high-yield (maximum gross yield over 14%)
new construction investment.
While asking the builder for
all-inclusive service,
"Please make it cheaper."
I do not engage in
price negotiations (haggling) that unilaterally
cut into the builder's profits.
What I am proposing is
to lower the cost price and construction cost
while ensuring the builder's profit.
If only the other party,
or only myself gains profit,
it will not last long.
In order to continue doing business,
both sides must retain profit.
I believe this is the most important thing.
Lowering cost prices through standardization
While ensuring profit,
why don't we lower the cost price and construction cost
together?
This is my proposal.
By utilizing past floor plans and specifications,
I will build multiple buildings
with the same specifications every year.
In other words,
instead of designing from scratch every time,
I am standardizing the floor plans and specifications
as much as possible.
If you think from scratch every time,
site planning,
floor plans,
exterior design,
housing equipment,
interior specifications,
and even meeting content,
everything has to be redone.
However, by standardizing,
many of these processes
no longer need to be repeated,
which can significantly reduce man-hours.
There are costs that cannot be cut,
such as materials and labor for craftsmen.
On the other hand,
planning reviews,
specification proposals,
meetings,
equipment ordering,
and sales
and other processes,
that are not directly related to construction,
can be reduced with some ingenuity.
Cost reduction for builders can be achieved through:
• Reduction of indirect labor costs
• Lower material prices due to reduced markup rates
This can be realized by,
In other words,
builders can lower construction costs
without reducing their profits.
For more details, please see past articles.
There are also benefits for the builder
This is not just about lowering construction costs.
There are also
significant benefits for the builder side.
Because the period from contract to completion
can be scheduled in the shortest time,
The period from construction to payment is shortened,
making cash flow management easier.
Furthermore,
continued orders can also be expected.
The builder can lower costs while still securing their profit.
I can also build at a lower construction cost.
Therefore,
this proposal is
beneficial to the builder as well,
a 'profit-generating proposal'
is what I consider it to be.
Creating high-yield projects
In my case, I think my
yield is generally quite good.
In other words, the probability that projects I propose or get quotes for
actually proceed to construction
is high.
This is because I have a solid track record of land acquisition and financing,
making it highly likely that they will proceed to construction.
Although it varies by builder,
even if they provide proposals or quotes,
the number of projects that actually proceed to construction
is by no means high.
In some cases,
even if they make 10 proposals,
only 1 or 2 might proceed to construction.
Even if they spend time and labor costs on
proposals, quotes, and meetings,
if they cannot secure the order, those costs cannot be recovered.
On the other hand, in my case,
they proceed to construction with a probability of over 80-90%.
From the builder's perspective,
these are projects where the time and labor costs spent on sales activities
are unlikely to be wasted.
This is what builders call
a 'high-yield project'.
Furthermore, this time
it was a special situation involving a builder bankruptcy.
Since the land purchase, preliminary loan screening,
and financing for the land purchase funds were already completed,
the probability of proceeding to construction was
even higher than usual.
That is precisely why the builder could feel at ease,
and it was easier for them to invest
time and effort into making a proposal.
Construction costs will not go down without a moderate state of competition.
However,
construction costs will not decrease based on profit alone.
A moderate level of competition is also necessary.
If the competition is too intense,
the likelihood of winning the contract from the builder's perspective becomes low,
and the incentive to spend time on a proposal
diminishes.
What I am conscious of is
a moderate state of competition where the builder also feels that
there is a sufficient chance of winning the contract.
I make the same proposal to every builder.
Therefore, I am conscious of maintaining the initiative
without relying on a single company.
Also, I create a situation where any builder
can build with the same quality and the same specifications,
and I possess the necessary
floor plans, specifications, and know-how
myself.
I believe that
leads to the initiative in price negotiations.
For details,
please see my past articles.
Price negotiations that generate profit
The foundation of this way of thinking is
the fact that my parent ran a construction company, and
the cost reduction philosophy I learned
at an automobile manufacturer.
Cost reduction does not mean
cutting into the other party's profit.
It means reviewing processes,
reducing waste, and
lowering costs
while maintaining quality.
Also,
because my parent ran a construction company,
I was able to see the workflow and
profit structure of a construction company
up close.
Therefore,
I know where improvements can be made.
I believe I was able to
naturally adopt that perspective.
My philosophy on management
The builder also makes a profit.
Therefore,
I can also earn a profit.
Instead of haggling,
think of a system where
the other party also makes a profit.
Because we have that kind of relationship,
we can continue to work together.
That is my philosophy on management.
However, it was not just this proposal
that realized the lump-sum payment after completion
and the low construction costs.
Next time,
I will explain why the builder accepted this proposal
and signed the contract under favorable terms.
From the perspective of "client power,"
I would like to write about the reasons.
