Newbie Building A Spec House...questions.
Hi all:
Great forum. I'm relatively new here
and have learned much by lurking.
I'm a succesful entrepreneur
in a non-real estate field. I live in
a market that is just beginning to
become hot and can get buildable golf-course lots for very little down. They will appreciate quickly.
By conducting research, speaking to realtors, etc. I know that there is a huge demand for single family homes in the 2000 sq. ft range. I am considering building these on spec but need input first.
Should I buy the land, prep it , pre-sale
and then build?
Or am I better off building the whole house and turning it over to a realtor?
How do I keep my initial cash outlay at a minimum?
I've recently built a few spec homes ranging from 1200-2100sqft. What I've found is it's much easier to complete the house your way and turn it over to a realtor after the major decisions have been reached only by you (i.e. flooring, exterior paint etc) Reason being is you know exactly how much you have invested in it and don't have to adjust the price as you go. The danger with having it sold prior to completion is you could have a buyer run up the cost or paint the house pink only to back out of the contract at the last minute. Not to mention people changing their mind, which in turn delays the project.
Keep it standard (neutral everything), ask max price, basically keep it simple. Don't throw alot of extras in. What you'll find is an exact one down the street with bare bones package will sell for the same as yours did !!
Captain:
Thanks, that's great advice.
When you put financing together, were you using banks, credit unions or other source?
What about builder financing? I've seen a few that will build spec houses with little down.
Thnx-
John,
Not knowing your market I can only assume. With traditional financing your not going to have much of a profit margin. Obviously your best bet it to have the entire amount of the spec house already secured. You'll get a big discount from the builder. It's no different than going into a car dealer with your own finacing or cash in place, you'll get a better deal. If you have to go the traditional route you will still make money just based on the time factor. People have a desire for instant gratification and your providing that for them for which you'll be rewarded. Make sure you find a reputable builder and pay in segments as the house comes along.
John,
If you are planning on building it yourself then why not get a construction loan? These are ususally only for the amount the house will cost to build plus the payments. That way the loan is making the payments for you.
Ryno
Please post your location in your profile.
If you presell the house you can get a bank to put up 100% of your verticle costs and 80% of your land and soft costs.
[addsig]
Isn't construction loans pretty high??
Quote:
On 2004-01-04 10:33, seekingwriter wrote:
Isn't construction loans pretty high??
Depending on your credit......these type of loans typically go for about 1/2 - 1 point over prime.
Your traditional loan companies and banks offer various programs as well as some lumber suppliers will offer such lending.
NC
I've not heard of lumber supply co's offering funding. Any specific names you know of? Here in GA we have Plymart, Stock, uhh sure there are more . .
interesting . . .
shelly
Hi Sb4,
Check with 84 Lumber,.....the contractor sales department. One of their sales reps contacted me about using them one some houses I am building in a new subdivision.
Carolina Builders (they do have some stores through out the US) offer the same program however I no longer use this company due to their inept billing practices.
If you do have a local supplier that is financially secure (trust funds etc) then you can advise them to speak with a local lender in helping them back the loans.
This is a niche to help those that are small builders or are new.
The main concern that any lender has is that you are able to complete the project in a timely manner as well as keeping to your budget.
For those that lack the experience then I suggest you contact a reputable contractor helping you with your first project..........even at the expense of paying them a certain percentage of
profit when it sells.
I am currently helping two new licensed contractors on their first projects (for free) and I like to help people on these forums with their building questions.....however it has been my experience that many "investors" have a tendency to want something (usually knowledge) for nothing or worse yet, they think their money is worth more than a persons knowledge and experience.
At anyrate check 84 about any programs they may offer in your area. If they do not offer such a program then keep looking......they are out there.....its just a matter of doing the footwork.
NC
NC_Yank I saw that you mentioned you were currently guiding two contractors who are new to the contracting business. Well I was wondering if you would provide your service to myself in the near future and I will be more than willing to compensate for your expertise....thanks.
Hi Shamund,
I will be the first to tell you that being a legitimate contractor is not cheap nor is it easy. The failure rate for small businesses is very high......most fail within the first five years.
Outside of the knowledge side of the equation, unless a person has at least $20,000.00 set aside for the business then the chances increase greatly that they will be part of that high failure rate.
As of Jan 1, I have already taken on one newbie..............contact me via private email and tell me more about yourself and your goals.
NC_Yank