Building a Home!
Building a Spec home is the least accessed method of making money in real estate for the average investor.
Keep in mind you are going to participate in EVERY part of the process.
You start with land. You worry about the permits (even though you are a Rebel, that doesn’t mean you break the law). Then you do all that needs to be done to build a house. When all is said and done, you sell it and hopefully make a ton of money. (Not too different than a flip.)
Things to consider when considering making money with Spec homes:
- Where are you going to buy the land?
- Is it developed or raw?
- If raw, how are you going to get the utilities to your home site?
- This needs to be accounted for in your budget.
- What kind of home will you build?
- Will it be generic where the blueprints are accessible at a low cost?
- Will it be custom?
- Will the zoning allow for the home you want to build?
- Will the location allow for it to be built?
- Is there an HOA?
- Do you have the time to see it through?
- With a Spec home, there will be a lot of permits required.
- Some parts of the job cannot be completed until there’s an inspection, which has to be scheduled.
- Juggling all of the subcontractors can be a real challenge.
- A Spec home can take 6 months or longer to complete. Can you afford to tie up your money for that long?
- Who will be your buyer?
- If you add in all of the custom things you like, will there be a buyer for the home?
- The number of buyers for custom homes is much smaller than the market of buyers for a beginning home or median-valued home.
- Custom homes can be a challenge when it comes to having them appraised.
Spec homes can be very profitable; however, do yourself a favor and look into all of the variables before you get started. We suggest speaking with someone who’s done it before. Get a mentor. Find out what struggles they had and how they dealt with them. It will save you a lot of time and money.
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