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Possibly contemplating a career change. What is the best way to get started or should I say raise $ to build a spec house? And most importantly, can a 1 man show support a family building spec homes?
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Yes, its easy and fun with little or no risk.
You will find an endless stream of investors willing to bet the farm on your first time out.
The pitfalls are few and the rewards are great, not to mention there is very little competition. A rudimentary knowledge of building and the local real estate market is helpful but not necessary. Shucks, everything you need to know about building wouldn't even fill the back of a postage stamp.
You'll probably never have to get out of the truck to make 30- 50% on the first one but you should be able to double your profit on the next one.
Why not borrow against your house and/or your parents house to grubstake the business? Most if not all spec houses sell before the footers go in so the risk is minimal.
I say go for it!!
If you've put as much thought into as it sounds, you could post a pro-forma income statement, and you might be surprised at how many of the guys around here would be willing to invest in your ventures. You can count me in for sure. I'm always in for a fast buck or two.
*tommy.. he drolley said.... huh?me... my 1st spec house i owned for 7 years... sold it for what i had in it just before the market turned and doubled the value... my last was a commercial condo... i owned that one for 15 years.. and sold it just before the market turned and the value went up by 50%... nowadays.. .. i got a deal with the state economic development corporation and the local realtors .. whenever i get the urge to spec. i call them up and they send out market forcasts warning everyone to get out.. then they send the guys in the white coats for me... it ain't bad here..and my wife sleeps easier...after the market recovers , they let me out
*tommy.. he drolley said.... huh? Mike,I don't speak pidgin, da kine? What does this mean? I'm saying it over and over like I'm trying to figure out one of those vanity license plates, but no luck.What, did I sound sarcastic in my last post?
*See the other thread for my opinion on spec homes. you'd have to be nuts and/or awfully lucky to try to make a living that way.
*tommy.....droll: odd, in a humorous or quaint way..u, sarcastic.?.. i hope not, it might have confused or dissuaded stickbut , now that i'm here.. there is one spec home i could recommend.. that's the one you build for yourself and live in for a couple of years, especially if you live in an area that has inflating housing costs...
*I think in the right market you can make money. You will have to do some of the work your self and it will need to be in the trades that pay the most such as tile setting, electrical and finish work. That being said My father and I lost a ton of money on our last spec and have change from spec to long term investment property. If you are in a prime location and can build luxury homes there is potential for profit, but if you are going to compete on the lower tier housing give up now. I would like to hear others on this subject too.good luckDerek
*Stick,Spec homes depend on your area and your experience. Are you in the constrcution field now? If you are and have connections to subs and suppliers, you could probably make it work although I would even be able to guess on what you'd make off it.If you're not in construction and have never built a home before and think its an easy way to make money. PLEASE, PLEASE reconsider. I'm the last person to tell others what to do but if someone told you that you can build a home for x number of dollars and sell it for y dollars in a given amount of time and pocket all kinds of profits...They've never done it either.Mike
*Edit to my last post...I meant to say "I WOULDN'T even be able to guess what you would make" Sorry, I can't type late at night.Mike
*But you can edit your own post at any time of the day, early, late or in between. After you make a post, you have 30 minutes in which you can go back and edit that particular post. You will find an edit button along with your mark, reply and delete buttons. After 30 minutes, the edit button disappears. You can delete your own post anytime, forever.Also, if you start a new discussion, you can edit that, and even delete it, right up until someone makes the first reply post to that discussion.
*Stick, a little research in your area will give you the answers you seek. Find a house plan that you intend to build. Solicit bids on all phases.Ask the local realtor to do comps. Find out the FMV of your proposed house. Take the expected FMV and subtract your projected costs. Rmember to factor in some contingencies. Make an informed decision.blue
*> Remember to factor in some contingencies.b Lotsof contingencies. Stuff that's way, way beyond your control. Like cabinet shops burning to the ground with your kitchen cabinets in them, and the company going bankrupt so you never see the $4,000 you put down on them. Or trying to frame the house during the worst December on record in your area. Or terrorist attacks. Not attacks on your house, but it sure killed any interest in my house for about 90 days.Or maybe businesses in the area closing down and killing the real estate market almost overnight.Or the basement leaks and you have to spend $3,500 fixing it. Not that any of these things have happened to me..............
*I'll elaborate on how I see the spec dilemma.Of course there is money to be made. Alot of builders make money on specs. I even knew a real douche bag of a punk who made 60k on 140k invested his first time out. He has been in business for probably 5 years and counting. He's been really, really lucky and stabbed a lot of people in the back too. I still maintain for him it is a house of cards. Due to lack of experience and poor construction technique, his outstanding liability is staggering in my opinion. The biq question was where did he get the money, pretty sure it was in the family.My crews do work for one builder who does primarily specs. They own the two developments they work in, and they build with their own money. They usually maintain an inventory of two houses in each development. They average 15% profit I am told. They also own the real estate company that sells the houses and all lots, and they have another company or two. They have some economies of scale because of their diversity and employees that they can utilize accross the businesses. They constantly moan about the carrying costs when the houses aren't selling. I'd say the average house takes one year to build and sell. They have a tremendous advantage in the spec market.I know other custom builders that build specs as model homes or to keep crews busy. They are lucky if they make anything on them.I think some of the latter are the ones who succcessfully build specs, at least in my market. I I ever build a spec it will probably be on a premium piece of ground. Or in a development where I am working and know the sales patterns and the floor plans that sell.I did work for a builder a few years ago that built the same spec plan over and over, built identical houses right next to each other. The buyers and realtors loved the plan. They incorporated a lot of square footage with bonus rooms and finished attics, but he was cutting corners every where he could. And he built them on cheap lots in the boonies. He definately had some strategies that worked for him.
*Stick, I have probably as enviable a position as a guy can have. I share a shop with my HVAC contractor, and my plumbing contractor. I own a rough-in crew, and I am the electrician and finish carpenter. My painter and I swap framing for him for painting for me. This adds up to alot of advantages for me and I can make a good run of it. However my bread and butter is my rough-in business. I could never make in building, what I make in rough-in. I do it for the simple satisfaction that I personally get out of it, and being the one to build someones dream home. Can you make money at it? If its your only gig? I doubt it, unless you are putting up a bunch of them. Great if the market is booming, but if it turns sour.......look out. Mike
*Mike.... explain what a rough in crew is... and how would one go about "owning" one?What do you rough in? Do you do the work...or employees...or both?Just scratching my head...near the stream,aj
*I thought it sounded odd also.Wish I owned a crew. I'm just a lowly employer. Now that I think about it my crew owns me.From here on out when people ask me what I do I will reply, "I good sir/madam, am owned by a crew of carpenters."
*i'm a kept man..
*I will build specs occasionally. Always low budget, ranches with builders grade of everything. They sell very quickly, usually to first time buyers. I explain everything up front. The framing and structure is first class, the rest will get you by until you decide to upgrade(light fixtures, vinyl floors, carpets, hollow core doors etc.) We make about 20% on a $100,000 home +lot...not bad. I stay out of the ego-spec market......I won't use my own money for that kind of nonsense.
*I had a small builder ( 5-20 a year) tell me you actually make your money off the land, not the house.The house is only to help upsell the land.Opinions?Sean
*Sorry, I probably didnt word that right. I employ a crew that roughs-in with me. Rough-in is the same thing as framing. We have all been together a long time. They dont own me or vice versa. We work together doing what we enjoy, I pay them excellent wages and benefits, and I receive in exchange, the fruits of their labor in revenue. Mike
*Got MLK ?b : )
*AJ gets the nod for the best message . Not to say that some of the others werent good. Winners in business gather their own data and make their own evaluation based on their studies. my opinion, Tim
*Mike....Thanks for a thousand laughs...as I really enjoyed calling you on the owning thing... Now since you are a rougher...does that make you a roughneck... a roughian... do you rough it..out there...in your...neck of...the woods?near the rowdy side...of the stream,aj
*Tim... thanks... for...b best message nomination!Now to practice my acceptance speech!First...I would like to thank mother...who gave birth to me..my computer...&Time Warner cable internet service... for the access and means...My third grade teacher for forcing me to write anything even if it was not about the book I didn't want to read...and last but not least...My dog ali... for without I would not have the warm feet she gives me while I surf...near the stream,aj
*AJ glad you enjoyed it. Just got my foot out of my mouth yesterday. Doc says in a few weeks I'll be good as new. Mike
*Mike... I know how it tastes as Rich Beckman just tried to place my foot in such location.Enjoy the board... Eventually... your in!near the stream,aj
*We are a semi-custom/custom builder, and we've always done fixed-price deals, whether on our lot or the buyer's lot. We have a buyer who wants a custom ($750K total budget on lot he already owns) on a cost-plus basis. We know how our margins work for fixed-price deals, but are having trouble coming up with a cost-plus structure. We have checked with a couple of people and the NAHB for ideas on pricing. The percentages for markup and methods for charging for supervision/field expenses as well as admin/overhead are all over the board.Who has done cost-plus deals and how did you structure them?
*Tom, how about a cost plus fixed fee? Agree on 10% (or whatever) in addition to the cost of material & subs & whatever else you can itemize. Shouldn't be too hard to come up with an estimated starting number. If they make add-changes to the project, your fee will increase accordingly, and if they make deduct changes, you can give back 5%. You'll need to put some appropriate words in the contract so they don't tghink you're running up the cost just to increase your fee. All changes in writing would be a good start.
*Tom- I have done this and it isn't too hard. Bid out like a custom build with fixed prices, determine your threshold fee and off you go.Your time has a minimum value as does your good name- reguardless of how much money the customer is able to cull from the eventual cost- that's your bottom line. now add profit and overhead- if you are competitive with your fixed pricing I doubt there is much difference- however 5% of 750k gets your buyer a new suit or two...
*stick-specs are not so bad. unless it don't sell.I actually did quite well with them until someone ran off with all the money we were making.we'd average about 15% profit and built in the 300k range.we started with 40k cash and a bank that knew we could produce. built in neighborhoods where the big dogs were and let them bring people to us- people out looking wandered in and we offered just a bit more than the other guys- and were nice to them.things have changed though-big guys are way more competitive now- truthfully their houses are almost as good as what I build- I am funnin'but listen to their commercials...I almost bought one of their places last week!
*Oh Stick-I fergot. No you can not support a family on the money from a spec. You have no money with a spec- it is the banks money. Don't take a penny from it until it sells. If you do this buy a gross of zantac...
*Good point Doug. You can throw a party after closing on it though. Wheres the keg? lol
*Mike, where are you roughing in. I used to build houses in Kansas City. We called it rough in. I now build in central texas. Here rough in is HVAC, plumbing and Elec. This got me in trouble with a trash hauler one time when i told him to pick up the rough in trash. He left all the lumber. P S here it is called framing (by everyone except me). And by the way why do we rough "in" and trim "out"leigh