"So You Want To Start Building Spec Homes"?
Reduce Risks By Getting Critical Advice From Storybook Properties!



Building spec homes can be extremely rewarding, no doubt about it! There is nothing like seeing a spot of dirt evolve into a breathtaking property improved with a home that you, yourself like an artist first dreamed of and then created. You are the one that can make it all happen!

How and Where to Start

Now for the tricky question. How and where do you begin? This does get pretty complicated, especially if you do not have the knowledge and experience that develop the skills you will need to figure everything out. It can still present difficulty at times even for Jennifer, as each project is unique and nearly always present a different set of circumstances and obstacles.

Be Conservative - Don't Think You're Going to Build a "Taj Mahal"!

Get a mind frame that you don't need to build an elaborate executive home in order to make a great profit. On the contrary! Plan your project with most future buyers in mind.

If the area you are considering your project reveals that most homes are selling for example, $350,000 for a 4 bedroom, 2 bathroom, 1,600 square foot residence with a 3 car garage on a 10,000 square foot lot, that is what you should consider building. Why? For a couple of reasons.

First, you already know that this is a solid market. An area sales analysis has shown what most buyers wants and needs are as far as property features, as well as what they are financially qualified for. The more the buyers, the merrier for you!

Second, a future buyer's lender must want to make a loan on it. Lenders feel warm and fuzzy about a property that isn't out of the ordinary. They love "typical" and features that conform to the area.

It would be horrible to build a 3,000 square foot home in the same area, get lucky finding 1 unlikely buyer and then have your deal fall to pieces when there is no lender willing to make a loan on it.

Last, But Not Least…"The Lot"

Be sure that the area you are considering building spec homes has the number one commodity that you absolutely need… the lot! Check out the availability of potential lots before spending considerable time analyzing sales data.

Piecing It All Together

Now for a quick and dirty feasibility analysis. Lets say you supervise the project yourself, eliminating the overhead of a general contractor. You hire subcontractors and piece out all phases of the contruction.

By doing this, your project construction cost, hypothetically is running about $110 per foot including permits and agency fees. That equates to $176,000 to build. Note that in reality, you will need an approved set of building plans in order to obtain accurate bids for each phase of construction.

Add that to your land acquisition cost of let's say $75,000. We like to see about 20-25% maximum toward raw site cost based on the finish value of the project. Using these figures, you are roughly into the project for $251,000. Sounding good so far? It should!

Other costs and fees to consider include, but are not limited to your construction lender fees, escrow fees, selling fees, payments while holding, if any, property taxes, insurance, income taxes, etc.

Try to estimate these additional costs as accurately as possible by getting written estimates from each of these service providers.

Building spec homes is more rewarding than you could ever imagine. With careful planning, anyone can build their own fortune and empire!

Feel free to contact us should you need assistance. Happy analyzing!

Definition of "building spec homes": a home or homes being built for the speculation of future sale and profit.


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