I have been hanging around this site for awhile. Even posted a few times. I am asking a very difficult question. What percentage profit should I expect if I GC a spec house? I am thinking in the $160,000 price range. Most likely a ranch that I would keep and rent if it does not sell. Let’s assume I do little or no work myself. I sub everything out but I have the knowledge, ability and contacts to get good bids from the subs. I do all the coordination, permits, material orders etc. Let’s factor in the usual % of screw ups……..something always goes wrong. I sell the house myself or with a low commision agent. Let’s also assume I build a nice home that has the quality and features of the price range.
In a former life a was a Home Improvement Contractor so I think I have some background. I had a partner and one helper……..that was the team. In other words I was a hands on guy. My Dad was a contractor. Currently I am in charge of Building and Grounds for a school system. Thus I have some contacts although I am a paper pusher now.
In closing I know there are a million variables. I am interested in a ballpark figure. Thanks so much for your thoughts.
Mike L.
Replies
In my area west of Boston, ma the area is very expensive compared to the country as a whole. A old S**t box house with 1/4 acre lot will sell for a minimum of $300k and they'll knock it down and build big. Most of the spec's here sell for 700k and up. They are generally looking at at 10% to 15% profit margin. Lot cost is usually 300k to 400k, framing is $11/sq ft, etc. Everything is very expensive so the price they need to get is that much higher. The companies have a GC and the money man and sub everything from site work to painting, to landscape, etc. out. They also finance everything so they need to get them build and sold quickly, usually 4 to 5 months for the custom ones, 3 months for the standards. The housing market here keeps going up though, so sometime they make even more. A development down the street from me started in '00 selling houses for $850k now the last few in the 40 house cul de sac are being sold for 1.4m and they are the same houses.
i say minus 5%
Brownbag was bein extra nice .
You might get out for -10 percent of the 100 you payed. Looks like a gamble though for sure.
Get your wife to slap you real hard, with both hands , twice. Repeat therapy tomorrow and post back tomorrow night . If yer not better she will need to repeat it again.
Tim Mooney
$160 G's will get you a building lot around Ct if you're lucky.
That said you should get 15 to 20% above costs.
Gosh...........some of you guys are pretty brutal. Mind telling me why you feel I may end up in the red? And if so, is that the price of the learning curve for the next one. If need be I can do some of the work myself. Obviously that would cut some costs. I better get to the gym and spend 6-12 months getting in shape. I remember this type of work from my younger days. Hard on the body!!!
Thanks again for your thoughts.
Mike L.
mike... here's exactly how much you will make..
add up exactly how much it will cost you to buy the land and put up the house
and exactly how much interest you will pay to carry it....
then find out from a real estate person in your area exactly how much you can sell that house for right now..
the difference between the two is your profit.. unless you want to deduct your labor from the profit..
will you make money ?
probably not..
you don't have enough experience to make money on a spec house or you wouldn't be asking your question
been there .... done that......
Mike Smith Rhode Island : Design / Build / Repair / Restore
Thanks for the math lesson. You must have been a math teacher. It seems to me there will be a few more issues than just a few computations. But thanks for your wisdom.
Mike Larson
hey, no problem.. happy to oblige
if you want to make money in houses.. buy the wrost house in the best neighborhood and remodel it..
in spec houses , most people would make more money by holding the land until the area is built out and then selling the landMike Smith Rhode Island : Design / Build / Repair / Restore
its real simple.
If you not a name brand contractor you will get no breaks in material price. The sub will screw you to death in price and you be bottom of list. with no power and pull you a nobody and will be treated like one. what make money, labor price down, build more than one house at same time in same area. material price down, buy in volumne material waste , minimum. bldg dept will eat your lunch.only way buy a cheap house, put no money in it and sell high, remembering you still have property tax while still for sale.I built my own house, did all my own labor , just materials only. It would been cheaper to buy one already built.
what crazy part of the world are you living in where it is more expensive to build your own house than it is to buy one. my buddy just built him a house down here in south texas for 250k it appraised for about 700k that's 450k equity on day one!
RTC
you got to remember the average house here runs from 85k to 120k. My house just material alone was 67k without any labor. the same house sells for 71k
You lost me with your numbers. Would you run through that just a little slower please. Thanks.
Mike L.
no... he really did get the numbers right.. he's just a little cryptic in his description..
go back and read it real slowMike Smith Rhode Island : Design / Build / Repair / Restore
rtc,
There are plenty of places where you could build your own house and it would only cost you about 20% more than if you just bought it. I live in one of them. It all depends on how many tract builders are in your area.
I guess Im the one you thought was brutal.
You dont have the experience to go 160 in debt on a spec house which isnt your residence .
If you had done your home work , you wouldnt be asking
Why dont you start practiceing surgery? Did you think it was this easy? You might think Im brutal , but not as bad as a divorce by a long shot.
You dont have a realtionship with subs nor the experience to handle them.
You arent a wholesale buyer with established accounts.
Business people do not know you in this business.
The banker probably wont loan you any money anyway unless you get a builder . They are risking their money if you havent thought about it on a business deal you know nothing about .
You are worse than green in the business , you are in kindergarden.
Do your math , get a banker comitted , land bought and secure , do all the math then and come back and talk to us . Talk to a realtor and ask whats the longest time you could expect to sell . Be sure to check the buidling codes , because here a homeowner cant buid a spec . He can build his own home that he must live in. No one but you can figgure the math, cause youve got the numbers. So compute them.
You may think Im being brutal but it didnt cost you a dime. Remember these two posts I made to you and we may get to talk again.
Im trying to help
Tim Mooney
Thanks for your thoughts. You have made many assumptions for me. Facts are:
I have wholesale acct's with two major suppliers. Covering HVAC, plumbing,electrical and of course a lumber yard. (Had them for 25 years) I work with subs and GC's on a daily basis in my current position. I managed just under two million dollars in commercial projects last year. I know the inspectors and the folks at the building department. I have a connection with a realtor who will treat me right if need be. And lastly I won't need a bank............at least not on one house. I owned my own small remodeling company. Was in busines for about ten years until I went to the dark side......management.
With all that said, at least give me credit for a grade school education.
Mike Larson
mike.. with all of your experience , why did you ask your original question ?
you should know , first, that most GC's have no idea how much money they are going to make..most are not good businessmen
and .. since the primary thing is. what can the house sell for... how can your question be answered ?Mike Smith Rhode Island : Design / Build / Repair / Restore
What amount of profit should I make ?
My assumption was from that question. I also added your experience from the first post. Read it . You ask a question like that and give a first post qualifier. Now you have a couple of accounts and some experience.
Now . If you knew what you were doing , you wouldnt be asking that question. You would have it figgured already . What possible worth would an answer you might get on this board be worth to you since its your money thats going down ? The ones that know what they are doing hit the calculator and a list to figgure from. They know their costs and insert them. They know what their subs charge and who not to use. You still dont buy and sell. This is where you leave a GC status. Now you have to KNOW what the house will bring and what the lot can be bought for which needs to be the lowest price in town for that type of lot. Theres folks competing against you. A broker has an edge on you from the start . You are not a developer, youre not an agent , your not a GC, youve got a full time job thats not on the spec house job. A builder , a developer , an agent all can beat you. When you plop 165,000 down , you dont take anyones advice. You are the man with the knowledge. You dont take a brokers word , our word , a builders word or anyone else.
Now since you wanted me to be nice ;
Land developers are in the building busiess . Brokers are in the building busness. Lumber yards are in the business of developement to compete with the boxes. They have a niche., Successful contractors get in the business also and they dont have to eat off of it . Theyve got big crews and big subs and they shake rattle and roll. They have some people hired cheaper than you can touch them and equiptment to boot. Theyve got grade alls, lifts, trenchers, back hoes , dump trucks , and commercial warehouses of equipment . paid for. They have plumbers hired by the hour at low rates , plus anyone else they want. Just for mechanical alone he will beat you by 1/2. He will have a person making just above minimum wage operating a backhoe and dump truck. That person digs all the footings , trenches , digs driveways , and does all the dirt work. Thats all he does every day , but he just works for that GC operating his equipment . Thats just a sample. You will see him operate like that several different ways with different people. Brokers are business people that know what the project will sell for and the bottom line they must make. They damn well know it . Theres no guessing or asking , and they have bought the land cheap or stole it . They will sell their houses first if they have to talk your house down. Thiers go to the table first ! Yours might set because they have no vested interrest in it . They know "where to build , when to build and when it needs to sell by target dates, what to build in each area, and how long it will take to sell and sometimes who their going to sell it to.
Those types of people are who we compete with building specs. They will eat our lunch if we dont have a direct purpose. I know the business and I know not to compete with them. I will build but not on their turf. They will break you or me if you letum in the king row.
Tim Mooney
Edited 3/10/2005 9:55 pm ET by TIMMOONEY52
wow learn something everyday
from reading all fo this you would think there is money in spec homes
well at least not in my area.
I can drive within 5 miles of this computer and drive by at leat 3 unsold, unrented spec homes.
if it was easy we would all do it
but seems liek the only ones that do are th ebig boys, that build a spec for a deveolpment.
Im not saying there is not money in it .
It is a big boys game , but there are smaller arenas to play in.
You know how they do handi caps at bowling ? Such is the case here.
I had mentioned in an earliar thread that no one was building recreation property here . Theres not a high demand for it , but there is none to buy thats decent and then it commands a high price. TA DA!!!!!!! An opening ! Differnt market , different rules.
I build some rentals to use my self . No one was building rental houses.
Instead of going into rentals in the flooded apartment market , I bought and built houses.
If you can move into the spec then it can set for two years and get full tax credit when its sold after that. It also can sell in its own sweet time and you are not in a hurry or competing.
Theres often room in the country where there is no in town comparibles. A house and 25 acres with a horse barn sets specs away from you.
In other words , pic a market you can compete easily if you must spec build.
At least that way you set up an edge. Then you still have to know all those things I talked about to spec build. If you lose your money yur done . When I started I didnt have any money, so it was imperitive I could not afford to lose . Specs are high stakes gambling if theres no back up to the plan. I still wont build specs in a wide open market where they are competing . Theres some money in them here if ya get out of town and pick top places for homesteaders to call their home . On a hill under some big live oaks , On a creek that offers fly fishin and swimmin, with a view of the mountains drinkin the mornin coffee on the back deck or sun room, A view of the river or a lake , even a pasture of horses or cattle they wont own. Gotta offer somthin different . Get some wow in there they cant have in town.
Tim Mooney
Around here, banks won't even talk to you about a spec project (new or remodel) if you don't have a GC license.
Oh, yeah, the building dept. won't either.
Plus, there's already 50 guys building in the same price range way cheaper.
bon chance!
DCS Inc.
"He who xxxxs nuns will later join the church." -The Clash
Mike,
This is a very area specific question. My father is very involved in the business end of construction. Every time he and I talk about specs we look at the price range that is selling. In my area the price range we could afford to build in is flooded with mass produced housing.
We could never put something up in the most popular size range and even hope to compete. We could go for the quality end of things but in todays market people don't identify quality issues on new construction. If they did they would be buying a custom home and it wouldn't be a spec anymore.
Maybe where you are there are fewer medium or big builders. Here, I can see about 25 $300K house under construction or for sale within a 2 mile radius.
I have bought and renovated homes and sold for profit.
the knowledge of home renovating is only half the formula. Before you buy you should know your market inside out. Before you buy you must understand the market and getting to know the market you need access to a realestate sales person that will let you sit his office when he is not busy and explore the market on his computer. Study what is for sale , what has sold in the last year, what a house of the same size in a equal area of value has sold for in a renovated state. Have the money, lawyer and time in place in order to capitalize on a good deal. The good deal will be one of a few things.
the owner has taken over the house for a number of reasons and just wants out First clean offer gets the house.
The house was priced to high and has out lasted the normal market and time for a low bid.
The house has sat emty for a while and the owner does not want to deal with a agent . YOu can get the owners name from city hall usually.
Only bid for a house in order to make a profit there will always be another around the corner if you get out bid.
Renovate a house with clients in mind I usually try to design the reno for 35 year old perfessional ready to or have a young family , house should have new kitchen , bathroom(Large) laundry on second floor, wire for computer ready, open up living and dining areas for open look leaving closed in halls and enterance.
Our most profitable was a home last uear, no one had lived in for 9 years we bought it for $215,000.oo put $85,000.00 in to it including our labour(at a low rate). sold 6 months later for $426,000.00, We also made a deal with the realestate sales person and only cost 2.5% for the sale.
George
George,
In the past I've made huge gains in realestate. You are right knowing the market is a big part of it.
Speculative new construction is an entirely different matter. In some markets the larger builders have made it all but suicide to try to build a Spec. In my area are: Ryland Homes, U.S homes, Pulte homes, Hovanian and Toll brothers. That does not include the mid sized local builders (between 100 and 200 units a year) of which I could name another twenty. All of this makes for a very competative market.
Renovate and sell is still a little touch and go around here. Too many people who can and will do the work themselves. Notice I didn't say they would do a good job, just that they would do it. When a good deal does come up about five guys who do excatly what you do end up in a bidding war over it.
The more profitable around here is the " spray some fresh paint, slap in some new carpet, throw in a few new bathroom fixtures and a room of crown and chair rail and get that thing back on the market" type renovations. Not my thing.
" The more profitable around here is the " spray some fresh paint, slap in some new carpet, throw in a few new bathroom fixtures and a room of crown and chair rail and get that thing back on the market" type renovations. Not my thing.
Hold on there cowboy , not so fast . <G>
What is your thing ? And how did you make those huge gains and how would you do that tomorrow morning?
Tim Mooney
I am about to start on my first spec house in a couple of months, and I am really suprised at all the negativity regarding this subject. I guess it depends on the area you are in. In the high desert outside of L.A. where I am, the spec house situation looks pretty darn good. The area is zoned rural, so all the lots have to be 2.5 acres, so that keeps the big developers away. There seems to be a much bigger demand for the houses than there are houses. A four bed/2 bath house sells for between 275 to 350k. They are competing against 250k houses with no back yards. The local contracters are buying up all the lots they can for 50k each. I bought mine a year and a half ago for 10k. I am going to do all the work myself with a couple of helpers, and sub out only the stucco, hvac, and grading/trenching. I plan on making about 200k of this house, and then buying land with the profit, and building more. It is so profitable where I am that a lot of people that had 10 acre lots with crappy trailers on them are subdividing and developing and making great money, and they don't even do any of the work.
See thread on housing bubble. Reminds me of 1980. Was just out of college and thought I could just build houses. Was lucky to get the first one sold. Before interest rates went to 20%. The point is that there were plenty of people that jumped in to be contractors at that time. Classic sign of a over saturation of contractors?
Time will tell
good luck
Getter done . Getcha some of it .
I said get outta town so you would not be competing .
Edited 3/13/2005 9:33 pm ET by TIMMOONEY52
i guess it is all about the area you are in because down here on North Padre Island,TX the home building industry is booming but there are no major tract homebuilders it seems as if the whole area is spec and custom. i know people who have never picked up a hammer buying up several lots and building low end but good quality specs and making money with little risk.pretty cool place.
RTC
"There seems to be a much bigger demand for the houses than there are houses. "
That's pretty much what I said when I started the "spec house from hell". It seemed like a sure thing.
Don't know if you read the thread about it, but a lot of the things that happened were completely out of my control. Like the terrorost attacks in 2001. And the downturn in the local economy. And another subdivision drawing attention away from where mine was built.
A lot of the negativity here comes from experience. So don't blow it off too easily.
How long a minute is depends on what side of the bathroom door you're on.
Tim,
Depending on where you are the real money is in raw land. I'm in an area where there is plenty of land " just off the beaten path of current development". Each year that land gets closer and closer to "Civilization". The trick is to have a feel for how long beofre it becomes " Prime Realestate".
It's more of a passive investment.
As for whats my thing. I prefer to do high end new work. Frame to trim. Build some stairs and hand rails.
Currently Uncle Sam has another plan for me and I've come to accept that I'll be here until I retire now. Hey an E-8 or E-9 pension will make life awful easy.
I think we have been profitable in these ventures because of a few factors
I only deal in houses in the core of the city. near public transit, parks, and good schools.( good schools is very important )
-My realestate saleman lets me use his computer to search on a daily bases when I am looking. I am never afraid to make a offer for what it is worth to me. I put a lot of offers in that I do not get. However i only need to score one .
I work with my son and we use the house to fill in when we are not working so it helps keep us going. We do 90% of the work ourselves.
When we do the roof I always add as many sky lights as possible especially over stairs and bathrooms.
We never use carpet and usually try to bring the house up to it's original standards however we usually lose a few walls and add high tech phone and cable lines.
We keep kitchens and bathrooms simple but bring as much light as possible we never purchase appliances, and paint with simple colours.
It is important to please as many people as possible when you put the house on the market, the more people interested in your house the higher the price.
Geroge
We usually make 20-30%, but we do pretty much everything past the drywall stage on our own.
Our goal is to make ~$150K on a house that sells for ~$600K (average price of 3000+ sq ft home where we're building), i.e. land ~$150K, cost to build ~$300K, and the rest is ours. We've not had to use a realtor for selling, so that helps.
http://forums.prospero.com/tp-breaktime/messages?msg=20924.1
The link Goldhiller gave you is to the Spec House from Hell story. But that's an old version of the thread. It got truncated for some reason, and I had to re-input it.
Just click on the Spec House from Hell words and it will take you to the updated version.
not trying to poor salt in old wounds here..
how does that saga rap up, don't think I ever read?
You moved into the spec and were thinking of selling your other house if I remember correctly..?
then, my memory isnt such a safe bet
The saga is SORT OF wrapped up. We ended up moving into it, figuring we were never going to be able to sell it. And I plan to rent out the old one. But the "curse" still hasn't gone away. They're trying to re-zone a farm field about 200' from my front door so they can put a super wal-mart in. That should make my property value go down faster than Monica Lewinski.
When you go after honey with a balloon, the great thing is not to let the bees know you're coming. [Winnie the Pooh]
"But the "curse" still hasn't gone away. They're trying to re-zone a farm field about 200' from my front door so they can put a super wal-mart in. "
The old house or the new house?
The new one. No one wants a super wal-mart right out their front door. I figure it will make the house virtually impossible to sell.
Do the thing that is right even when the boss isn't looking because the boss isn't the criterion. The real boss is standing alongside you every moment of your life. [Alfred P. Haake]
screw wally world!
Well, that's kinda what I think too. But the city has $$$ in their eyes, wanting all the revenue from the sales taxes. So it will definitely be an uphill battle.
A good listener is not only popular everywhere, but after a while, he knows something.
threaten to hang out on your front porch in a speedo every day if they build it
It is not yet understood the valid reason , but our best source for the paper has said that since Boss Hogg was fired as Santa Claus, he has taken a stand by acting out his displeasure by greeting Walmart customers on his front porch in speedos.
As the acting editor [since hes not here] it makes me wonder if we should take a serious look at reinstatement of his volunteer duties this comming December.
Also I would like to add that election time is nearing and I think we should have this swept under the rug before ballets are cast!
Edited 3/11/2005 12:13 pm ET by TIMMOONEY52
You guys are getting wierder every stinkin' day...
Progress consists largely of learning to apply laws and truths that have always existed. [John Allan May]
Hey, you movin to the big city or not. I've been waitin around for you for over a year. We've got work.Never serious, but always right.
Thanks for all the input. Certainly cause to think. I had a relative who did very well doing spec homes from around 1950-62. Small operation, one or two units per year. Acted as GC, did some work on the homes but not too much. I know none of you are old enough to remember those days but...... was the profit margin greater during that time period? If so, what was it.
Please share your thoughts. I am interested in a history lesson. Thanks for you time.
Mike Larson
PS- My ego is mended, I am back at it. I am going to do something, even if it is getting a paper route!!!!!!!!! I was pretty good at that!!!
I want to apologize for bein harsh. The content stands as a wake up call before you jump.
My father built homes back then . My involvement would have been close to 1965. My knowledge about pricing starts in 1970.
Story;
In 1972, Father offered me one of three homes all around 1200 sq ft. They were all together and done . One had a fire place and Ill add all homes were brick with a carport/storage. Lot was 1/2 acre which is pretty big in todays standards for that size of house. All three were ranch. We called them S-235s as I believe that was the goverment loan. He offered one of the two with out fireplaces at his cost at 10,500. Then other one was priced at 11,000. He owned a lumber yard and was the biggest contractor in the area. The houses sold for 14,000 and 14,500 . Hard to believe 500 for a brick fireplace.
Hes dead now , but my own wonderment is now is that looks like 30 percent . He was a big contractor with all the big equipment , plus owned a yard. He had every trade working by the hour with no subcontractors. He had cut all the profit out for others. He often had 12 to 15 of those going at once with about 3 customs or large specs. He built specs in the 3,000 ft range.
I remember no one could afford to build the small ones but him . He was selling building materials to them. Now thats comming back as I mentioned.
I ended up buying a bigger house that was old for 6,000.
From that date to the early 80s , those houses more than tripled. I wanna say a 12 year span.
Tim Mooney
If you did home improvement , why dont you buy repos? I dont look at that as risk since the prices are set before you buy.
We keep a thread going in the business section constantly . Come on over .
Tim Mooney
Thanks for the insight Tim. It was my father who was doing the one/two houses a year thing in the 50's/60's while being a fulltime large city policeman. I was too young to pay much attention. As I look back he was pretty smart. He bought land in tracts big enough for mutilple homesites. Mostly always used the same subs (ie relationships). Always built in the nice area of town. He and my mom spent most weekends out looking at opens trying to catch a new idea. Many of his houses sold before they were finished. Mostly ranches with three bedroms, eat-in kitchen, LR and DR, finished rec room, one fireplace, two car attached garage, hardwood floors, plaster walls, Anderson windows, GE appliances-built-ins. Etc. etc. Pretty nice places that still look nice today. Key factor, nice neighborhoods and good schools.
I have thought about repo's or handyman specials. Certainly safer. Been there done that, at least with the handyman specials. Guess I am liking the idea of new work. I spent my share of time repairing others poor work. Usually homeowners trying to do it themselves.
Many of you have offered perspectives. I appreciate that. I am open to other thoughts.
Mike Larson
What is being said may be harsh... but it may save you a wife and about 225k.
Building spec homes is one of the riskiest businesses I can think of. You would be better off to become an investor in a development than to attempt this on your own... even IF you had ALL of the pieces of the puzzle in place.
If you want to make money... buy the worst house in the best neighborhood and renovate it. If you can get some inside info on a sheriff's auction house... or inside info on a foreclosure... you can make some money.
But spec home building is a big time gamble... and one that doesn't pay off with big-time profits.
Venture capitalists look for 40% on this big a risk... and they have a cap on their loss. Building a spec house will not have the same cap on the loss. In order to get the return... you have no choice than to invest the additional capital.
Harsh... yes. Honest... yes. Given with the best of intentions... yes.
We are initially building 4 spec homes in the Chicago western suburbs in partnership with the developer. This is a small 16 lot sub-divsion. We are competing with a $350k lot tear down market. Our advantage is the owner knows a new home of similar value will be their neighbor, not another future tear down or hidious home addition for the next 5 to 25 years.
The spec's will be in the $900k to $1.1m area including the $300k lot, markup 15% to 20% on the total package. The developers markup on the lots was significantly more.
Russ - hope you don't mind me asking, but... where in Chicago suburbs are you building?
La Grange. Maybe we can do some business. We'll be down to visit our friends next weekend, I'll look you up. Eat at the 102 in downtown Paxton last Sat. night, pretty good.Never serious, but always right.
La Grange.... Hmmm.. Excellent location and lots of candidates for teardowns (at least to me :) ).
They gotta lotta nice girls out there.
Ya!
Mr T
I can't afford to be affordable anymore
As a semi retired Broker/Builder I suggest you do some homework before you tackle this project.
1. Make sure your wife is 110% with you on this.
2. See above
3. Establish a working relationship with a Realtor. He/she must KNOW that you will give the listing. They'll tell you where & what to build. If one person sees/buys your house; one person knows you're a builder. But listed on MLS, many agents know you're building and by extension, many of their clients know too. That 5% is the cheapest advertising you can buy. Needless to say, pick a good Realtor to start with. And the 5% is just added into the price.
4. Since building is 50% paperwork, you're halfway there with your current job. And your former job will help when it comes to subs. You're not likely to get the best subs, so be prepared to fill in the gaps yourself, nights and weekends.
5. Know absolutely how to do a take-off. Don't leave anything out. Take a course if you need to. Know how to pin a foundation. After all the footer man won't have to move the house if you're over the setbacks.
6. Add 30% profit and always be happy to break even. S*#t happens.
7. Never build anything that YOU can't live in!
Joe:
Thanks for taking the time to post . You make a great deal of sense. I had not thought much about involving a realtor early on in the project but you point out some pluses. I just so happen to have a relationship with a good one. I have not spoken with her in a number of years but she is still out there doing her thing.
I am now thinking a little about building a twinplex with the idea of moving into it some day. A decent one.................maybe in the $300K market. Just a thought.
Again, thanks for taking the time.
Mike L.
I agree with Mooney totally. We have a building boom in our area and it's usually the realtors and developers who make the money screwing everyone on the price of the lots. Sure the builders are bragging about all the specs they are building. but the established builders who have been around for years are not building spec houses. If you can live with yourself building cheap boxes for an unknown client who doesn't care anyway go for it and have fun. I prefer working with a known client on a job that I know the outcome of and that I won't have to live in. I have a newlywed daughter who is building with one of those slick willies and it is really a joke! The workmanship is terrible. The contractor is hardly ever on the job and just drives around checking his jobs where the guys are working out of station wagons!
"where the guys are working out of station wagons! "
I used to have to fight the urge to try that . Those things got like 35 miles a gallon years ago. At 2.00 a gallon now would be tempting . I know you were teasing about them, but I cant think of a cheaper ride for a carp and his tools. They dont bring anything used compared to other vehicles which is one reason they were tempting .
Was always a hair brained idea like wanting a small Toyota 4wd pick up. I would have bout one of those too , but its an expensive 5 gallon bucket, which is about how much they will haul.
There's been some very sage advice here about the perils of the spec home world. Pay heed.
We're building a few, but in a very unique area. An old upscale suburban area with no vacant land available. The developer bought this last small 16 lot tract from the Catholic Church. So no competition from large builders or other subdivisions, only individual tear downs. You can be successful but you must realistically be competitive with the market. Location, quality, design, amenities, services, and cost. Be very careful, there are plenty of spec home entrepreneurs out there working for guys like us now or worse yet HD.
We think we know what we're doing, but, I could be advising you about the advantages of Pergo next year.
Again, thanks to all for taking the time to dicuss this topic. I asked this question in an earlier post but no reponse. Was the profit margin higher in the spec market during the 50's and early 60's? If it is -20% to 30% today (depending on who I listen to) what was it back then? I ask because I am aware of a small time builder (1-2 houses per year) who did well during that time period. What was different?
I will give this a rest after I get a handle on this aspect. Thanks.
Mike L.
larso..
timing has a lot to do with it also..
if you start building spec at the top of a housing boom, by the time you get your product ready to sell, the mortgage rates can be climbing... or a big plant can close..
or the president may decide to punish some senator by moving a military post out of his district
none of these things do you have any control over... but the effect on home sales and prices is just like turning off a faucet..
faster than you can blink.. next thing you know you're back to the olde coin toss..
dump your house or move in yourself and wait for the market to recoverMike Smith Rhode Island : Design / Build / Repair / Restore