Start Up For Business?

roscoe8423

Ive had my own business, working as a sub, framing houses for about a year now. Im not running the show by any means, I sub to somebody who gets the framing bids. I want to be all the way out on my own and build spec houses and frame while I do that but I have no capital. Im sure some of you were in this situation before. What should I do? Are loans the way to go? Or should I look for venture capital? And where should I look for both if so?

Jeeper1970

Most of the builders I've worked for get interest-only contruction loans. Some banks have (had) loans where you didn't have to make a payment for three months, and would extend it another three months for "preferred" customers, but those were getting hard to come by before the financial industry crashed.

BKFranks

How's the housing market in your area? Are homes keeping their value or are they losing like they are most places? Seems like it would already be hard to secure a loan unless you had stellar credit, but with the credit markets they way they are now and most homes losing equity, I think it would be even harder hard for anyone to get this type of money right now. Again, I'm not sure how things are in your area right now, but where I am homes continue to decline and everyone is saying they will continue to decline till at least the end of 2009. Residential construction is dead here.

If you can get something going, good luck. I'd be glad some one out there is making a buck.

__________________

roscoe8423

Well, the housing market has definitely slowed down a lot on new building but the value of homes actually hasnt declined so much compared to other parts of America. I know for a fact that I can build spec houses and make money because the people that I work for are doing just that and they are no smarter than I am. Actually the builder that we are framing for now has no clue about construction, he just has a money backer. But I dont know if the banks really care about that at this point with the credit market being how it is. I wish I was one of those lucky guys that just happened upon a huge financial backer to let him use his money. haha. But seeing how my luck never works like that, I need to figure something else out and I dont really know where to start. And as far as credit goes, its decent. Im 25 so my credit history isnt that extensive but its a lot better than most 25 year olds.

Mike Finley

Hey, it's awesome

MBS

One way to get started in the spec home business is to build a home and live in it as your primary residence while its up for sale. You're not paying for an empty house while living elsewhere, you get to live in a new home, the home is an asset and not a liability, and its far easier to get a home owner loan than a spec home loan.

__________________
I think I say OOPS!! out loud way to often.

sgr1

mbs has the right idea. That was what I was thinking as I read the threads. If you don't have your own home or are renting. You would be building equity and your credit. And hopefuly some money to boot.

__________________
www.srelectric.org Texarkana,TX Electrical Contractor

woodchuck2

X3, i know guys who have done this and it works well for them. They are always living in a new home. This has other benifits too, this way you can see what floor layouts work well and what doesnt. One fella bought a camper and lived in that while building the home, then moved the camper to the next lot while he lived in the new home. When the home sold he went back into the camper and started building again if he wasnt building already. To do this you have to be tight with $$$ and know how to pick good developable lots at a good price. You must be willing to work a full time job and still work 40-50 hrs a week for yourself until you sell several homes. Obviously you will need all the tools too and down the road buy some equipment to save yourself some $$$. Here in upstate NY you can do your own electrical, plumbing, concrete, excavation, etc. This wont save you time but it will save money. Saving money is like making money in this game.

roscoe8423

Yeah, thats what I was thinking too. Im living in a condo that I bought right now, well the bank bought, but w/e. Most contractors that I deal with have done or are doing that. And yes I do know that it is a risky business to be in, especially now but you dont make money without taking risks. And even if I did blow it, Im sure I would get another chance at something. Im only 25. I know a builder that went from framing to building and he went bankrupt after 3 years of building and now hes a multi millionaire, so its possible. But you should see how much of a tight ass he is. lol. its ridiculous. but thats off the point. I guess another question I would ask people would be: Given the current economy, do you think that it would be best to wait to try this out until this passes or do you think i should give it a shot. Heres my view on it: I am pretty sure that we will bounce out of this slump, when and how, i dont know, but we will. And when we do, it will be a boom. And it would be nice to be in a good position, already building and doing things when the boom hits. Right?

MBS

My personal perspective is that there are about 1 million too many homes on the market right now. There is going to be another 2 million homes in foreclosure in the next year. And there are over a million homes currently in foreclosure. When I add this up, it spells disaster for the spec market, unless you are in a hot market, or you have a truly special piece of real estate to build on.

If you're in a typical market area, with a standard lot, then you have to compete with all those other homes. What is it about your spec home that makes it stand out from, and be far more desirable than all those other homes? If you have that solved, then go for it.

__________________
I think I say OOPS!! out loud way to often.

justariot

Seems to me that buying a deeply discounted lot or pre-existing home would not be too hard. If you purchased a lot you could build on it but if you purchase a house you could renovate it, or complete it as the case may be.
The wife and I are looking to buy a real nice place in northern South Carolina. By real nice I mean cheap and in need of mild renovation. This way we cut our mortgage down, have a place to live and maybe just maybe the economy can turn around.

Here is hoping!

Dave

Mike Finley

Also if you're in a market that is hot enough to be spec friendly, your customers aren't the type who are going to buy they home you are squatting in. You better think long and hard about that. Understand your buyer first.

modterry

The posts are right on - what is the market in your area going to be in the next year. At age 25 you do have time to start over but, why. Be smart and learn from someone who has been there. Find a mentor. Banks are very tough. In Denver they are even requiring 40% down on new homes above certain price ranges.

2) if you are dead set on the idea - go to a lot owner that wants to sell- approach him with a JV idea that you would pay for a sign - Custom Home designed for this site - offer to build the home - he puts up the land, print a brochure, wait for a qualified buyer .

That puts you in the custom business, not the spec business, but you would have a pre-sale and the buyer gets the financing.

The land owner gets his site sold, you get to build a house, the buyer gets a new home - You just need to be prepared to put up with the new buyers for a year.

Good Luck !
Terry

D.A.S.Anthony

Well, Spec building is not a easy business when the market is well. I have been building spec for about 10 years now, sprinkled in with the occasional multi-million renovation. In this market, we are now doing the $50,000 renovation and the occasional multi-million renovation! Get the point. Not trying to brag here, simply saying that we are no longer building spec homes at all. Even if we wanted to we would not be able to get the financing. The homes I built were generally between 7000sq and 20,000sq.

Actually all the spec home builders I know are now out of business. They do not even want to take the smaller custom stuff. It is thier choice as most of them are bringing in money from other areas, and used their $$$ for spec.

In order to be successful, you must know your client, know your neighborhoods, and have a plan. Do not put granite into a neighborhood that warrants porcelein. Do not put Marvin windows when everyone else has Anderson. Do not put sub-zero's when a GE profile will do. Do not paint the house purple because YOU think it looks good.

The point is DO YOUR RESEARCH about an area, the market, the neighborhood etc. Before you purchase a location. Have a idea of a good floor plan, building spec may sound great, but successful spec home builders are thought-out and educated about a specific market. You have got to pay attention to the finishes. What you like does not matter, it is what the general public in that area likes. The key is what seperates your home from the other 500 for sale in that town right now? Seperate your home with quality and a plan.

__________________
Anthony
_____________________________
www.dasassociates.com Building from Greenwich to Fairfield and Westchester Counties.