Spec Houses?

Dmiller

First, Howdy from Texas...


Spec houses has anyone had really good luck? Has Anyone had really bad Luck? I am a student going to school to do construction. And I need some advise on Starting and Owning a sucessful Business being a Contrator either in Spec houses or Custom homes. But I cant do custom homes w/o a good name so I figured that I would do a couple of spec house, if the market is good. Any info is good info, Thanks for yalls time.......

King of Crown

where do you live?
Here the market is slowing, and i think it is slowing everywhere, but there is still allot you can do. People got excited with spec houses for a while, and were charging rediculous amounts of money, so those same houses have been on the market for over 6 months now. There is going to be a correction in the price of realestate, but then things should be booming again.

__________________
Real nice guys

Dmiller

i Live in College Station Texas. What is the profit like on them. Lets put it this way if you wanted to build a house in a ares that the houses are going for 140-150 what does it cost to build a house that goes for that, if you are the contractor

Glasshousebltr

That's a trick question Dmiller. Product, equipment, labor and your survival durring the build can make a major impact on that cost.

If it was me, I think I could turn key on a 160k for between 120 and 130. However, I'd have to do most the work (no subs), eat peanuts durring the build, use builders grade products, stay at a simple design and I already own all the equipment.

Being new to this, I don't think your ready to jump in yet. Get some experience to fall back on. If you try this now you may destroy your credit and any hopes of doing it in the future.

Bob

__________________
Bob

rino1494

You are right, the market is slowing. Last year, the builder that we mainly do work for couldn't build specs fast enough. He was selling them before they were even framed. Now, he is sitting on 7 specs for over 6 months and can't sell them. It takes alot of money to do a spec and if you can't sell it right away, the interest will kill you.

__________________
Life is hard. It is harder when you are stupid

Uncle Sam wants YOU....to speak ENGLISH

Dmiller

How do yall think the easiest (safest) way to get started in the Construction business, with ending up with a sucessful Self own business?

Also Custom homes are they safer and DO you make more money that way?

Big Dave

Nothing is guaranteed in life. I have been in construction like most guys since high school. I have worked for builders who did it all, footings, short walls, framing, siding, roofing, etc. I finally at age 36 decided to go out on my own and so far it has worked out. It scared the h e double hockey sticks out of me and still does. What I did though was work on quality and speed, in that order. As far as money making on specs versus custom, it's about the same if you can turn the spec quickly. Customs are mostly a pain in the butt, and if you don't have your contract in your favor you could loose big time. I've done both and I enjoy the customs because you get to do things that you wouldn't normally do in a spec. but the homeowner can be your biggest nightmare or your best freind. There are no quick to the point answers for the questions that you are asking. If I were you I would work for a construction company and see how things go before I would jump in with cold feet. Hope this helps with your decisions in life.

Dave.

__________________
Do one thing at a time, do it well, then move on.
http://www.bigdaveswoodworks.com

Dmiller

Yeah I understand, I am 23 now and I have work in construction since I was 16, I would like to start early with a business so I can enjoy owning a businees While I am still young...... But thanks for yalls input and am looking forward to any other info......

jproffer

Specs:
Pros:
- You're the boss - there is no "That's not the type of trim we wanted"..it's YOUR trim and what YOU want.
- Make it as simple or as complex as you want. (read: as quick to build or not, as you want)
- Don't quote me on this one, but I would think the profit would be more in specs than a GC's pay per house.

Cons:
- You gotta sell it. Every day it sits costs YOU money.


Custom:
Pros:
- The home is already sold...the money is guaranteed (assuming your contract is tight)
- As someone else said, you get to do things (fancy, high dollar things usually) that you probably wouldn't do in a spec.

Cons:
- The homeowner factor...'nuff said.
- Again I don't know for a fact, but probably less profit on the sale.

I'm sure there are way more pros and cons to both than that, that's just the big ones that I could think of as I typed it.

__________________
Jim P.

ruskent

In my ideal world, i would do high end spec houses. It be great. I would have no boss. I could build it exactly how i wanted to. And if i built a high quality house, it would sell with out a proablem.

The thing with alot of these spec house builders it that they try to build these houses as cheap as possible, with no regards to quality. Thats why spec houses might not always sell as fast.

Tscarborough

I would not build a spec house unless I could do it for cash. Otherwise, you have a partner, and that partner (the bank) has control and will make as much money as you.

Cole

Well first of all, welcome to the forum!!!

Spec homes are iffy if you don't know the market and what it can handle.

I see you are from College Station, which is good because that area is really starting to boom.

__________________
Tulsa's Leader in Outdoor Living Construction | Facebook | Tulsa Pergola Builder | Tulsa Outdoor Kitchens

Dmiller

yeah there is a new subdivision coming in and it has lots of potential. The sign says houses ranging in the 140-150s...... but when i get done with school I will move to austin Texas to do business

Tscarborough

If you want to build houses in the 100-140 range, you better be ready to build 20+ at the same time.

Dmiller

really Why so many? If you where to build 20+ what kind of profit are you looking at? and in what time frame. What kind of profit are you looking at per house, in the 140-150 range? Some of these question might sound alittle dumb but like i said I am just starting out....

Tscarborough

The only way to get your costs down to a reasonable level are bulk buying and standardized plans. As for specific prices and profits, I have no idea, but I do know that in that price range, only the tract home builders can compete.

The ideal niche to me is urban infill. Modern style is desired and is generally cheaper to build, and the market price compared to the budget numbers I have run is tidy. Even in a bedroom community, unless you can buy a fair amount of lots in an acreage development, you will be beat down by semi-custom builders to a minimal profit. And, again, unless you are paying out of pocket, the bank will make the money from your labor.

edit-My budget numbers give me (triple-net) 10% on a 500,000 dollar home, provided I pay as I go and perform about 20% of the labor myself. Not good enough for me to do it, yet.

Dmiller

When you say "tract home builders" you mean like a company building a numerous amount of homes in on spot.......


edit-My budget numbers give me (triple-net) 10% on a 500,000 dollar home, provided I pay as I go and perform about 20% of the labor myself. Not good enough for me to do it, yet

Put this is dummy terms for me?

How long have you lived in Austin? What part?
what is the market like on new homes?

I have a lot on Lake Travis I thought about putting a sign on it that says " will build to suit" For a first house do you think that the profit will be a good turn out? Another words would you do it?

Bob Kovacs

Typical homebuilder profit percentage (gross) benchmarks are in the 8-12% range. So on your $150k house, if all goes well, you stand to make $12-18,000- that's not exactly big bucks for the risk and liability you assume in building and selling a home.

T's comment regarding building 20 or so homes is correct- to get any decent return on your time and effort, you'll have to build in bulk- other wise you're be paying too much for single lots, not getting the best pricing, and spending a disproportionate amount of time managing this one house when you could just as easily manage 10 in the same amount of time.

Bob

A+Carpenter

When you get to Austin let me know. If you any good I will put you in the door to million+ dollar homes.

I have a builder down there that from time to time calls me to frame them.

__________________

Mike Finley

From the latest national home builders survey

Land costs 20%-25%
Materials 25%-30%
Labor 20%-25%
Overhead/Selling 6%
Financing 2%
Profits 10%

Profits base on home price
100k-175K - 8.8%
175K-$230K - 5.9%
230K-360K - 8.4%
362K-3.1 m - 10.5%