Where to get spec home financing?
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Where to get spec.home financing ? From your blue jeans,besides being real hard to get,borrowed money will put you on a tread mill. Make no mistake about it,spec. building is a rich man's game. In the last housing debacle it also made many rich men broke men.
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If you don't already have a) a lot of money to self finance or b) a close working relationship with a financial institution, you're probably not going to be building on spec.
After the last one, I never want to build on spec again. I can still feel the sting.
After the last one, I never want to build on spec again. I can still feel the sting.
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I walked into the bank for my first loan, for two specs, last year. I owned the lots and had my estimates with a 60% LTV. Got a loan no problem at half the interest rate I was expecting (4.5). I made great money. I think if you're not in a place to get similar numbers, you should stay away from specs. This was also in Alaska where I am very competitive.
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Around these parts, there are still lots of homes with upside down mortgages and a bunch of inventory in short sale. Not many banks are going to loan money to build a $200,000 house that you can buy right now for $140,000.
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And why would you want to build one?
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That's my point....and also why the bank won't lend the money
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Generally the banks know what's up now.
Well, there's always Big Vinnie from Jersey for an "unsecured loan"....... :whistling
It's along the lines of the adage, "if you have to ask how much it costs, you can't afford it.". :no: If you can't self finance and afford to lose it all, then you're not in good enough shape to assume the risk for the project. And no bank will assume that risk either. Keep building for others until you can self finance. Don't expect a bank to be anything but overly conservative still. The "upswing" isn't happening everywhere.
It's along the lines of the adage, "if you have to ask how much it costs, you can't afford it.". :no: If you can't self finance and afford to lose it all, then you're not in good enough shape to assume the risk for the project. And no bank will assume that risk either. Keep building for others until you can self finance. Don't expect a bank to be anything but overly conservative still. The "upswing" isn't happening everywhere.
Have you tried your local business banks. I tried to get one last year, they wanted good credit and 60% LTV which I could do. However, they also wanted my past three tax returns to show income that could cover my mortgage as well as the spec home's mortgage in perpetuity, that I could not do.
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Yup, house flipping those foreclosure homes would probably be a better alternative right now than spec building. To the original poster, if you wanted to consider house flipping instead, try vestus.com to get some info.loneframer said:
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I've been building specs for 40 years, it is not an easy way to make money. I do it as an adjunct to my custom business, I try to do 1/3 specs and 2/3 custom. I just sold a spec house for $4,350,000, my asking price was $4,400,000. The buyer started out by offering me $3,700,000, kept going up. I held firm because I knew it was a very nice house compared to others on the market. I am currently about to start 2 more.
As to financing, stay away from national banks, try local lenders. Plan on having to put at least 10%-20% of the sales price in as hard equity, if you are a new builder they might want more. Then plan on worst case scenario of having to hold the house and pay interest, property taxes, insurance, utilities, and maintenance for an extended period of time.
If you are new, plan on the crawl, walk, run plan. Start with one spec moderately priced, and build a program on that one spec. Use the best architect and design team you can find. Building specs is entirely 1000% completely different than building for clients.
Allan
As to financing, stay away from national banks, try local lenders. Plan on having to put at least 10%-20% of the sales price in as hard equity, if you are a new builder they might want more. Then plan on worst case scenario of having to hold the house and pay interest, property taxes, insurance, utilities, and maintenance for an extended period of time.
If you are new, plan on the crawl, walk, run plan. Start with one spec moderately priced, and build a program on that one spec. Use the best architect and design team you can find. Building specs is entirely 1000% completely different than building for clients.
Allan
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Great website, and looks like you produce a great product:thumbsup:
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