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Spec Homes

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Published On : 04-02-2005
Author : Steve Donegan
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One of our readers posted the following: 

“I am interested in building spec homes in Arizona. I have many questions regarding the spec home industry and have had a difficult time obtaining useful information. Plenty of info on fixers, foreclosures, investment property and such but with regard to building spec homes and the financing, planning construction and selling there just isn't much out there.”

I don't consider myself an expert on spec building, but I have built over 200 homes.  Out of the 200 homes I would say 120 of them have been spec homes.  I enjoy building spec homes because it is much easier and can be more profitable.  However, it can be risky.  The best thing to do is start with a good floor plan and build it in a good area.  The way to determine if it is a good area is to find out information about the comparibles of the homes that have sold in the area. 

Another thing I like to do is get the home plan and lot appraised before I start.  I then figure out my building costs and determine if there is enough value in building the home in that area.  If there is not enough value DON'T BUILD IT.  I did it once and lost $35,0000.   Builders like to figure out their costs and then add their profit on top.  That is not how value is determined.  The value of a home is not created by the builder.  It is created by supply and demand. 

I like to follow what sells for a higher than usual.  If I find that someone paid more for a home in a certain area, I try and get a lot as close to that home as possible.  When someone pays too much, it raises the values of surrounding homes.  That is always a good thing if you are building a spec home.

 

Good Luck and Happy home plan Hunting

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