Spec House Building

[CATNHAT]

So, heres the deal, if you had the option to build a house "on spec" would you do it? "on spec" means that you buy a lot, build an 1,800 sq/ft 3 br ranch, 2 car attached garage, and wait for a buyer to come along.

You make the selections for countertops, flooring, exterior finishes, etc, etc, etc. And then finish the house and put it on the market. Then wait for a buyer.

Of course some cash would have to be thrown in, and given the time frame of sale, the return could be: Turn it quickly--JACKPOT!! Sit on it for 1 year--Brokedown POS!

This is Checkers or Wreckers!

What would UUUUUUUUUUUU do????????

[team beater]

To many factors to say a positive no, as it depends on the potential for return on investment. Personally I wouldn't be investing any money in new construction right now. The cost to build probably exceeds the current market value right(number you should focus on if you want a fast sale). Plus once complete you have a another set of bills you have to pay until it sells. The amount of inventory on the market right now is ridiculous, also you have to remember that although we did see a spike in home sales so far this year, a lot of it was lower cost homes (I would guess 100k to 200k) because of the First Time Home-buyer program.
If you have the money to spend or option to obtain Monies, my suggestion would be to buy up some preexisting homes/duplexes as rental properties. You can buy low with a ton of room for further negotiations and renting percentages are up. Makes more sense to me than a spec.


Just my .02

[HITMAN]

In this economy and housing market? No way. IMO it's too much risk even on a total cash basis but if you do it on credit you are truly a fool.

[Al]

Does this make you the builder contractor, per se?
Also, how much $ are you responsible for?

Could be a trap.

[0TransAm0]

if i had the extra money to throw down that wouldn't matter if i lost sure id take the gamble. you could always rent it out if it doesn't sell fast enough.

[Karps TA]

5 years ago yes. Now pretty much no way in hell. Unless I was well enough off I could afford the gamble if it takes 2 years to sell.

[Lash]

No. Bielinski pretty much own's that part of the market. You can't build crappy enough to even think about competing with them.

[Russ Jerome]

With 238 houses on MLS that fall in the "1,800 sq/ft 3 br ranch, 2 car attached garage" unsold on the market presently, the Obama throw away $8000 first time buyers is over I would say 100% no. Milwaukee oddly enough is high in the nation wide sales so Im probably wrong.

As noted above you can buy a 1800 sq foot house for 50g's less than 2 years ago, maybe less this summer who knows.

[Al]

Milwaukee oddly enough is high in the nation wide sales so Im probably wrong.

How many of those houses are the cheap ones available in the hood of Milwaukee? I heard that turnover is high in areas where houses sell for $18,000.

[Russ Jerome]

Good question, this is a newer article from the Milw Urinal:

http://www.jsonline.com/business/93303009.html

[CATNHAT]

One good thing is that I can get a really good deal on the lot, I will subordinate the lot title until closing, and pay for it after the closing. The lot is in Franklin, the houses in the area have vinly siding, vinyl windows, etc. and are surrounded by Kaerek built homes. If anyone can build cheaper that Belinski, it is Kaerek. So that is my competition.

I have built specs in the past and had good luck, but the market was obviously different.

I know it is a big gamble, but Trump says, "Go big or go home". One spec house is not big, but there is alot to lose if things go wrong.

Right now I am 50/50 on the project.

[CATNHAT]

Good question, this is a newer article from the Milw Urinal:

http://www.jsonline.com/business/93303009.html

I read that and a couple others. Some economists are predicitng that the housing market falls off a cliff after this wave of closings hit. Some say that wont happen.

I would be suprised if Obarfma creates a new tax credit or extends the recently terminated tax credit home buyer incentive.

One thing that Obama is good at, is spending tax payers money.

Money sure isnt easy to make, but it sure is easy to spend.

[Russ Jerome]

One thing that Obama is good at, is spending tax payers money.

Money sure isnt easy to make, but it sure is easy to spend.

One thing the economist will also remind us of is the fact THE US HAS NO MONEY AT ALL. We owe China and others incredible amounts, we are printing our grand kids tax dollars not ours. If the bottom truely drops as some predict you wont have to worry about paying off your new house, a Japenese finacial warden will own you "assets". There is a pretty good chance the late 20's will look pretty good compared to late 2010 and early 2011.

http://www.usdebtclock.org/#
These are real numbers above ^^^^ the same feds who are running up this debt are also the guys who say they are backing your loans....I would be very cautious on laying a thin dime of my own out as an "investment".

[Yooformula]

can you rent it out if it doesnt sell within 6months or would it be restricted?

[CATNHAT]

can you rent it out if it doesnt sell within 6months or would it be restricted?

I could rent it if it didnt sell, which would help. The loan would not be for to much so rent would cover that expense. The taxes would be a different story though. And taxes in Franklin are no joke.

[84 Regal]

I would not do it, the lumber mills are closed and lumber is way up. look at the price of OSB 15.00 a sheet for 7/16. Been in this field for 15 years and they are not building like they where last year. It is a big chance in this market. I will not build a house unless I have a buyer. I would not build in Milwaukee County.

[Al]

look at the price of OSB 15.00 a sheet for 7/16.

What was it in the past?

[wrath]

I would not do it right now unless you get the lumber locked in and you get the lot for $25k. SE WI has the highest percentage of jobs in the NATION for manufacturing and medical billing. Manufacturing is picking up but if it crashes again it's going to hurt. And Obama's medical mess is going to cause a TON of consolidation in the medical field. That means no more $17/hr jobs for unskilled labor handling medical paperwork.


What was it in the past?

Last fall I bought a ton of 7/16" OSB for $4.50/sheet. I bought a bunch of straight wane-less 2x4x8s for $1.29/each.

[Old Dog]

If you can get such a good deal on the lot, why not buy and flip it? You can put it up for sale the same day you close on it. No waiting 6-9 months to build a spec home.

[CATNHAT]

If you can get such a good deal on the lot, why not buy and flip it? You can put it up for sale the same day you close on it. No waiting 6-9 months to build a spec home.

B/C the developer is letting me pay for the lot after closing. this helps my downstroke, appraisal, and interest carry.

They are doing me a favor.

[84 Regal]

What was it in the past?


$4.87 3 months ago

[wrath]

Habitat for Humanity can build a ranch house in 5 weeks. My Dad and I built my parents' house in 3 years doing everything except welding the beam and laying the block walls.

There is no reason for any less than 3500sqft 2 story house to take more than 3 months to build from site preparation until occupancy if it is being done by professionals. Hell, they built a duplex down the street from me in less than that.

[CATNHAT]

Habitat for Humanity can build a ranch house in 5 weeks. My Dad and I built my parents' house in 3 years doing everything except welding the beam and laying the block walls.

There is no reason for any less than 3500sqft 2 story house to take more than 3 months to build from site preparation until occupancy if it is being done by professionals. Hell, they built a duplex down the street from me in less than that.

I think your schedule may be little optimistic. 3500 sqft 2 story in 3 months-- I would not want to live in that house.

I was figuring 3 months for the build on an 1800 sft ranch. There are a LOT of ways to minimize expense. Most of the projects I have built in the past were either really big, or expensive and required more time. In addition, dealing with homeowners on a custom build adds a lot of time due to changes. Every home owner says "no more changes" after 10 revisions to the CD's and at least another 15 in the field.

Schedule is the least of my worries on this project.

[Z You L8r]

I just finished building a house in Pewaukee and as a real estate appraiser and small developer, I would do what you can to buy the lot now and wait until at least next year to build. My appraisal on my new house was a total joke. The appraisers are being so conservative with new construction appraisals. The appraisal came back 10% lower than the cost to build. So you also have to factor in the appraisal side. If you can't get it to appraise out you will have to put more of your money into the house. There are just too many foreclosures and despirate people out there that you are competing against. See if you can buy the lot now at the great discounts developers are offering and holding it. What subdivision is it in? PM me if you don't want everyone knowing. I'll give you my opinion if it seems low enough of a price.

Scott