Spec Building Versus Rehabbing
If you are looking to enter into the spec home building market you better know the local market well. What are the employment factors? What is the absorption rate (properties listed vs. properties sold) for existing homes? If that number is greater than 50% you should do well. Of course the average sales price for existing and newly built homes has to support a new build. Learn the city’s requirements. Know your general contractor well and watch closely. Know your competition. What are they doing? How can you do better? Have a contingency plan for if/when things go wrong. Working with Peregrine Construction we can help you run the numbers for spec building vs. rehabbing. You might find it makes more sense to build than to rehab.
And a warning; spec builders are notorious for over extending. Be disciplined, focused, and continually manage your risk. When the housing cycle peaks, be ready to stop building and wait for the sweet spot in the next cycle. Spec building can be a very lucrative investment, but like other investments requires an understanding of the process and risks. Peregrine Construction will work with spec home builders to build the proper team of architects, engineers, subcontractors, and material suppliers to be sure you are delivering a high quality product at production rates.
Spec building has its place in the upswing in the real estate cycle. Now is the time for providing new in-fill housing in areas of growth, where new builds have lagged over the past several years. More and more areas now have pent-up demand for new homes. Spec building takes your time, attention and capital (doesn’t have to be your money), and can provide outstanding returns in a fairly short time period. Peregrine Construction specializes in working with over seas and out of state investors looking to take advantage of the upswing in the Florida real estate market.
The Benefit of Spec Building
Peregrine Construction urges anyone interested in building spec homes to double and triple check in making sure the lot they are purchasing is a fantastic deal. The majority of the profit is made with the acquisition of the lot and a properly designed home. The advantage with spec building over other real estate investing strategies is the lack of competition. It seems like when a good idea comes along like flipping, or rehabbing, or wholesaling, everyone and their brother get involved in that. This tends to drive the prices up and make the spread far less than what an investor would like to see. The other benefit is it seems much easier to find private money to use for building spec homes as opposed to flips.
The primary advantage that for spec building is that you start with a clean slate regarding the building and most if not all of issues are removed during the design of building. Every rehabber knows that each new project brings and endless opportunity for surprises and the attendant increase in costs and completion date extensions. Just think undiscovered termite damage!
Peregrine Construction has been one of St. Petersburg and Tampa’s top custom home builders; designing and building distinctive residences in many of the areas finest communities. With house designs from contemporary to traditional, Peregrine Construction is able to help each home buyer find the unique style that will set their luxury home apart.