Breaking Into The Spec Home Business
A partner and I are trying to break into the spec home building business. We are in a hot teardown area (west suburban Chicago) where the majority are spec. Neither one of us is experienced in construction, so we are thinking of getting started by focusing on the money side of the equation and partnering with a builder/GC. We hope to learn the construction side of the business as we go. We know of a few builders in the area that would consider an arrangement like this (e.g. split profits, cost plus, etc).
So our first challenge is to determine the best way to fund the project. Our options are:
1. One of us could apply for a construction (owner/builder) loan (and just flip it when we get a buyer)
2. We could pool money from our home equity lines of credit
Some points we are debating:
- Loan Costs
- Interest rates (home equity rates can be lower than construction rates)
- Rate stability (Libor+ vs. Prime+)
- Built in cash-flow controls (they pay when milestones are reached)
- Buying power with cash (from home equity LOC) vs. construction loan
I know some of you might be rolling your eyes and some might suggest we get a job in a trade to learn the business....well, we've looked into all that and this is where we are....are we crazy or just stupid? Your advise is welcome.
Thanks.
Also located in chicago, and would like to discuss with you and your partner about how you can get into spec home building using little or no money. Basically, what we do is find land, select a home (Blueprint) and offer it is (Pre-construction) to potential homebuyers.
Qualify the buyers for the loan and build for them at a discount. Win-win for both of us...
Can discuss this with you and your partner.
Have over 10,000 homeplan to select from, as well as financing sources.
Contact:
Steven M. Schlidt
**Please See My Profile**
847-338-2428