How did I get into Spec Home Building?
It is actually not me that is into Spec building. It is my wife working with the builder. They work well together. I enjoy watching what they come up with. She doesn’t do websites though, but she allowed me to do this one and chronicle our first and maybe only (if it doesn’t sell) Spec Home. I will admit. I am an attorney by trade. I am not proud of that fact and I am not ashamed of that fact. It is something that I deal with. My Dad is an attorney. I should have been a doctor. Everybody is an attorney.
I’m not a do-it-yourself type of a guy though. This summer, my wife asked me to trim the tree in the back yard:
After living with my wife’s parents for a long time and really skimping, we got our student loans paid off. There is a lot competition in the area of law that I am in. I tried a couple of things outside of my law practice, just to see what is out there. I tried to start a compost business (making compost out of sawdust and chopped up rotten food). I almost died of inhalation poisoning the first night of composting.
I got my real estate license and passed the tests, but I have never activated it with the State. I’m not too interested in taking people around and pointing out how neat everything in a house is. Not for me.
Later, I was approached by a lifelong friend that was bored of his job and wanted to fulfill his dream of being a full time home builder. He had time and was motivated. I trusted him and felt comfortable with him from the beginning. We decided to team up and build a spec home and split the profit.
My Wife The Designer
My wife is a pinterest follower. It is her favorite website and the only one I ever see her on. She knows trends and she loves houses and house plans and house finishes. She knows what people like. I put my wife in contact with the builder and they began immediately with a house plan. I set the budget and picked out the best land available for a spec home. The problem was it was expensive. $92,400 for .77 acre, right in front of a beautiful apple orchard. We sold our home, tapped our savings and financed the project.
The land became our down payment on the Construction Loan. We began to rent a home. A big, old, somewhat smelly box of a home. We like it though.
Our plan was to build the Spec home, let it sit on the market for two months after completion and move in if there were no takers.
Our goal was 1/3 or 33.33% Markup. We wanted to at least split $100k in profit.
The Initial Plan
The initial plan was to build a 3500 square foot home for a total price (including land) of $400k. We would list it for $533,333.00 and sell it for no less than $495k. We would split up $95k (appx 45k) each and move onto the next Spec home. We Initially decided against using a real estate agent.
Reality Sets In
Reality began to set in when we got our completed plans back from the architect. The home was not 3500 square feet. IT WAS 4668! There was no way we were going to build a 4668 square foot home for $400k. Remember, the land alone cost $92,400. I asked my wife if we could “scale down” on the plans and have them re-drawn. But, alas she was set on the plan and preferred to move forward as it was.
I do admit, I love the house plan. It has a HUGE KITCHEN and HUGE GREAT ROOM. I did my fair share of internet searching for a house plan that we could buy. Most house plans were a thousand dollars or over and none of them offered what this house plan did.
So I consented to the house plan. Ever since I consented, my stress level has gone way up and I haven’t been sleeping as well. I don’t use medicine to sleep, because I don’t like medicine. I did however buy a sleeping mask and ear plugs and sometimes I sneak in a swig or two of the kids Benadryl.
So, we began looking at ways to reduce house cost without trimming the quality.
Here are some of the ways that we saved cost hopefully increased value to our Spec Home. Again, these ideas were for our First Spec Home Adventure and may change if we ever get to build a second.
The Stomach Punch
Initial Bids came in at 498,000 (including land of $92,400)! What? The builder called and asked if he could come to my office to break the news. I called my wife and asked her if she was ready to give up yet on this project. We thought there is no way that we could mark up a 500k home enough to make money and find a buyer. In our area, buyers above 500k are few and far between. We would either have to build a Killer house or just give up.
I couldn’t afford a 500k dollar house. Just too expensive. I have too many kids (4 under 7 years old).
After a couple of days of letting it settle in, we decided to press on. We are going to take a fairly big risk, knowing that if the home doesn’t sell we can move in (although it is more expensive of a house than we really want to afford).
Life just got a little more nervous.
My Semi-Retired Dad called and said he thinks that we maybe should reconsider what we are doing, sell the land and move into something more affordable. I appreciated his advice. I just felt like I should proceed. I felt like we could sell the home. I felt like it was still a good idea. I wanted to take the Spec Building Home Risk.
So we moved forward……..
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