Financing First Spec Home

[Cory Gerlach]

For the last 2 years, I have been trying to determine the best strategy for me to get started in real estate investing.  I have strongly considered flipping, buy & hold, and spec home building.  I have finally determined that spec home building would be the best option for me and I want to get started with the first home.

I now need to determine how I am going to finance the project.  I own a primary residence with around $180K equity and have >$50K in the bank.  I am looking for some advice on how to finance this project.  I really don't know where to start.

[Jon Klaus]

Typically, I'll pay cash for the lot, and then get a construction loan from a bank.  The bank sees my equity in the lot as enough collateral if it's worth 25-30% of total cost.   You'll also need some operating capital to start construction, since the bank won't fund draws until the work is completed.