Pay off construction loan with proceeds of selling?

[Dane Entze]

A bit of background... I am a full time Engineer and part time Realtor (1 year experience, 5 transactions), my wife is a freelance architect and holds a degree in construction management. All we want right now is to set ourselves up so I can leave my day job and work full time running our own real estate business. We live in Utah County Utah which is a hot market, at least for selling given the low inventory and huge buyer pool. The challenge is that with so little inventory there is a lot of competition to buy flips if any even come up and few other opportunities.

Our Plan... as mentioned in many places sometimes we have to create out own opportunities. That being said we want to jump in by buying lots and building small single family homes i.e. 1500 sq ft or less simple spec homes. Since I also have a background in carpentry the plan would be to start by building the first one myself. This will allow greater potential for profits and less waiting for contractors since they are hard to come across given to amount of construction going on currently in our market.

The challenge... of course if it was easy everyone would be doing it. So we need to figure out financing. We have roughly $40k - 60k of equity we are freeing up via a HELOC and possibly some 16k of "if-come" in the fall but we are not going to factor that in at this point. Though we have some cash available we need to find some financing fund the construction and lot costs.

My questions... First, is it possible to pay off a construction loan by selling the home immediately after completion before getting a mortgage? Second, If I could convince a Deed transfer for a lot, what would a seller generally want to see in the contract to feel comfortable to do it? And if i did get a deed transfer how would a prospective lender view it? Lastly, What may be some pitfalls I should consider if we go the route of building a small spec home?