Spec build, new construction, infill development??

Question

Hello All!

Im a GC and buy and hold investor. With the housing shortage here in Northern Colorado I am looking into building one-off single family homes on lots and then selling them.

I am looking feedback on why I should not do this!

However more importantly id love to connect with anyone who is having success with building and development on such a small scale. I am not opposed to growing and scaling in the future, however that is not where i am starting from.

Thanks all!

Grayson Lynum · Answer

Thanks everyone for the feedback, it has been very encouraging! Contrary to popular methodology, I am not trying to compete with custom home builders. I have no intention of building high-end homes, or for them to take more than nine months to build. I am very familiar with high-quality modular homes, and am plotting How to take lots and put beautiful modular homes on them, this will allow me a very quick turnaround, high-quality end result, and that a “low” price point.

The risk with a custom home is how long it takes of course. On-site work on a modular from first excavation to wrap up can be done in less than six months. On top of that, the modular home builder takes care of everything and the construction process above the foundation. Leaving me to worry only about landscape (minimal), foundation, basement, septic, well as well as any outbuildings necessary like a detached garage.

Emilio Ramirez · Answer

I would avoid lots in production home subdivisions. No way to compete with those guys on price point. Plus HOA can be a pain in the butt. In Denver, I'm building specs mostly for investors on infill lots in mid to higher end range. Not sure if the formula is the same in noco but you can do a quick search on any of the real estate apps and find recent sold new construction infill properties. Look for a pattern of these amd you will find neighborhoods where it will work. You will also be able to find the sold price the builder/developer paid for the lot. Most "infill" lots will require tearing down the old house. I would not do it if you can't do it for a profit... :)

Kelan Donahue · Answer

The reasons you should not do this are that the land is expensive, supplies are expensive and tough to come by, and labor is difficult to hire right now. If you have those situations figured out, then go for it.

Grayson Lynum · Answer

@Matt M. its a daily struggle isnt it!?! As business owners are we the gold miners or the folks selling supplies?

With enough capitol and a great business relationship one would develop land and partner/own a modular builder to supply the homes. Particularly in areas like resort towns where affordable housing is a real problem for the people that work there!

Matt M. · Answer

Please keep us updated on the modular. I looked into it several years ago. We also looked at it for our Breck project, but the logistics didn't work out. There is a company that just built a 100k warehouse in Buena Vista for modular, and they are sold out for the next 2 years! They have a 400k sqft facility under construction.

Stuart Grazier · Answer

@Grayson Lynum I'd love to learn more about your idea of low cost modular home development. I think there is tons of opportunity if you can get the land at the right price and then do low cost construction! I think the cost of materials and labor are the biggest challenge right now, but if you can find a way around those two items, I say go for it! Then teach me!

Matt M. · Answer

Doing this in Breckenridge and Denver. Land and WATER is high along with building costs. It can be done, but it's a risk. The music will stop sometime, but we are just not sure when.

Account Closed · Answer

Do it.  I'm about to get started on a 180 home sub division. Plenty of money to be made.

Anna Laud · Answer

@Grayson Lynum

Hi Grayson!

I can only advise on this from the POV of being a custom home builder's daughter and knowing the in's and out's of building specs from what I grew up with- hope it offers some insight at least!

Now it may be different in CO and more development based, but usually (or historically) when you're going in to buy these 'cherry' or prime lots, it's not unheard of to also need to buy an outlaying or unfavorable lot as well. It usually comes at with a discounted rate from the better lot, but it's been the way (again, historically speaking) to get rid of the less desired lots while they're selling off the lots they know will go quickly.

This is worth looking into as a possibility if you're going to be stuck buying an additional lot that backs up to an interstate etc. Yes, there's an overall shortage in most places of available housing, but I would word caution in overbuilding a spec on one of these lots as want to be on the lower end vs the higher end. Meaning, I'd rather have the least in home value in the neighborhood on one of these lots vs the highest home value in the neighborhood, so it would in theory move faster.

I would also evaluate the competition closely as far as other home builders go and make sure that I could compete in not only my plans but cost as well. I say that as many custom home builders were pretty much outpriced as competition with tract builders with their cookie cutter designs  and lower overhead.

You can take a spec house of higher quality and sit on it for months longer vs a cheaper tract home (with enough material in it to simply pass inspection) in too many cases- so knowing your market and competition well pays off. In a lot of cases end users are looking at SqFt and price point over a quality product. In 'lay person' terms- they don't understand the difference in crawl spaces vs slabs, the amount or quality of product in trusses, grade of wood in floor joists etc. and the price point differences that go along with it. It's like having costume jewelry vs heirloom quality custom made pieces and a lot of folks want the sparkle without the price tag.

I guess that would be my other word of caution, know your market and if it's conducive to specs in more in 'personalized' end user purchased with tract homes or new builds that support more custom home end user transactions.

If you and your crew can get in there and crank one of these spec houses out that's in line with other new builds in the area as far as price point, and you can keep from having too much capital tied up on your (maybe) undesirable lots, it might not be a bad idea.

You can always market for custom home building in the meantime and build your buyers list while you turn out a few specs of more generic or average quality and scale up that way in time. This would be a good way to judge the market for new builds as well- simply running a PPC ad for custom homes while having an initial spec or two going.

I would go ahead and connect with an agent in your area if you haven't already that may be able to help negotiate the lot purchases and obviously they are going to want to help you with this and what's in your best interest as they want the listing after it's built as well.

They may also have established relationships with lenders as well that could be beneficial to you getting started - I may be able to help with an argent connection if you need it.

If you go this route and end up wanting any advice on staging and getting some tips on showing properties yourself let me know- I've been doing that since middle school ha and I'll be happy to send along what I can. (That may come up in time if you've got more than one spec going and your agent is holding an open house in one- you might be showing the other if there's not a newbie agent to help with the other showings)

Hope that helps some!

Spec build, new construction, infill development??

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