Spec Homes and Investor Relationship

[Kresh Shehu]

Just recently I have come in contact with builders looking for private investors to finance spec homes. Since the housing market around Austin is very good at the moment, they are offering 10-12% interest. Seems very enticing but I don't have experience on how the legal process would be to set it up so the investor is strongly protected. I know that the best way would be is to set up a 'draw' schedule, etc. However, I am looking for some advice on the details. How is the investor protected if the builder leaves town? What liability coverage does the investor need to see from the builder so the investment is protected as it is getting built? Your advice is greatly appreciated.