Spec home dilemma

[Aaron Aguilar]

As an architect by trade for over 20 years, my dream has been to build what I have designed. As in the business of architecture, after every completed project is done I’m basically unemployed. With that being said, I wanted monthly cash flow and just opened up a franchise business that will provide monthly cash flow while still continuing to work at my “day job.” To pursue my dream, I reached out to a friend who is a contractor to get advice of how to go about doing this. They referred me to a developer who has 6 lots and is willing to partner with my by throwing in the lot, and I get the financing. We will then sell and pay him back the lot and split the profit. The lots are 1 acre plus in the Davidson, NC area and plan on building about 3,200 sf 2-story that are currently being appraised at about 550k. We can build for 100/psf, plus the lot at 80k, I will do the plans and permitting, while we will split the GC duties. My big hang up is that I will be responsible for the monthly interest payments until it sells and just opening up a business, I used my cash and business credit cards to get up and running. Is this too risky for me and my family at this time? Should I pass and save up the cash or think outside the box?  Thanks for your suggestions!

[Jay Hinrichs]

@Aaron Aguilar most lenders will ( banks) go 70% of ARV and or 80 to 90% of cost which ever is less

so on your 320k build 80k lot thats 400k   550 X  70% is right at 395k.... 

10% cash equity is 40k... leaving you 40k to pull from for interest reserve.. 

this is what i do on my new builds .. I have a 9 month interest reserve so once construction loan drops NO more payments .. helps like heck.. I have 20 going in one subdivision with no payments going out :)

ergo the urgency for your builder to get it sold and closed in that time frame

So if your partner owns lots free and clear this should be quite easy for you.