View cash flow as necessary to cover expenditures and meet debt coverage ratios in order to obtain favorable financing, do not view cash flow as a vehicle to cover future down payments. 

I am self employed but want to build a spec home using the equity in my house as collateral.

Right now, you have a property with a great equity position, solid cash flow, and cheap debt (interest rate is low). 

Though it may cash flow well based on their current debt service, when you compare the income it produces to the equity they have is it actually even a good investment for them from an ROI perspective or would they be better off liquidating and redeploying?

E Equity, how much of the home will you own on day one.  

Usually turnkey operators suck the equity out of a deal and sell at or above market so there goes the equity. 

LOne common strategy is doing a cash-out refinance on one of your rental properties to tap into the equity.

It has certainly been a challenge finding cash flowing properties in area where the demographic are favorable. 

The industry continues to see consolidation, with private equity-backed firms actively acquiring, albeit at a slightly slower pace than the frenzy a few years back.

Raising the  amount required to buy your target properties is not easy, and beyond the amount that must be raised without leverage it will be difficult for you to provide favorable return profile for your investors.