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Let's Build a Spec House!

A detailed account of a Fastlane process...

Get Right

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Wow a 6% increase! How would you go about hitting 20% though? :oops:
Baby steps. I plan to keep using my data to find "lost" money through efficiency, speed etc. That coupled with increasing prices due to demand.

For instance, I've shaved about 3 months off my build time. At the same time I've increased the price on every house. That spread will help me get closer....but 20% is a long way off.
 

Get Right

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Rainy today so no pictures, trying again tomorrow.

BTW - Check out that new shiny red badge under my avatar!
 

Raoul Duke

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Get Right

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It's still overcast but I promised pictures so here goes! These are 2 new models I'm testing the market with (you've seen the others). One is already sold, the other is not on the market (on purpose).

20190204_165025.jpg

20190204_172942.jpg
Cheers!
 

Get Right

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Moving on up! This one's on the water...and already sold - yippee!

20190419_082450.jpg
 
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reedracer

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I think your truss' are sexy! Thanks for the awesome journal! Great read.
 

Get Right

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Finished another one. Thought you might enjoy a night picture:

3060 night.jpg

I'll have to say though I'm a little disappointed with the market response on this one. It gets tons of ohh's and ahh's but guess what...not 1 showing scheduled. It's only been 2 weeks so I'm trying to not be negative. But it's tough. I pour everything I have into these houses.

Anyway, I'll keep my mild depression to a minimum. It's just another Desert of Desertion. Yep those still happen.

On a positive note my phone rings off the hook with customers wanting me to design/build them a house. My conversion ratio is off the charts as well. I'm really only hampered by 3 things that if solved could blow up to a monster business: (please feel free to give me advice on them!)

1. Operating capital. It takes about 70k per job for me to cash flow. Currently this limits the number of houses I can build at a time. My funds now are a hodgepodge of cash and small lines of credit.
2. The correct employees. I have great guys already but to get really big I need a few rockstars sprinkled in. I've tried the usual approaches but these guys have been eluding me.
3. At this point I really need a business coach. I think the efficiency of using a coach would speed up some areas that I currently neglect (due to my lack of knowledge). I haven't even started looking for one so my bad here.
 

Get Right

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Johnny Le

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Hey boss man!! It's been awhile since we've spoken/updated this thread! How has everything been going for you regarding your spec building business? I've got 2 on the market right now.
 

LateStarter

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Yes, margins are increasing. My first house was 7%, the last one was 13%. I'm still trying to hit that magic 20% but it is hard.

I still work 60+ hours but it's fun so I don't mind for now. I hired my first PM when I started missing things I normally catch.

Owning your own equipment is a big money saver/maker for me.

I made a template based off a previous job. I tweak it each project and that becomes the new template.
I stumbled back on this post after reading it several years ago. I was at the Summit when you spoke about this business and although I was investing in real estate at the time, I never thought this would be a part of my future plans. As it turns out, it was.

My wife and I started with land prospecting and ended up becoming home builders. We took on a partner (50/50) who had construction expertise and we financed the deals. I think our market conditions are/were very different compared to what you're experiencing.

The handful of homes we've built have been estate-style homes on 1ac+ lots. Our margins have consistently been at or above 20% even through the trials of the Covid supply chain issues. Our most recent build is at 22% and we're disappointed with that. Having said that, we are in a 50/50 partnership so my wife and I take home 10%+. We shouldn't complain though, it's not bad money considering it's largely passive for us outside of the funding stresses.

Since we started, we've intentionally kept our volume low as we've learned the business. This was to mitigate the downside risk and, frankly, because it's such a cash intensive business and we own a number of rental properties already, we were somewhat over leveraged in our own minds.

Right now our homes are selling for $1.2M+ and that's in a depressed market. When the market rebounds we hope to be closer to the $1.4 - 1.6M range. We have one vacant lot left to build on, then we're out of inventory. With interest rates on the rise and land prices sky rocketing, we need to figure out how we can grow this business more effectively and increase our margins. I'm considering exploring higher density starter homes to help maximize the lot profitability and leverage economies of scale. It's not as sexy as estate homes, but it's a needed segment in the market. I'm not (yet) convinced it can be as profitable, but I have more research to do.

I'm also wondering if starting/buying other existing businesses, like HVAC and plumbing, could make sense to become more vertically integrated.

Thanks for all the unexpected and transparent inspiration along the way!
 

Johnny Le

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I stumbled back on this post after reading it several years ago. I was at the Summit when you spoke about this business and although I was investing in real estate at the time, I never thought this would be a part of my future plans. As it turns out, it was.

My wife and I started with land prospecting and ended up becoming home builders. We took on a partner (50/50) who had construction expertise and we financed the deals. I think our market conditions are/were very different compared to what you're experiencing.

The handful of homes we've built have been estate-style homes on 1ac+ lots. Our margins have consistently been at or above 20% even through the trials of the Covid supply chain issues. Our most recent build is at 22% and we're disappointed with that. Having said that, we are in a 50/50 partnership so my wife and I take home 10%+. We shouldn't complain though, it's not bad money considering it's largely passive for us outside of the funding stresses.

Since we started, we've intentionally kept our volume low as we've learned the business. This was to mitigate the downside risk and, frankly, because it's such a cash intensive business and we own a number of rental properties already, we were somewhat over leveraged in our own minds.

Right now our homes are selling for $1.2M+ and that's in a depressed market. When the market rebounds we hope to be closer to the $1.4 - 1.6M range. We have one vacant lot left to build on, then we're out of inventory. With interest rates on the rise and land prices sky rocketing, we need to figure out how we can grow this business more effectively and increase our margins. I'm considering exploring higher density starter homes to help maximize the lot profitability and leverage economies of scale. It's not as sexy as estate homes, but it's a needed segment in the market. I'm not (yet) convinced it can be as profitable, but I have more research to do.

I'm also wondering if starting/buying other existing businesses, like HVAC and plumbing, could make sense to become more vertically integrated.

Thanks for all the unexpected and transparent inspiration along the way!
Wow. Just got a notification from this thread!! Thanks for everything @Get Right!!

It's been five years since my journey began and I've been able to build 10 spec homes since. From finding financing to building it to selling it.

In my market I was building in the upper price range, but have since considered to begin building higher density homes. In order to do so, we've spent a good bit on consultants.

If you want more information I'd recommend Builder Partnerships. (I have no affiliation with them!)

Best of luck!
 
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Get Right

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Wow. Just got a notification from this thread!! Thanks for everything @Get Right!!

It's been five years since my journey began and I've been able to build 10 spec homes since. From finding financing to building it to selling it.

In my market I was building in the upper price range, but have since considered to begin building higher density homes. In order to do so, we've spent a good bit on consultants.

If you want more information I'd recommend Builder Partnerships. (I have no affiliation with them!)

Best of luck!
Congratulations on your success! 10 specs is pretty awesome.
 

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