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EXECUTION Let's Build a Spec House!

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JScott

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Is it normal for houses there to take so long? Up here a halfway decent spec home can be done in 3 months or so, even of the nicer, more luxury-ended ones.
It depends on the type of house, the location and other factors. I can build a standard house on a crawl space in Atlanta in 3-4 months. A standard house in Maryland has a basement and is subject to much more stringent environmental requirements, so it's more like 4-6 months. In some places, permits take a week or two; in others, the same permits can take 8-12 months.

So, there are a lot of variables. That said, the OP seems to be doing a lot of things sub optimally and is taking a lot longer than he should be to get to where he is. He may have gotten in over his head with multiple projects simultaneously...
 

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Whats the latest update? Love seeing the updates as looks as though construction methods are slightly different to that of my home country.
Busier than ever and having a blast! Currently I have 6 under construction with 2 more in the works. All of these houses are close to the ocean and require pilings for foundations. Basically when the big waves come they wash under the house as opposed to washing the whole house away.

Is it normal for houses there to take so long? Up here a halfway decent spec home can be done in 3 months or so, even of the nicer, more luxury-ended ones.
In my area and this style, yes. We are on track for 8 months per house. We have a severe shortage of framers, always been a problem. I've looked into hiring my own team of framers but then it becomes a job and not very "fastlane".

That said, the OP seems to be doing a lot of things sub optimally and is taking a lot longer than he should be to get to where he is. He may have gotten in over his head with multiple projects simultaneously...
O, come on man why the hatin'?
 

JScott

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O, come on man why the hatin'?
That wasn't meant to be an insult...I apologize...

My point is that you would have been better off building a single one of those properties start to finish and then using what you learned to fast-track the rest of them. You broke ground on the first one over 9 months ago -- I would have focused on getting that one built (and sold!) by now, and then you'd have experience start-to-finish on this kind of project and the next 4 or 5 would have gone very quickly.

As for framing, I highly recommend finding a local framing company that can do pre-built wall panels and trusses and then ship them to the site. The bulk of the work is done in a factory, so the quality tends to be higher and because you don't need framers to build the panels, it can generally get done quickly. Then, once the panels are built, the framing takes essentially no time.

Here's video from a recent build I did -- this is a 4000 sf house that was framed in 2.5 days:

Day 1: Frame Basement and Main Level

Day 2: Frame Second Level

Day 3: Frame Porch & Roof
 

BrandonS85

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That wasn't meant to be an insult...I apologize...

My point is that you would have been better off building a single one of those properties start to finish and then using what you learned to fast-track the rest of them. You broke ground on the first one over 9 months ago -- I would have focused on getting that one built (and sold!) by now, and then you'd have experience start-to-finish on this kind of project and the next 4 or 5 would have gone very quickly.

As for framing, I highly recommend finding a local framing company that can do pre-built wall panels and trusses and then ship them to the site. The bulk of the work is done in a factory, so the quality tends to be higher and because you don't need framers to build the panels, it can generally get done quickly. Then, once the panels are built, the framing takes essentially no time.

Here's video from a recent build I did -- this is a 4000 sf house that was framed in 2.5 days:

Day 1: Frame Basement and Main Level

Day 2: Frame Second Level

Day 3: Frame Porch & Roof
Forgive me for dumb questions but...

If a homeowner came to you and wanted only framing, how much would you charge psf on a two story? Reason I ask is because I want to design my own house, which is to be only a large box that I want to finish inside. I've got resources for almost everything but foundations and framing are two things i don't have a good handle on. I've read so much about wall , roof and floor loading yet still don't understand it all especially when it comes to pricing.
 

JScott

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Forgive me for dumb questions but...

If a homeowner came to you and wanted only framing, how much would you charge psf on a two story? Reason I ask is because I want to design my own house, which is to be only a large box that I want to finish inside. I've got resources for almost everything but foundations and framing are two things i don't have a good handle on. I've read so much about wall , roof and floor loading yet still don't understand it all especially when it comes to pricing.
I'm an investor/developer, not a contractor, so this isn't something I would do for someone else...

That said, to give you an idea, for the house above (three stories, 4000 sf, 10' ceilings, higher-end materials for decking, etc), which was built in Maryland where the codes are pretty strict, we spent about $58K on the framing. That included all the steel beams, framing, sheathing, decking, etc. I think it was another $1200 or so for the house wrap.

Now, this framing job was completely turn-key -- I handed the plans to the framing company (Builders FirstSource, a big, national supplier and contracting vendor) and they took care of everything. Had I subbed it out to framing contractors, purchased the materials myself and done the oversight of the job, I probably could have taken it from $60K to $40K.

Again, this is Maryland. A similar build in Atlanta would have been about 20-30% less, just based on the market and the lower cost of materials. Those are the only two markets I build in, so I can't say what it would be in other markets, but Atlanta tends to be on the low side in terms of costs and Maryland tends to be a bit higher than average.

Now, this was a bit more complicated than framing just big a square box, so that certainly adds cost, as did the high ceilings, a higher-profile roof trusses and a very large/tall garage. But, it wasn't a complicated framing job, so the extra cost isn't significant. It boils down to the number of walls and the linear footage of those walls.

But, that should give you a basic idea...
 
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BrandonS85

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I'm an investor/developer, not a contractor, so this isn't something I would do for someone else...

That said, to give you an idea, for the house above (three stories, 4000 sf, 10' ceilings, higher-end materials for decking, etc), which was built in Maryland where the codes are pretty strict, we spent about $58K on the framing. That included all the steel beams, framing, sheathing, decking, etc. I think it was another $1200 or so for the house wrap.

Now, this framing job was completely turn-key -- I handed the plans to the framing company (Builders FirstSource, a big, national supplier and contracting vendor) and they took care of everything. Had I subbed it out to framing contractors, purchased the materials myself and done the oversight of the job, I probably could have taken it from $60K to $40K.

Again, this is Maryland. A similar build in Atlanta would have been about 20-30% less, just based on the market and the lower cost of materials. Those are the only two markets I build in, so I can't say what it would be in other markets, but Atlanta tends to be on the low side in terms of costs and Maryland tends to be a bit higher than average.

Now, this was a bit more complicated than framing just big a square box, so that certainly adds cost, as did the high ceilings, a higher-profile roof trusses and a very large/tall garage. But, it wasn't a complicated framing job, so the extra cost isn't significant. It boils down to the number of walls and the linear footage of those walls.

But, that should give you a basic idea...
Are there any good resources out there for learning to cost-cut by DIYing the networking/design and the like? I don't want to do much if any physically with the property, just figure a way to get the largest house imaginable for the cheapest price possible through networking. So far I've had great luck at getting material extremely under cost (At the moment I can do HVAC in some cases for 1/5th of the pricing of what my rental competitors are paying).
 
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Hello Fastlaners! I've been super busy with the spec homes so sorry for the progress delay.

The last few months have been a little trying but I'm still in good spirits. I've had to fire sub contractors, ride heard on my primary contractor and deal with mistakes and delays that could have been avoided. Cool thing is, every time I have a problem I say "this would probably stop my competitors". I then proceed to kick the problem's butt and continue on. Thanks to @MJ DeMarco for explaining the Desert of Desertion. I watch his video on it from time to time. The Desert is real and it doesn't get much easier even though I am quite experienced at traveling it.

I've also learned more about premium pricing my products. By meeting (and golfing :) with much bigger developers I have learned that my products are under-priced. I think it is a mindset issue I worked on 2 years ago, revisiting. Once I corrected the pricing structure I "saw" what the other guys were seeing.

Good news - my houses are turning out pretty cool! Here are a few quick pictures of the progress.

-landscape.jpg

-landscape (1).jpg

As I mentioned before, I sold 2 of them. 2 more of them were listed today. I have 2 more lots getting cleared now. In addition to that, I have 2 more new lots in the purchase/ negotiation phase. That makes 8 total. If the new pricing works out, this would make it my most profitable year...ever... As promised in the beginning of the thread, I will start posting numbers and ways you guys can do this also. This assumes it all works as planned, ha!

I hope you guys are rocking your personal fastlane's. As always, let me know if I can help.
 

Blair

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Good Post, glad you are overcoming challenges. Development can be a prick of an industry but seems like you are building a good product, getting the sales and seeking council from more knowledgable individuals. I know you said you are looking at posting numbers but what sort of return on costs are you looking at (net profit / total costs excl tax)? Always interesting to me to see how other countries and states stack up in terms of development.
 
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Good Post, glad you are overcoming challenges. Development can be a prick of an industry but seems like you are building a good product, getting the sales and seeking council from more knowledgable individuals. I know you said you are looking at posting numbers but what sort of return on costs are you looking at (net profit / total costs excl tax)? Always interesting to me to see how other countries and states stack up in terms of development.
Ha, right! Frankly the only real problems I have are when I violate one of my "rules". Rules such as selling before its finished etc.

When I did my initial estimates I was looking for about a 5% profit per house. So for a $500k house it would be around $25k. I've been creative however and that number will be closer to 15% or $75k per house.

If you look at the US large builders they end up with about $15k per house profit. I have seen their numbers and it only makes sense with huge volume.
 

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Your style choices are looking great man. Are those a quartz counter top? We went with a similar counter for our home recently. Your lighting is very similar to our choices as well. Please post some more pictures as you continue to build.
 
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levijean

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I have considered spec building in the past but its hard to compete with the guys satisfied with 5% to 10% margins. That is just way too much headache and risk for that slim of a margin for me. It doesnt take much of a hiccup in the market, cost runover, or sale delay to burn through that.
 

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Blair

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I have considered spec building in the past but its hard to compete with the guys satisfied with 5% to 10% margins. That is just way too much headache and risk for that slim of a margin for me. It doesnt take much of a hiccup in the market, cost runover, or sale delay to burn through that.
This 100%, especially if operating with debt not your own cash.
 
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Are those a quartz counter top?
Thanks! It's actually granite but looks very much like quartz. It's not even very expensive as far as granites go.

I have considered spec building in the past but its hard to compete with the guys satisfied with 5% to 10% margins.
Just a barrier to entry. Climb over the barrier
and there are a lot less competitors.

This 100%, especially if operating with debt not your own cash.
Having cash is a big advantage but you can still do it with OPM. The trick is giving the market what it really wants. If I have something you really want most times you are willing to pay a premium. That premium is one of the differences between my houses and the competition.
 

4x4ord

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Congratulations on the progress! The houses are coming out great, you're learning and you're making money. What more could you ask for!

I recently just went back to work for a branch of a large home builder (slowlane, I know). One thing you might consider, once you get your house plans, process and contractors figured out, is to offer to build your spec house on customers existing lots. With a spec as a base, you can leverage cost savings in materials and contractor costs, because you already know what you are building. If the customer wants something outside of the spec, charge a 30-50% markup. If the change come after construction starts, tag on a stiff change order fee.

With this model, you reduce your risk of carrying the cost of the lot and the risk of potentially not selling. The client carries the risk as long as you stay cash positive.

Anyhow, keep up the progress. I'm looking forward to seeing this grow for you. The housing market appears to ripe for new builders.
 
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Hey Get Right, just thought id check in and ask how its going with the builds?
Wow, it's been 4 months since I updated this thread! Thanks @Blair for the reminder! I'm going to make 2 posts to answer your question. One now and one in a few days. Today's post:

I literally feel like I can't walk another day in this desert (of desertion). My feet are burned, my brow is battered and I have no water left to sweat.

But I do. I keep walking.

Be damned the heat. Be damned the duration. Be damned whatever needs bedamn-ing. I'm crossing this thing.

...and you know what? I think I see something in the distance.

(to be continued)
 
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?? What happened?
There was an oasis! A beautiful place with trees, fauna and all the water you could drink. There absolutely was an end to this Desert of Desertion.

So I just sold another spec house. This one was different however. It wasn't finished. It wasn't on the market. It doesn't even have any doors yet...but a customer had to have it. I would consider them my first true "fans".

The market validated my product and now I feel I can scale this business. This sale put me over the $1M mark (gross). Reaching this milestone opens up my next milestone - to reach $10M in sales. My timeline to reach this milestone is fall of 2018. I'm pretty confident I can make it.

So for all of you struggling in the Desert, keep walking. You can do this too :)
 

Blair

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Good on you, glad to hear you are having some good sales! Hope the builds go well and costs come in as expected! Feel free to share some photos ;)
 
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I learned something yesterday. I was invited to a market research lecture by some friends in the building industry. The guy they flew in is very well known for studying spec homes throughout the country. He gave us/me loads of information as to the success potential of new spec homes depending on certain parameters.

His advice to me was to do what I am doing now but 2 counties over. That sparked an interesting drive for information that culminated in a "maybe that's not too bad advice". I'll keep researching and let you know how it turns out. I had no idea people studied this specific of a thing for a living.

Feel free to share some photos
Picture for @Blair !
20170807_140957.jpg
 
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Hey Guys! I have a question and I need your help!

Background - So the spec home business is doing pretty well. I have plenty of houses in the pipeline mixed with a few custom builds. Everything is working and scaling nicely. I've done so without any marketing (I don't even have a webpage), a real "office" (I work out of my house), a real business presence (no advertised phone number/address/business cards), a real vehicle (I still drive my old truck), etc. Heck, I don't even have a marketable business name and not many people even know what I am doing. Without any of this I think I can hit my original $ goal in just a few years.

So on to my question - Am I limiting myself by not doing the above things? Am I missing the opportunity to absolutely smash this business out of the park? Basically, am I selling myself short?
 

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JScott

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Hey Guys! I have a question and I need your help!

Background - So the spec home business is doing pretty well. I have plenty of houses in the pipeline mixed with a few custom builds. Everything is working and scaling nicely. I've done so without any marketing (I don't even have a webpage), a real "office" (I work out of my house), a real business presence (no advertised phone number/address/business cards), a real vehicle (I still drive my old truck), etc. Heck, I don't even have a marketable business name and not many people even know what I am doing. Without any of this I think I can hit my original $ goal in just a few years.

So on to my question - Am I limiting myself by not doing the above things? Am I missing the opportunity to absolutely smash this business out of the park? Basically, am I selling myself short?
Who do you want to market to? Who do you need business cards for? What would you do with an office? How would a "real" business name help you? What benefit do you see in driving a nice car?

More importantly, what are your goals, and how would those things help you achieve your goals?

For reference, I don't have business cards, my office is wherever I happen to be sitting with my phone and/or computer, my business name changes every time I start a new LLC (which is about a half dozen times per year), I drive an old truck (except when my wife let's me drive the nice car), my neighbors think I'm a lazy slob who spends all day in his pajamas (and my friends think that too), and not only do I not do any marketing, but I spend way too much time on Facebook pissing people off.

And yet I've done 300+ real estate projects encompassing over $60M in property...

I've been able to achieve my goals without those things, and if your goals are the same as mine, you probably can too. But, without knowing your goals, I don't think anyone can tell you if those things will help you...
 
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Thanks JScott

I've been able to achieve my goals without those things,
This is interesting. In the past I've needed to market heavy to sell my products/services. This particular business appears to not need it.

I won't need any of the things above to hit my goal but perhaps my goal was too low.
 

Blair

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Are you limiting yourself? Probably but at the same time only limiting yourself in the form of maybe more sales / builds, if you do all of the above you will likely be time poor, more stressed etc. My personal opinion would be to scale through larger projects, shifting from stand alone housing to multi unit complex changed my business overnight. Turn over far more money at a higher margin but still have similar amounts of work per project (one permit/consent, funding agreement, set of tendering to do, set of accounts etc). However your location / market / council will largely determine if the above is possible. Also have sold 4 homes this year via facebook (never would have thought in Jan this would have happened) so sometimes the stuff that does seem a bit pointless does pay off. Just my 2 cents on your question anyway.
 
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shifting from stand alone housing to multi unit complex changed my business overnight
That's very interesting. Did you sell the units individually (townhouse/condo) or keep them for the rental income?
 
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Early in this thread I promised to show you the numbers, so here they are! These are from house #2 which I would consider repeatable.

Sales Price: $532,000
Lot Cost: $44,450
Construction cost: $395,000
Closing Costs: $36,173
Interest costs: $14,241
Business costs: $6,000
Net Profit: $36,136
Net profit as a percentage: 6.79%

My goal is 18-20% profit so I still have some work to do... but it doesn't hurt to throw $36k in the bank. My current houses are benefiting from the knowledge and the profit is trending higher.
 

jon.a

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Early in this thread I promised to show you the numbers, so here they are! These are from house #2 which I would consider repeatable.

Sales Price: $532,000
Lot Cost: $44,450
Construction cost: $395,000
Closing Costs: $36,173
Interest costs: $14,241
Business costs: $6,000
Net Profit: $36,136
Net profit as a percentage: 6.79%

My goal is 18-20% profit so I still have some work to do... but it doesn't hurt to throw $36k in the bank. My current houses are benefiting from the knowledge and the profit is trending higher.
How long did this take?
 

Sauce

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Early in this thread I promised to show you the numbers, so here they are! These are from house #2 which I would consider repeatable.

Sales Price: $532,000
Lot Cost: $44,450
Construction cost: $395,000
Closing Costs: $36,173
Interest costs: $14,241
Business costs: $6,000
Net Profit: $36,136
Net profit as a percentage: 6.79%

My goal is 18-20% profit so I still have some work to do... but it doesn't hurt to throw $36k in the bank. My current houses are benefiting from the knowledge and the profit is trending higher.
How much labor did you have to put in? Did you factor that in as a cost?

What areas do you plan to improve on to get your costs down? I am surprised your lot cost is so low.

Love the thread and the discussion!
 

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