The Entrepreneur Forum | Financial Freedom | Starting a Business | Motivation | Money | Success

Welcome to the only entrepreneur forum dedicated to building life-changing wealth.

Build a Fastlane business. Earn real financial freedom. Join free.

Join over 80,000 entrepreneurs who have rejected the paradigm of mediocrity and said "NO!" to underpaid jobs, ascetic frugality, and suffocating savings rituals— learn how to build a Fastlane business that pays both freedom and lifestyle affluence.

Free registration at the forum removes this block.

Let's Build a Spec House!

A detailed account of a Fastlane process...

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Blair

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
206%
Mar 4, 2014
96
198
New Zealand
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.
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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.
 

CycleGuy

Bronze Contributor
Speedway Pass
User Power
Value/Post Ratio
254%
Jan 16, 2015
123
313
Midwest
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.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.
Last edited:

ljean

Silver Contributor
Read Fastlane!
Read Unscripted!
Speedway Pass
User Power
Value/Post Ratio
169%
Jan 22, 2017
506
857
USA
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.
 

Blair

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
206%
Mar 4, 2014
96
198
New Zealand
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.
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

4x4ord

It's all about freedom
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
208%
Sep 28, 2015
97
202
42
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.
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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)
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
?? 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

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
206%
Mar 4, 2014
96
198
New Zealand
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 ;)
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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?
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Blair

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
206%
Mar 4, 2014
96
198
New Zealand
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.
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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?
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
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.
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

jon.a

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Speedway Pass
User Power
Value/Post Ratio
329%
Sep 29, 2012
4,306
14,175
Near San Diego
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

Bronze Contributor
Speedway Pass
User Power
Value/Post Ratio
145%
Jan 16, 2013
82
119
Albuquerque, NM
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!
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Blair

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
206%
Mar 4, 2014
96
198
New Zealand
That's very interesting. Did you sell the units individually (townhouse/condo) or keep them for the rental income?
Sold individually, have two current projects that are build to keeps but rest are built and sold. (usually sold before construction starts)
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
I thought that in a previous post, you indicated that you purchased Lot #2 in December 2015?

Sorry, the house number doesn't correspond to the lot number. In this case, "house #2" was built on "lot #3" in this thread. Whenever I see a land deal I buy it and develop when the time is right. This lot was purchased in January of 2016.

How much labor did you have to put in? Did you factor that in as a cost?

I put a decent amount of labor in on purpose (maybe 20 hours a week). I paid myself the same amount as it would have cost me. Those numbers are included in the "cost of construction". So technically I "made" more than just the profit. I mainly did this to educate myself and have already started limiting my time on current projects.

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

Improvements:
1. I applied for a contractor license to save the $25k fee I am currently paying per job.
2. I overpaid a few subs which will save $10k
3. Better deal on materials will save $6k
4. I hired an employee to self perform some work saving around $9k
5. I priced house #2 too low. I lost an easy $20k+ there
6. I am going to try to sell the next one myself which could theoretically save $30k (but might not work).

Lot costs - Yes, I bought those lots at the perfect time. I won't have that advantage when I run out (2 left). I expect to pay about $60k for the next round of lots.
 

Striver

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
91%
Mar 23, 2017
138
125
49
USA
It was below freezing and the wind was howling...



BobcatE30.jpg

Freezing in Florida?!?! lol

You just lost all credibility, in my eyes!
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
What work did you hire an employee to do that would cost less than paying a subcontractor?
Interior trim and interior prep/painting.
 

Striver

Bronze Contributor
Read Fastlane!
Speedway Pass
User Power
Value/Post Ratio
91%
Mar 23, 2017
138
125
49
USA
10 months of build time. I build three at a time though.

Have you worked on getting build time shortened significantly? I've seen other member mention build times of half as long.

DISCLAIMER: I know nothing of building homes... just going off of what other people are saying?
 
Dislike ads? Remove them and support the forum: Subscribe to Fastlane Insiders.

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
How is an employee cheaper than a contractor? The hourly rate should be about the same, but with an employee, you're on the hook for FICA taxes as well... Plus, you should now carry liability and workers comp under your business to cover him, which is likely more expensive than if he was covered under his own policy as a subcontrator.

I always advise investors never to classify a worker as an employee when you can legally classify him as a contractor (per IRS rules). There are few upsides and several downsides (cost, liability, paperwork, overhead, etc)...

With all due respect, your advice in this thread is nothing but negative. I find it hard to believe your "real estate coaching" will be successful if you continue to offer your cynicism with no constructive advice. I politely ask that you refrain from posting on this thread anymore.
 

Get Right

Legendary Contributor
EPIC CONTRIBUTOR
Read Fastlane!
Read Unscripted!
Summit Attendee
Speedway Pass
User Power
Value/Post Ratio
477%
Jul 16, 2013
1,317
6,281
Sunny Florida
Have you worked on getting build time shortened significantly? I've seen other member mention build times of half as long.

DISCLAIMER: I know nothing of building homes... just going off of what other people are saying?

Thanks @Striver . I do need to shorten the build time. My houses are all on pilings so it takes a little longer but I would love to see 7-8 month builds. I will take your advice and see what I can do! Thanks again!
 

Post New Topic

Please SEARCH before posting.
Please select the BEST category.

Post new topic

Guest post submissions offered HERE.

Latest Posts

New Topics

Fastlane Insiders

View the forum AD FREE.
Private, unindexed content
Detailed process/execution threads
Ideas needing execution, more!

Join Fastlane Insiders.

Top