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Wow a 6% increase! How would you go about hitting 20% though?
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Free registration at the forum removes this block.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.Wow a 6% increase! How would you go about hitting 20% though?
$176/square footOut of curiosity, what is your average cost per square foot to build not including the land?
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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.$176/square foot
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.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.
Wow. Just got a notification from this thread!! Thanks for everything @Get Right!!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!
Congratulations on your success! 10 specs is pretty awesome.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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