The Advantages of Spec Building: 3 on 3 Interview Series
I wanted to do something a little different, so I borrowed an idea from a couple sports blogs I follow and decided to start a 3 on 3 series. In each article three investors with experience in the subject area will answer the same three questions. The objective is to provide three perspectives from experts in a given field. To start the series I am going out of my knowledge area and into one I am interested in; spec building.Spec(ulative) building is building properties for which no buyer has been pre-identified and carries the risk that the finished product will be difficult to sell at a price yielding acceptable returns.Answering the questions will be:Rich Weese – Rich has been investing involved with real estate investing for over 40 years and has experience in nearly every aspect of investing. During this period he has built over 75 homes.Peter Giardini – Peter Giardini has been an active real estate investor in the Baltimore Maryland region for the past 10 years. He has purchased and sold over 120 properties and currently invests in 10 –15 properties a year. Peter is currently involved in a development deal in North Dakota.Jon Klaus – Jon has owned and flipped properties over the past 20 years, but started focusing on building a portfolio in 2009.
In 2011 he built his first spec home which was recently sold.
3 on 3: Spec Building1: What advantage do you find spec building to have over other real estate investing strategies?Rich: The advantage I see with spec building over other real estate investing strategies is the lack of competition. It seems like when a good idea comes along like flipping, or rehabbing, or wholesaling, everyone and their brother get involved in that. This tends to drive the prices up and make the spread far less than what an investor would like to see. The other benefit is it seems much easier to find private money to use for building spec homes as opposed to flips.Pete: The primary advantage that I see for spec building is that you start with a clean slate regarding the building and most if not all of issues are removed during the design of building. Every rehabber knows that each new project brings and endless opportunity for surprises and the attendant increase in costs and completion date extensions. Just think undiscovered termite damage!Jon: Spec building has its place in the upswing in the real estate cycle. Now is the time for providing new in-fill housing in areas of growth, where new builds have lagged over the past several years. More and more areas now have pent-up demand for new homes. Spec building takes your time, attention and capital (doesn’t have to be your money), and can provide outstanding returns in a fairly short time period
.2: Where are you currently building and what drove you to that market?Rich: I am currently building in two different locations; homes in the $100-$170,000 in the Rio Grande Valley of Texas and $300,000 homes one hundred miles north of Las Vegas in a retirement community known as St. George, Utah. I am targeting wealthy individuals that are looking to this area for a second home and generally pay cash.