Spec Home - High Level Analysis
Hello BP'ers,
I've been having high level discussions with a colleague about a single family home spec build. We have our own equity that we would put into the project plus a couple of investors who have shown interest in our project. Here's what I have numbers wise. We would design the project ourselves and manage the construction.
Land - $100,000
Design/Entitlement - $25,000
Cost per sf - $180 ($150+$30 contingency)
SF - 2250
Build Cost - $405,000
Sitework - $25,000
Total Cost - $555,000
Cost/SF - $247
Median List Price in Neighborhood - $471/SF
Our list price - $345/SF
List Price - $777,000
Sales expenses $77,700
Gross Margin $144,300
ROI 26%
Average DOM = 187
Exit strategy would be to sell asap. Investors would be guaranteed 10% return before we were paid a dime.
Exit strategy II - If market stagnates and we cannot sell. We can rent for $50-$60k a year. Which would provide some cashflow for investors until sale.
Land is wildcard. We can get city sewer and water at $100,000 and up or well and septic starting at $50k. More rural lots could decrease sales and rental value.
I think it pencils out and is worth researching further. What do you think?
Any ideas on cost of builders risk and general liability for this project?
My biggest concern is this property is in Colorado which has heated up quite a bit over the past couple of years and seems to be cooling a little right now. Not sure if the timing is right.