Spec deal structure
How do these numbers look on a spec deal? Enough return to justify the risk in your opinion?
Lot: $325,000
Construction costs: $450,000
Financing costs: $35,000 (est.)
Closing & commissions: $40,000 (est.)
BREAKEVEN: $850,000
SALES PRICE = $1,000,000 very realistic in this location
I'm lined up with a local portfolio lender who will loan me 80% of the acq + construction costs (includes hard & soft). In this example, I'll get a loan for $620,000 and need to bring $155,000 in equity to the deal. My plan is to put $20,000 of the equity in myself and bring the other $135,000 in with partners. We are looking at them being invested in the deal versus me just borrowing the money from them at 9% for 12 months (or duration of the project.)
I'll be partnering with an experienced spec home developer and an experienced spec home builder, who also does his own spec deals.
If the numbers above hold true, the gross profit would be $150,000. The builder would take 50% and I'd take 50%.