{"id":112991,"date":"2019-07-11T14:30:41","date_gmt":"2019-07-11T20:30:41","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=112991"},"modified":"2021-03-16T14:54:52","modified_gmt":"2021-03-16T20:54:52","slug":"pros-cons-spec-homes-investment-property","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/pros-cons-spec-homes-investment-property","title":{"rendered":"Little Competition, Big Profits: Why Spec Home Investing Could Be Right for You"},"content":{"rendered":"

Real estate investors have multiple options for getting into the game. The most popular investment strategies are fix and flip<\/a> and long-term rentals<\/a>, with fix and flip getting the most publicity.<\/p>\n

But another option that doesn\u2019t get nearly the amount of press is spec houses. As with any real estate investment, there are pros and cons when it comes to spec houses. I\u2019ll walk through a few of each to help you determine if spec house investing is right for you.<\/p>\n

What Are Spec Houses?<\/h2>\n

A spec home is basically what it sounds like: building a single family or multifamily property without having a buyer lined up (speculation). Spec homes can be a risky venture, but with that risk comes an upside potential that can be very attractive.<\/p>\n

Investors typically make their money on spec homes in one of two ways. They can finance a percentage of the construction costs (lend money to a builder) and earn interest or share in the profits once the home is sold.<\/p>\n

In the latter case, you or the builder may also borrow money from a bank or private lender to pay for some of the construction costs.\u00a0 Sharing in the profits is often called \u201cequity investing\u201d and is potentially riskier but also more rewarding than lending money to a builder.<\/p>\n

\"home<\/p>\n

Pros & Cons of Investing in Spec Homes<\/h2>\n

Now that we have the basics down, let\u2019s look at a few of the pros and cons of investing in spec homes.<\/p>\n

Pros of Investing in Spec Homes<\/h3>\n