Small spec home questions

Land & New Construction
6dFollow

Small spec home questions

Blake Bittner
Member since 2026 · 1 post · 0 votes

I’m a small builder based in Elkhart, Indiana. I found a property in South Bend with an existing foundation that an engineer has already approved. It also has a one car garage, and the utilities have been verified. I’m trying to buy the survey and engineer’s report from the previous buyer, who dropped out of the deal. The land is $15,000, and I have the cash to buy it now.

My plan is to buy the property, clean it up, and reface the garage. I’d then have certified building plans drawn for an open-floor-plan home under 1,100 square feet. I’ve built a similar house before for $117,000, not including land.

Rather than build right away, I want to sell the lot together with the house/engineer plans and build only once it sells. The sale would be set up so the buyer signs me as the contractor, so I’d be rewarded with the build job. plus I know my cost would be $145k roughly and I would list it for $195k I know in my market there's another builder doing the same his homes start at $225k but he builds them then sells them I just don't have the money for that yet. I have the subs already and it would take me roughly 180 days from breaking ground to getting the certificate of occupancy. plus taxes would be income taxes for my business rather then capital gains from what I been told. regulations in Indiana are far less then most states im not worried about be held up due to permits

please share thoughts or experiences!

0Reply
334 views

6 Replies

Jump to latestLatest
  • Marc Del Priore
    Lender · Philadelphia, PA · Member since 2024 · 63 posts · 18 votes
    6d

    Hi Blake, selling the lot with the plans first is a smart way to avoid carrying build cost, and a construction loan is the other path that can let you build then sell for the full $195k instead of only the lot value. With a $15,000 lot, about $145,000 in build cost, and a similar home built before for $117,000, lenders will focus on the as completed value, your build budget, and your experience as a builder. We are Royal Partners and we arrange construction financing for small spec builds like this. DM us the South Bend lot address, the certified plan set, and the build budget breakdown and we will give you straight numbers on a construction loan versus selling the lot first.

    0Reply
  • Redgy Saint-Germain
    Developer · Boston, MA · Member since 2017 · 261 posts · 137 votes
    6d

    I've done ground up builds, and I'd verify that existing foundation before treating it as savings. Get the inspection records and an engineer's opinion on whether it works for your exact plans. Get utility connection costs in writing too. Available at the street and paid for are two different things.

    Selling the lot with a build contract could reduce your exposure, but have your attorney and the buyer's lender review that structure before you rely on it. Underwrite the full build with contingency and carrying costs, then compare it with recent closed sales. I'd avoid spending much on plans or garage work until those pieces check out

    0Reply
  • Matthew MorrowBusiness Member
    Investor · PA - NY - NJ · Member since 2019 · 972 posts · 353 votes
    4d

    @Blake Bittner I'd map when you actually get paid against when your subs and suppliers need paying. Selling the idea first doesn't necessarily fund the work, and six months is a long time to carry that gap. Have the buyer's lender explain the draw process before counting on it. I'd also separate your builder compensation from the project's remaining margin after financing, selling costs and contingency. The difference between $145K and $195K isn't all available profit.

    [email protected]484-791-6200
    CORE Team | Realty ONE Group Supreme548 Reviews
    WebsiteView Page
    0Reply
  • Cat Rauh
    Lender · Irvine, CA · Member since 2026 · 36 posts · 14 votes
    1d

    Selling the lot with plans and building for the buyer is a legit way to get going without carrying a spec, but a few things to think through.

    On the presale route, the buyer's construction-to-perm lender runs the draws, not you. You'll get paid in stages after inspections, so set your sub payment terms to match that schedule or you end up floating labor between draws. Get a real deposit up front that at least covers your plans and engineering in case the buyer's financing falls apart during approval. And at $195K, a lot of your buyers will be first-timers on conventional or FHA construction loans, which can take a while to close.

    If you'd rather build it as a spec and keep the full spread, that's not as far off as it sounds. A construction lender mostly looks at three things: that you've already built a similar house in your own or your company's name (you have one, so keep the address, cost and sale or appraisal docs handy), nearby new-build comps that support the $195K, and a line-item budget with plans and permits. Owning the land free and clear also helps, since that equity counts toward what you're putting in.

    Full disclosure, I'm a lender, and a lot of small builders I talk to make the jump from presale to spec right around house two or three.

    0Reply
  • Noah WrightBusiness Member
    USA, Nationwide · Member since 2024 · 475 posts · 150 votes
    2h

    If the buyer signs you as the builder, you'll be paid through their construction loan, and that money arrives in draws after each inspection, not up front. Your experience on the earlier build helps you set a realistic schedule, but plan the cash to carry labor and materials between draws, since a late inspection pushes your payment back too.

    The buyer's lender also has to sign off on you as the builder before it approves the loan, which is the step between a signed build contract and getting paid. Once a buyer is lined up, ask their lender for the draw schedule and whether they release a deposit for materials at closing. Have any local construction lenders already approved you as a builder?

    [email protected]737-773-3717
    0Reply
  • Amit PatelBusiness Member
    Property Manager · Bartlett, IL · Member since 2025 · 188 posts · 73 votes
    1h

    Smart way to start without tying up a lot of cash. We do a lot of renovation work alongside the rentals, and a few things I’d think through before you list it:

    The biggest one is the buyer’s financing. Most buyers will need a construction-to-permanent loan, and that means the lender has to approve them, appraise the house off your plans, and approve you as the builder. Talk to two or three local lenders now so you know their process and can hand buyers a ready path. That alone will make it much easier to sell.

    Make sure the existing foundation really fits the plans you’re drawing. An engineer approving it is great, but design the house around that footprint, not the other way around, or you’ll eat your margin on day one.

    Get your contract right. Spell out allowances for finishes, how change orders are priced, the draw schedule, and add a materials escalation clause. With a 180-day build, prices can move and you don’t want that coming out of your pocket.

    On price, if a similar builder starts at $225k, I’d be careful going too low at $195k. Make sure there’s room for the surprises every build has. You can always negotiate down, but it’s hard to go up.

    And yes, talk to a CPA before you close. How you structure the land sale versus the build contract can make a real difference in taxes.

    Casanomy Property Management561 Reviews
    WebsiteView Page
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free