investing in spec home building

[Joseph Dasmerces]

Hi, I'm new to spec building I have questions on trying to figure out what kind of returns I should expect also what should I pay for the lot?

We are looking to build a 3200sqft home 2400 heated I have a builder ready to go that will build for $79 per sqft turn key. homes in that area are averaging $125sqft sell price. My bank has approved me for 100% finance for the build cost for a one year interest only loan prime + 1.75% I will have to purchase the lot cash listed at 49k my relater feels we can pick it up for 45k.

Again new to spec building any advice would be greatly appreciated. so the question is I would like to make a least 15%-18% return and what would I need to pay for the lot to make the numbers work. thank you!

[Manolo D.]

Turn key is a word that could be used broadly. If he can build it at 79/sf, what's included? plans, specifications, design, utility taps, government fees, and hard construction. What kind of finishes is he putting in 99 cent floors when neighbors are using 3/sf floors? RTA cabinets when neighbors are custom made? Laminate counters while others have granite?
80/sf in LA doesn't even have drywalls on studs, it seems very low. But i don't know prices out of state. Also is your financing 100% soft and hard construction costs or just hard construction costs?