First time spec home builder few questions/advice ?

Question

Hi, all so as a new spec home builder I am looking to do my first build soon, as someone who has done this multiple times what are common mistakes that has occurred in beginners and if I were to go over budget for example or made a another mistake any ways to fix it what are the consequences in this game if something goes wrong , any other good advice and how has work load been through out the day what a typical day looks like and how involved does it get if hire a project manager? Any any opinions on building in Arizona Scottsdale phoenix paradise area vs like Dallas,tx

Levi Rawlings · Answer

Luis, Devin, and Mark have covered the budget, financing, and lot diligence well, so I'll take the two questions that are still open: how involved you'll be, and the market choice.

A project manager runs the site day to day, but you still own the decisions that move money: approving draws, signing off on change orders, and settling schedule conflicts between trades. On a first build, plan on a weekly site walk with the PM, a weekly budget-versus-actual review, and a rule that no change order proceeds without your written approval. Most of your time goes into those decisions rather than the site itself.

On Arizona versus Dallas, I'd add one check to Luis's comparison: competing supply. Look at how many spec homes in your price band are active, pending, or permitted near each lot. A good margin can shrink quickly if several similar homes finish at the same time as yours, because buyers then have choices while your carrying costs keep running.

Devin Peterson · Answer

Ken, on your question about going over budget, here's how it usually works on the financing side. A construction or spec loan is approved against a fixed budget and paid out in draws after inspections. If costs run over, the lender generally doesn't increase the loan, so the overrun comes out of your pocket before the next draw is released. That's why lenders want to see a contingency line in the budget and proof of reserves.

For a first spec build, expect lenders to ask about your experience or your GC's track record, and leverage may be lower than for experienced builders. Also budget for interest carry through the sale period, not just the build. Permit and approval timelines differ between Phoenix/Scottsdale and Dallas, and every extra month is carrying cost. Getting financing terms in writing before you buy the lot will tell you a lot about which market actually pencils.

Luis Ochoa · Answer

@Ken Feng

Before choosing Dallas or Scottsdale, run the same deal in both: lot price, cost to build per square foot, realistic sale price from recent new-build comps, and months on market. Spec margins get thin fast if resale takes longer than planned.

For a first build, a few habits save the most pain: get the lot's utilities, soils and setbacks confirmed before you buy, lock fixed bids with a clear scope, keep a 10 to 15% contingency, and check how your builder or PM handles change orders and draw paperwork.

If you go over budget mid-build, the realistic fixes are your own reserve, value-engineering the finishes, or a capital partner, and the time to line those up is before you break ground.

Jay Hinrichs · Answer

biggest challenge is going to be your first build with Zero experience behind you as it relates to financing.

I ran into this in Charleston SC when I started building specs there.. I could not get a bank to loan to me because I was ONE out of market and TWO no experience in the market so the first 4 or 5 homes I built there we did it out of cash and proved our model.. once that was done I got a few banks to give me 2 to 3 mil dollar lines of credit to build specs.. and proceeded to build close to 40 more over the last 10 years or so.. So all the advice is all well and good and pretty basic stuff anyone would need to do to be successful at building but finance at a reasonable rate and term is what will get you stuck in the mud.. And for sure the lot needs to be paid for in cash if you want the best chance at financing.. trying to get max debt and being brand new pretty tough you could end up spinning your wheels chasing something that is pretty much reserved for very experienced builders.

Mark Andales · Answer

One thing I'd recommend before getting too far into the project is putting together a simple property due-dilligence checklist that separates confirmed information from items that still need verification.

Things like zoning requirements, setbacks, legal access, utility availability, drainage, and any site-specific restrictions are worth documenting early.

County records and GIS maps can be useful starting points, but they don't always establish whether a particular development plan is feasible.

Keeping track of outstanding questions, who needs to verify them, and the potential costs involved could helpp avoid surprises once engineering and construction planning begin.

First time spec home builder few questions/advice ?

First time spec home builder few questions/advice ?

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