HOW TO MINIMIZE RISK ON A SPEC BUILD



Spec builds definitely have their perks: no clients to please throughout the construction phase, full control on decision making, and the ability to execute the project at your own speed. However, there are also risks, such as the project not making any money or sometimes even losing money. Here are our top picks for minimizing this risk. While it is possible to get lucky on a spec build and do well regardless, minimizing risk is all about playing it safe and raising the probability of a return on investment.

1. Choose your Location Wisely


Avoid busy roads. They tend to be less popular with buyers. If you do build on a busy road, buyers will likely want a discount based on location. You might be able to purchase the land for $100,000 less due to location, but if each of your infills then sell for $100,000 less, you will actually be losing money.

Avoid shallow lots. The overall size of your project will be affected, as you can only build to 45% lot coverage. 5 feet short may not be an issue, but 10+ feet can really affect the build. And depending on your setbacks, you may find the backyard area suffers the most. Buyers often buy based on square footage, and they want to see backyard space similar to other types of projects.

Choose a desirable community. Make sure there is demand for infills in this area. Is there an established market? Buyers for infills like to see other infills around them.

2. Build for the Neighborhood


Evaluate the type of product and level of finishing in a community. Don’t build an estate-level single detached home in a location where there isn’t demand. Areas where land is more expensive tend to have higher expectations for a finished product. Make sure you don’t underwhelm on your finished product in a more estate area. On the flip side…

3. Don’t Overbuild


Don’t spend more on finishings than there is demand for in a particular community. Areas where infills sell mostly in the lower price points don’t always have a ton of buyers willing to pay a substantial amount more for a nicer home. You might get lucky, but minimizing risk is key. Avoid really unique or expensive materials on a spec because you don’t know whether a buyer will pay for it.

4. Hire a Designer


Seriously. Make sure the home looks well put together! Unless you are an amazing designer yourself, hire a pro, and they will make sure that the finished product looks just right. Mismatched colors/tones or a dated aesthetic can be deal killers on a spec. After all, you are building for the market 12 months from now.

5. Scrutinize your Floorplan


Ensure your floorplan works! We can’t say this enough. An awkward layout is a death sentence in real estate, and you don’t need to reinvent the wheel on a spec build. Do what works and what the market likes if you want to minimize your risk. 

Include these necessary features:
• A proper mud room
• Minimum 3 bedrooms upstairs
• An open-concept kitchen
• Tall ceilings (at least 10-ft on the main and at least 9-ft everywhere else)
These are the bare minimum. We could go on!

6. Hire an Infill Expert


Hiring the right Realtor early on can make a huge difference! The right agent can help you sell for more money with less time on market. At NewInfills, we offer guidance and consulting right from planning through to completion on our client’s new builds. We review floorplans, finishes, and help plan the right home in the right location.
We sell a significant number of our homes presale, which reduces time on market for a vacant, completed home to zero, minimizing carrying costs and financial risk. We also have information on hundreds of upcoming projects throughout the city, so you can know what your competition will look like. 

How can we help? Contact us today!