Property “Spec” Home – Investment into Construction

» Posted by on Jan 14, 2015 in Gallery Investments, News, Portfolio | 0 comments

Property “Spec” Home – Investment into Construction

Property “Spec” Home – Investment into Construction


Providence, RI

Spec Homes

The term “Spec home” describes exactly what you are trying to achieve – you are speculating that you will develop and sell to a consumer.  But…just because you are able to sell a pre-designed and constructed home in one area does not mean the same sale price will work just a few streets down.  For example – we recently purchased land in two locations in providence – both were raw land. One area was a single lot where the metrics were relatively simple: buy land, pull permits, build house and sell to “speculated” buyer based on area comps.  Our ROI was $80,000.00.  Running simultaneously, we had also purchased a lot that was able to be split into two separate properties with only $20,000 more invested for the land –  after preparing, filing and receiving approval with zoning, we began construction of the same design.  One house sold with a net profit of $72,000.00 and the other produced a $55,000.00 net profit.  Why?  The sales were 3 months apart. If one was to assume all three would sell for the same price there would be a combined net profit of $240,000 (figuring that each would produce an $80k ROI)…but the actual combined net profit was $207k.  Obviously still a great 12 month return, but never always the same which reinforces the term speculation