Spec Home Developer
Currently an Associate at Hines / Tishman / Trammell / Related (6 YOE). I’m really interested in architecture / design, and have always been drawn to the idea of building spec homes. If I had the ability to raise the money, how hard is it to succeed in the luxury ($10M+) spec home space (markets like LA, Santa Barbara, Montecito, Monterey, etc.)? Please assume I’m reasonably intelligent for the purposes of this question — it is intentionally broad, so feel free to respond with anything of relevance.
DM me and I can share some offline thoughts.
Considering you have no experience (your institutional experience is useless here) in building single family homes, let alone luxury, hard. Also not sure what your interest in architecture/design has to do with building luxury spec homes.
I think it’s hard. I left luxury homes after three years. Lots of dumb people you will have to deal with so the financing part of it is a tiny piece of the equation.
Let's break this one down.
Great spot to be in. Congrats.
Those are two very different things and it is worth remembering that if you want to build for *your* tastes, you can do so in a home you own, but if you're building spec homes, you are building for the market's taste - which are often boring, even in high end homes. The average person just wants something modern and clean. They are not design aficionados.
Might be the biggest "if" there is, just so you know.
Incredibly difficult. I, oddly enough, personally know at least two people who lost millions of dollars doing this.
This is an all or nothing game. In say the apartment world, maybe it takes you 26 months to build instead of 24, or it takes you 14 months to lease up instead of 12. Those are going to be drags on your returns but you can still execute and sell the deal and be content with hitting a single or a double instead of a home run. If your house doesn't sell, because you got too weird on the design, or mistimed the market, or Powell decided to personally fuck you, you are done.
Not to mention you have no experience building houses and your shiny resume both doesn't matter here nor did your associate job accurately prepare you for the task at hand. Even as something as simple as the different in level of subcontractors is going to fuck you up. You're used to dealing with professionals. That is not what you will find here.
I love architecture too. When I build my dream house from scratch, it's going to be fucking awesome. But that's a vanity project, not a business plan.
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