I built my first spec house more than
a decade ago. Although I’d been
building houses for 10 years before
that, when I discovered that banks
would give contractors construction
loans at 70% to 80% of the appraisal
value of a finished house, it was great
news to me. By rough calculation, if
my desired profit was 20%, the construction
cost could be covered by the
bank loan. However, one thing was
immediately apparent: I wouldn’t be
paying myself until the house sold.
(Of course, if I worked on the house,
I’d pay myself an hourly wage.) To
build on spec, you have to have some
savings or other work to pay the
household bills. You can’t