Investing in Real Estate

Is Building a Spec House a Smart Real Estate Investment?

Building a new home from scratch can be a profitable investment strategy, but there are a few things to know first.

There’s a significant housing supply shortage in many parts of the United States, and this is especially true when it comes to newly-built homes. A spec house might seem like a smart way to invest in real estate, especially if the supply of new homes is low in your area or the general real estate market is doing well. While there is certainly money to be made by building a house on spec from the ground up, it’s not a great investment strategy for everyone. Here’s what you need to know to help determine if building a spec house is the right move for you.

The term spec house refers to a house that is built for the sole purpose of selling for a profit.

As far as investment dynamics go, building a spec house is a close cousin of fixing-and-flipping houses. Unlike most other types of real estate investments, spec house construction and flipping houses aren’t intended as long-term investments. The objective is to build or renovate a house and sell it as quickly as possible.

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