One of the most critical decisions you’ll make when building on spec is where you want to build. I find that most of our investors tend to build where they live. And that makes sense. They already know the area, the schools and the community amenities. These are all important things to consider.
Location is critical when choosing a building site. Finding the right location can be the difference between an “okay” return and a home run. Here is a short list of questions I always ask myself when considering a lot purchase.
Is the lot located in a desirable school district?
Now I realize this may not be at the top of the list for all but it will be for most. Because most buyers who are searching for a new home will have families with school aged children. I also find that families are not only looking for a certain school system but for specific schools. Buyers look for schools with certain test scores and programs like the International Baccalaureate (IB) programs offered by some (but not all) schools in northern Virginia. Top rated schools will fetch top dollar when you go to sell your spec home.
Is the lot located on a nice street?
If you want to get a great return on your investment, choose a lot that is located on a nice street. Sounds obvious right? As an investor, you should be looking at the surrounding neighborhood to determine if the location would be considered desirable. Is it on a busy street? Is there other new development happening or would this be the first new home in the neighborhood? Is it close to amenities like public transportation or retail businesses? You have to think like a buyer. Ultimately, would you live there?
Does it “feel” right?
OK – bear with me for a minute. I’m not going to get all philosophical on you but I do think there is a lot to be said about loving the lot you’re buying. Even though you won’t be living in the house, I think you still need to feel a connection to it. If you’re not “sold” on the location and how the lot “feels”, how will potential buyers feel? I have to be able to stand on a lot and envision what it will be like with the new house. I must be able to imagine living there. And have to love it. If not, I move on.
Once I identify a lot, I follow a specific process before removing the study period (and I ALWAYS incorporate a study period). We often work with our Investor Builders while they are looking for lots. We can help them examine a lot before purchasing. We can look at feasibility, what’s the best NDI design for the lot and neighborhood, what potential site costs might there be, etc. We can’t always anticipate everything, but I can always give you my gut feeling. Not sure they teach that in business school but it has served me well. Which brings me to my next tip!
Tip #2: Follow your gut. More often than not, your gut will lead you in the right direction (if you listen).
Dream Big. Build Smart.