5 Strategies to Build a House for a Profit

Building a home from scratch is likely one of the most expensive expenditures a person will make in their lifetime. Due to the overall cost, self-builders want to ensure that the job is completed to the highest standard possible. This is especially true if they intend to build a house for a profit and then sell it.  

Builder looking at the plans and completed new construction home.

In the past couple of years, new construction costs have increased mightily. But that doesn’t mean you can’t still profit from building a spec home. Some projections have an average yield of around 25%. Thought my sources say it’s closer to 10%-15%.

This is not a project that should be carried out without planning for an abundance of scenarios. One of the riskiest scenarios for self-builders is running out of funds. This will result in the self-builder having to put more money into the project or, worst-case scenario, the build not being completed. 

Investors must realize that when you build a house for a profit, it’s a much different scenario than building your own dream home. From sticking to a strict budget to being mindful of trends, there are various things that self-builders need to be aware of to ensure they reap significant profit.  Providing that it is done correctly, a self-build can be an excellent investment. Keep reading to learn the best strategies needed to build a house for a profit. 

1. Determine Your Budget 

No two self-build projects are the same. Determine your budget by outlining all of your costs. When projects fail it’s most often due to poor budget estimates. Only you can determine how much you can put into the project without causing any disruptions to your current lifestyle. 

Assess your current funds and your current financial commitments to determine the level of risk you can take. Once you’ve done this, you may consider approaching the bank for a construction loan. Most builders can rarely afford all costs upfront. 

If you go this route, we recommend taking a copy of your outlined budget and your cost schedule. This will tell the person assessing your application the breakdown of every expense involved over the course of the build. Bankers like seeing the details.

2. Source Your Materials  

Building a house requires many construction materials. These will be specified in your design package. Depending on the construction method, you will likely be relying on a builder’s merchant to supply all the materials. As the project progresses, your material requirements will likely change. So it’s imperative that you plan for them to be delivered on the dates when they are needed on site. 

Some supply companies may offer a broader range of materials. To avoid missing out, research additional supplies that might provide those hard-to-find materials that might be more cost-effective.  

You’ll also want to be aware of the tools needed, not just the materials. A leading supplier of products specially designed for the stone industry, Amastone stone tools are designed to help artisans in Kentucky choose, purchase, and use products to produce the best quality craftsmanship according to the best Kentucky Crafted Retailers. From drill bits to adhesives, consider visiting their website or contacting a team member via telephone, email, or online chat for more information. 

3. Assemble Your Team

Especially if you’re not the most experienced self-builder, it’s crucial that you put together an outstanding team. Search for project managers, builders, contractors, and consultants interested in your project who have a track record of delivering high-quality builds. 

Ask around. Ensure that potential colleagues are suitable by interviewing previous clients. This goes a long way to learning about the people who will be doing the actual work. Avoid making your selection based on who offers the lowest quote. This is a warning sign that their work may lack the desired quality. 

4. Choose Your Location 

Location is one of the most critical factors in real estate, especially when selling for a profit. Therefore, home builders must carefully consider where the build will be situated to reap the most significant profit possible.  Work with a local real estate expert who knows the area and helps identify the best lots.

Look at crime rates, school districts, access to amenities, tax rates, and other intangibles. The bottom line is you want the home to sell quickly. This is essential for a high profit margin.

5. Design Blueprints

As we discussed before, it’s imperative to remember that you are creating a house that will appeal to the masses. You can’t pigeonhole yourself into a niche. Ideally, you want to design a home that is current to today’s lifestyle.  

View properties that have recently sold in the area. Again, ask your trusted Realtor to help. Their advice is valuable and in most cases doesn’t cost you a thing.

Once you have the blueprints, you’re ready to start! Now comes the hard work. But far better to have completed the necessary planning than to simply jumped into the deep end. We hope these strategies have spurred your thinking about the best ways to build a house for a profit. 

Tre Pryor, Realtor

Tre Pryor is the leading real estate expert in the city of Louisville. He is a multi-million dollar producer and consistently ranks in the top 1% of Louisville Realtors for homes sold. Tre Pryor has the highest possible rating—5.0 stars on Google—by his clients and is routinely interviewed by the local NBC news. Tre Pryor is a member of the RE/MAX Hall of Fame.