Betting On Spec Homes in Culver City
Spec homes (short for speculative) are houses that are built by a builder with the intent to sell upon completion. It’s speculative in the sense that the buyer is unknown. There is a bit of faith that goes into this type of investing; if you build it, they will come. The bet is that after you purchased the land, designed, permitted and built the house, a buyer will purchase the home for a price that will pay for everything and make a profit.
Building spec homes in a market where the inventory is low and prices are high is a key to timing the success of your investments in spec home building. Furthermore, if you can focus on a niche market that is surrounded by a major employment market, great schools, amazing weather and a large body of water, you can significantly insulate yourself from risk of downturns in the market.
This is why we focus our spec home building investments in Culver City, CA. It is a small city in a large city, just over 5 square miles. Centrally located in Los Angeles and 15 minutes from the beach, Culver City has a population of 40k people with its own Mayor, police and fire department (who somehow keep the homeless out), award winning school district, planning department and building & safety. The last two components are the key ones. Culver City has its own planning department, which means navigating through the red tape in a small city is much easier than the surrounding City of Los Angeles. However, the red tape is still not for the faint of heart.
Comparatively, the City of LA has a population of 4 million people and is geographically 502 square miles. Getting your architectural plans through planning and obtaining permits can take 18-24 months. It’s a nightmare to navigate all the special clearances needed from each department in a giant city with revolving staff.
Culver City has also become the home to some of the biggest entertainment providers in the industry including Sony Picture Studios, Amazon Studios (just completed a 412k sf studio expansion), HBO, Time Warner Media and Apple+ in the race to create streaming content. Apple+ just announced an expansion of their newly created streaming HQ to include a campus of over 500k sf of office space called Culver Crossing increasing their employee count at this location to 2,400. The economic drivers in Culver City combined with their family oriented living environment make this a great place to spec build single family homes.
In this post-covid economy with high inflation, a deflating stock market and interest rate on the rise, it’s hard to know what to invest your cash in. If you just leave it in the bank, you’re losing money at the rate of inflation. If you put it in the stock market, you are at the mercy of wall street’s strange and unpredictable swings. Certificate Deposits (CDs) are safe and conservative, but offer low single digit rates, which still means you are losing value against inflation. From someone who had dedicated their career to real estate development and investing, I’m biased to the industry. However, the amount of opportunities in real estate syndication investments is vast in today’s world with technology and various platforms that make it easy as clicking buttons on your computer.
