How to Get Land for Nearly Nothing
Small-volume builders don’t need tons of capital to grab up land like the big, national companies. Leverage your networking skills to get the hometown advantage.

In “Small-Volume Strategies for Tying Up Land and Lots,” a seminar offered at the 2004 International Builders’ Show, attendees learned how to control land without owning it and how to find the best parcels.

The seminar was presented by Jay Grant, president of Grant Homes in Morristown, NJ, Tim Hernandez, president of New Urban Communities in Delray Beach, FL, and Barry Rutenberg, president of Barry Rutenberg & Associates in Gainesville, FL, and was moderated by Bill Lurz, senior editor of Professional Builder magazine. Here are some of their strategies to try in your market.

Don’t Go It Alone

Consider doing a joint venture partnership or a rolling lot option contract with a land owner. In either case, you need a seller who’s wealthy. He or she must be able to sit tight and go without money while you build and sell homes. You’ll split the proceeds after the project is complete.

To get the best land:

• Bid only on the best parcels.
• Prepare to pay 90%-100% of the asking price (if it’s reasonable).
• Schedule a meeting with the seller. “Relationships are built on mutuality of trust,” says Grant. “That’s why face-to-face meetings are so important. The seller gets to know your track record and past successes.”
• Bring photos of your homes and literature about your company, and tell the seller about awards you’ve won.
• Offer to build one or two “quick delivery” (spec) homes. “You must be financially prepared to do that,” Grant points out.

Your spec home must be well designed. It must be competitively priced not to make a lot of money, but to absorb lots. The land owner wants to know that you’re a good bet to do business with.

Don’t Dawdle Over Land

When Hernandez finds out about a piece of land, his goal is to sketch a site plan, prepare a pro forma, and send a letter of intent within 24 hours.

“If you can do that, you won’t miss out on the opportunity,” says the builder. “You’ll at least be in the conversation. Many times, it’s the first guy in the door who gets the most attention from the seller.”

To enhance the likelihood of getting a deal approved:

• Be familiar with zoning so you can develop a pro forma and site plan to suit.
• Identify your risk. “Only issue a letter of intent if there’s little or know risk of getting hurt,” Hernandez advises.

Here are some tips to reduce your risk:

• Know who’s likely to buy homes on the land you’re considering
• Know about the local regulatory environment
• Know how long the project will take to complete.

If a national builder is eyeing the same parcel, you may have the hometown advantage. “Since you’re local, you know who to call and can probably get the information sooner,” says Hernandez.

To reduce your risk further, get a financial partner to invest in the land. The goal is to use as little of your money as possible to tie up land and get it developed.

Alternately, you can go in on the land with another builder and split up the lots. “Obviously, you’d differentiate your product so you’re not going head to head with each other,” says Hernandez.

Whether or not you go in on a parcel with another builder, it’s a good idea to differentiate your product. “If you build what everyone else has, you won’t get the land unless you’re related to the seller,” says Hernandez.

Set yourself apart from the competition by perhaps building more density, building a product no one else in the market does, or perhaps doing a mixed-use project. Determine what the seller envisions for the property and deliver on it.

“The key to this is getting into the mind of the land owner and finding out what they want,” says Rutenberg. “If you can find a common thread — whatever they want and what works for you — that’s fine. It’s a good deal.”

A well-run, focused business gives you the mettle to compete for the best land. Get yours in order by picking up a copy of the PRO Builder Business Plan Guide. The book offers step-by-step exercises and proven methods for establishing your company’s goals, developing strategies, setting priorities, and evaluating results. It includes an electronic spreadsheet on CD for developing the financial section of your business plan. The price is $22.46 for NAHB members and $24.95 for non-members. Call 800-223-2665 or select this link to order it online.

NAHB’s Efforts Save Members $3.5 Billion in Environmental Expenses
On April 1, the EPA announced its final decision to not issue Effluent Limitation Guidelines. This is a tremendous victory for NAHB, because the additional regulations being considered would have cost developers and home builders an estimated $3.5 billion per year. State and local environmental regulators also supported this decision, as comprehensive storm water permitting rules already in place are sufficient to limit site runoff and protect our environment.

The announcement that EPA would not alter its existing storm water regulations capped five years of hard work by NAHB members and staff, along with a prodigious amount of sound scientific research funded by NAHB and supervised by in-house experts. A full update will be reported at NAHB's Spring Board of Directors Meeting this month. Meanwhile, read the NAHB statement applauding the breaking news or contact Marolyn Parson at 800-368-5242 x8157.
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Protect Your Profits From Escalating Materials Prices
Rising material prices often throw wrenches into best-laid bids and budgets, but there’s plenty you can do to explain these costs upfront to your customers and protect your profits.

NAHB has developed a sample escalation clause that provides for contract termination in the event that increases in materials prices cause the total contract price to increase by more than a certain percent, although this can also be stated as a certain dollar amount. Both the owner and the builder should mutually agree on the percentage or the amount. This may be pegged to the lending limits on the construction loan or another figure that both parties find acceptable.

Because the builder must take affirmative steps to claim the increase, it is possible for him or her to waive or ignore increases considered to be minor. However, including the clause in the contract is insurance against suffering the effects of crippling builder material cost hikes.

To download the escalation clause, select this link. For more information, contact David Crump, NAHB’s director of legal research, at 800-368-5242 x8491 or contact David Jaffe, NAHB’s staff vice president for construction liability and legal research, at 800-368-5242 x8317.
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Benchmark Your Business With the Cost of Doing Business Study
Newly published by NAHB, the Cost of Doing Business Study, 2004 Edition gives home builders a rare glimpse at other builders’ books by providing data about profitability, cost of sales, and expenses from hundreds of home builders across the country. See how your financial performance stacks up against the industry as a whole (survey respondents grossed 18.9% on average) and against your goals for your business.

The study analyzes several categories (volume, operation type, and land costs vs. no land costs) to help builders fine-tune comparisons between study results and their companies. Categories are broken down further by average performance and by the 25% most profitable and 25% least profitable home builders. (With gross profit margins of 26.6% and net profits of 15.7%, small-volume builders with land costs were the most profitable survey respondents.) Use the top- and bottom-performers’ numbers to shoot for the top or to make some changes to your systems and operations if you’re heading into the red.

Financial performance is not the only measure of a company’s success. The Cost of Doing Business Study, 2004 Edition offers supplemental information on developing cost control systems and cutting cycle time. It also includes historic Cost of Doing Business Study data, financing information, material usage and features in new homes, new-home cost components, and trade contracting trends to provide a complete picture of the state of the home building industry.

The Cost of Doing Business Study, 2004 Edition is $79.95 for NAHB members and $249.95 for non-members. To order a copy of this unique business management tool, call 800-223-2665 or select this link.
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Customize Your NAHB Web Site View
You deliver exactly what your customers want in the homes you build. Now NAHB’s Web site delivers exactly what you need to run your business and keep abreast of important industry issues.

NAHB has just added customization features to the http://www.nahb.org site that allow you to create your own My NAHB interface and make it yours. What does that mean to you?
 
Similar to MyYahoo and MyMSN, you can now set up your own My NAHB. Simply identify the home building topics that you want to know more about in the My Profile section and matching site content will then display in your own customized windows. You’ll find resources, meetings, courses, messages and more in My NAHB — customized just for you based on your preferences. You can even view a slice of My NAHB on one page with My NAHB at a Glance.
 
Along with customization, NAHB added the ability to identify pages as “My NAHB Favorites” and save them for future reference. You can even identify four favorites to appear on the home page.  Your profile is the key to setting your content preferences and it can be found under the My NAHB section off the main navigation bar or by typing “my profile” in the search box. Specific details and instructions on customizing this site can be found under "How to Use www.nahb.org."
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Builder Bright Ideas
The personal touch goes a long way with home buyers even after they’ve moved in. Try these subtle marketing strategies to demonstrate that you care and to net a few more referrals:

• Sent monthly postcards to past customers reminding them that certain home maintenance activities need to be done. Preprint the cards, leaving space for personal messages such as, “How are the kids?” “How was your vacation?” This is an inexpensive way to keep your name in front of your best referral—a happy past customer.
  
• After a major rainstorm, call your customers to check if their basements have leaked. If a customer’s basement did leak, you’ll wind up hearing from the customer and fixing the basement anyway. If it’s dry, you are a hero for checking. Either way, it’s a win-win situation.

You’ll find hundreds of terrific tips on accounting, personnel, customer service, sales and marketing, management, trades, production, and design in More! Management Ideas That Work from NAHB’s Business Management Department. The book costs $25 for NAHB members and $31.25 for non-members. Call 800-223-2665 or select this link to order it online. [return to top]

Business Opportunities from NAHB’s Councils and Departments

Celebrate National Home Remodeling Month

Throughout May, be sure to take advantage of the opportunities surrounding National Home Remodeling Month to help publicize the industry and emphasize to homeowners the importance of hiring qualified, professional remodelers. Contact your local Remodelors Council to find out about plans for the month and join this important campaign.

NAHB’s Remodelors™ Council offers downloadable material to help promote National Remodeling Month, including proclamations, public service announcements, press releases, and articles. Select this link for more information.

Spotlight Your Design Skills

Co-sponsored by Professional Builder magazine and NAHB, the annual Best in American Living Awards recognize builders, developers, architects, land planners, designers, and other industry professional who produce homes that illustrate design quality and success in the marketplace and exemplify the best in American living.

The registration deadline for the awards is July 1 and entries are due by July 15.

For information, eligibility requirements, and application forms, visit www.housingzone.com, or call NAHB at 800-368-5242 x 8309 or Professional Builder at 630-288-8184.

Highlight Workforce Housing Communities

The Innovation in Workforce Housing Awards (IWHA) are designed to recognize outstanding examples of workforce housing communities across the nation that provide decent and affordable homes for nurses, police officers, schoolteachers, retail workers and the like near areas in which they work.

IWHA is open to builders, architects, designers, developers and land planners nationwide. Communities completed or for which the first model opened, or the first unit was occupied, between January 1, 2002 and July 1, 2004 are eligible to enter. Entries must be postmarked no later than July 1.

For additional entry guidelines and an entry form, select this link.

Do Business in Mexico

NAHB's Access Mexico Project provides a variety of opportunities to link U.S. and Mexican homebuilders and suppliers such as the 2nd International Housing Conference of the Americas, which takes place November 7-10 in Mexico City.  Conference highlights include pre-arranged, one-on-one networking meetings between U.S. and Mexican company representatives, property tours of Mexico’s top builders, and interactive, highly informative panels. Tabletop exhibit space and sponsorship opportunities are still available but are going fast. If you’re doing business in Mexico, be sure you represent your company at this event.

Select this link to register online for the conference. For more information about NAHB International, call 800-368-5242 x8417 or e-mail international@nahb.com. [return to top]

Member Advantage: Liberty Mutual Saves NAHB Members Money
NAHB members can save up to $327.96 or more a year on auto and home insurance with Group Savings Plus®* from Liberty Mutual.  A new addition to the HBA Member Advantage Program for 2004, Liberty Mutual Group is a diversified worldwide insurance service organization with a common mission of helping people live safer, more secure lives.

With Group Savings Plus®, members can receive an exclusive group discount*.  Additional savings are based on the insured’s age, driving experience and auto equipment (such as anti-lock brakes and airbags). Rates are guaranteed for 12 months, not six.

Liberty Mutual offers convenient payment plans, including electronic funds transfer (EFT) with no down payment. It’s known for its round-the-clock claims service and 24-Hour Emergency Roadside Assistance**.

Call 1-800-341-5247 for a free coverage evaluation and no-obligation rate quote.  Or receive a quote on-line at http://www.libertymutual.com/omapps/ContentServer?pagename=PMInternet/pmAffinity/LandingPage&cid=1058289654244.

For the most up-to-date details on the Member Advantage discount program and all of the participating companies, go to http://www.nahb.org/generic.aspx?sectionID=147.

Or visit http://www.nahb.org/ to explore the full range of benefits associated with membership in your local, state, and national home builders associations.

*Average savings based on data compiled as of 3/1/00.  Discounts vary by state.
**Service applies to auto policyholders and is provided by Cross Country Motor Club of Boston, Inc., Boston, MA or through Cross Country Motor Club of California, Inc., Boston, MA.
Coverage provided by and underwritten by Liberty Mutual Insurance Company and its affiliates, 175 Berkeley Street, Boston, MA. [return to top]