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Participating in a May 18 discussion panel during NAHB’s spring board meeting in Washington, D.C., five builders described how they have succeeded against difficult odds in keeping their businesses going and positioning them for the new markets slowly emerging from the rubble of one of the most challenging housing downturns imaginable.
Reminiscing about what it was like 20 years ago when his new custom home building business was struggling to get off the ground, Dean Mon, president and CEO of D R Mon Group of Shrewsbury, N.J., said, “I remember not even having enough money to buy a can of soup.”
Networking — and joining his local home builders association — was his salvation. “You need to get out of your house and go network with the other builders,” he said.
Newcomers to the industry will find that home builders are generous with their time and advice, Mon said. “Buy them a cup of coffee, buy them lunch and they’ll tell you anything.”
Looking at the alternatives, Mon decided to turn his focus to affordable home building, convinced that it would put his business on higher ground with the availability of state and local funding for infill development projects and workforce housing.
“Open up your eyes and take advantage of the opportunities,” he said.
In addition, it’s important to have an open and honest relationship with a local bank, he said. “Do your homework and find one,” visit it frequently and look at it as a true partner, he said.
Get Your Name Out There
When a visitor looks for Phil Kean Designs on an Internet search engine, the first word that comes up is “award-winning.”
By participating in home shows, speaking opportunities and awards programs, Kean is constantly generating publicity for his Winter Park, Fla., design/build company — and that name recognition has steadily led to more clients. “Our last year was our best year yet,” he said.
Kean has eight employees, including a full-time marketing director. “I believe in marketing,” he said, especially when times are tough, something that not all of his competitors understand.
Kean knows his market, targeting a small circle of very affluent households in Central Florida, and he knows how to reach them. “If you don’t have a marketing strategy, it’s your biggest hurdle.” Even the best built homes won’t bring in more business “if no one knows who you are,” he said.
Kean said he budgets generously for professional photography, entry fees for design awards and parade of homes entries “so we win.”
His public exposure is further enhanced by speaking at local events, sending out press releases to newspapers and sponsoring charitable causes in the community.
“Be generous and gracious when you meet people,” Kean advised.
An optimistic outlook is also helpful “when people come in and want me to design their dream,” he said. And to stay in a productive frame of mind it doesn’t hurt to tune out some of the bad news so abundant over the airwaves these days.
Kean is also a green builder, certifying homes under established green rating programs when the client wants it, and spending $250 to $300 per square foot on energy-efficient, sustainable and high-end products and finishes.
Explain How to Buy
Aware that many potential home buyers are overwhelmed by the home buying process and are in no position to shop for a new home until they learn how to create an effective household budget and secure financing, Ivar Pietri, chairman of Peregrine Development Co. in San Juan, Puerto Rico, decided to teach them.
For his blackboard, Pietri, working with his HBA and an experienced promoter, created a new home fair, La Feria de tu Nuevo Hogar, a “reinvigorating” weekend event that attracted 35,000 attendees and 2,500 mortgage applications and led to 137 home sales.
The fair featured booths at which banks, product suppliers and home building companies provided the education and found solutions that put people on the path to owning a new home.
The event also publicized government tax exemptions and other incentives designed to encourage homeownership that “had not generated a lot of interest,” Pietri said, perhaps because not enough people were aware of them or understood how they worked.
“There is a pent-up demand out there,” Pietri said, but “people need to be convinced that now is the time to buy and that prices aren’t getting any lower.”
Know Your Strengths
Mick Galatio’s company, Desert Wind Homes, is thriving in Las Vegas, arguably the worst housing market in the country, and the secret, he said, is playing to your strengths, knowing what you can’t do and dealing honestly.
“I consider myself a sticks and bricks guy,” he said. “I hire other people to take care of the administration and the accounting,” while working personally to maintain strong business relationships with Realtors® and bankers.
After the housing bubble burst, Galatio found himself in 2008 working in nine subdivisions financed by five different banks — and holding $52 million in debt.
The excellent long-term relationship he had cultivated with his creditors paid off in helping the company restructure its debt. “It got us a lot more mileage,” he said.
Once back on its feet, his company turned to general construction and an assortment of odd jobs to maintain cash flow until it could retool to meet changing market demand, which today has brought him into the profitable business of rehabbing foreclosed properties.
“We rehab these homes with new drywall, bathrooms and kitchens,” and sell two or three per month to value-conscious buyers, netting about 12% profit on each sale.
“When your buyers come in, you’ve got to cater to them, follow up with what they want and give them a good deal,” he said.
Meanwhile, Desert Wind Homes is seeking to purchase finished lots it eventually wants to build on. “We’re looking forward to the industry coming back,” Galatio said, adding that “the banks have changed a lot and are starting to work with us more.”
Understand the New Green Buyer
Before the downturn, award-winning green builder Don Ferrier of Ferrier Custom Homes in Fort Worth, Texas, pretty much had his market sewn up, catering to baby boomers with good incomes looking for a highly energy-efficient “last home” with low operating costs.
“We always had a niche,” Ferrier said. He built his reputation and brought in new clients by winning the Energy Value Housing Award and the National Green Building Award. Ferrier himself was named Green Builder Advocate of the Year in 2008 at the NAHB National Green Building Conference & Expo.
“As we won these awards, and newspapers and magazines wanted articles on green, “they called us,” he said.
Today, with more baby boomers sitting on the sidelines before making their next move, Ferrier is focusing on a new niche: the mid-30s buyer whose more modest income is outweighed by an altruistic commitment to help the environment along with a consumer’s desire to cut energy costs.
Ferrier talks with his clients early and often about budgets to ensure they are planning realistically and to avoid surprises.
To stay competitive, he trimmed back his profit margins to about 20%, down from 22% when housing was in its heyday, but 2011 is on track to be “an above-average year” for the family-owned company, he said.
Moderating the panel, NAHB Chairman Bob Nielsen noted that networking, education and participating in HBA and NAHB events and conferences are keys to success in the new evolving environment for housing.
“No one said it was going to be easy,” Nielsen said. “This is a new business, these are new concepts and you have to keep your mind open to make money.”