Under-40 Home Builders: Working the Market

Q: How have your relationships with lenders changed?

A: During the recession we worked with our bankers and really looked at our balance sheet to see which things they didn’t like. We got rid of assets they weren’t real high on, whether we had to take a loss on them or break even. We’re very open with our bankers about which projects we’re working on, and which projects we’re looking into and why, so they’re always fully informed about what we’re doing instead of having a knee-jerk reaction when they see something on our quarterly financials. One of the things we try to do is give them anything and everything they want—some bankers want this report, some bankers want another report. We try to compile all of that information so that when they get our information they have it all there, and it really gives them a comfort level—we’re not trying to hide anything from them. With the shortage of lots that we have in our market, always letting our bankers know what we’re doing, why we’re doing it, and what their liability is before they even know about it has allowed us to get into land development. Bankers are important to us, as it can be very tough to get development loans. It allows us to get into these deals without having to go into partnerships, so we don’t have to tie up all of our liquidity.

 

Q: How do you handle your land and lot positions?

A: For the last three years, we have been meeting with every developer, landowner, and Realtor trying to find lots. We tried to tie up as many lots as we could, although we knew it was just going to be a short-term game plan for us. Oklahoma City is very spread out, and we have all sorts of land. But the two problems we have are people don’t want to sell it or there aren’t any utilities with it—there’s a reason that it’s sitting here. We continue to not give up and as we’ve worked out different deals over the years, more deals started coming. You’d close a deal and then all of the sudden you’d get people coming out of the woodwork, and you start having deals come in that are too good to pass up. So we’ve run into a position where we actually went from being scared about where we were on lots to having too many lots. We were buying land to develop and build for ourselves to make sure we have longevity in this market, and now we’re going to be selling lots because we have too many out in front of us. So it’s a good position to be in, especially with the supply and demand on the lots, and we should be able to get a good rate of return on those lots.

 

Q: What is your approach to marketing?

A: We’re really trying to evaluate the market. Last year the cost on our houses went up around $20,000. With an average sales price of $260,000 that’s quite a bit. Supply and demand is in favor of the trades, so trade prices just went through the roof. And last year we also had a tornado in Oklahoma City. So we’re trying to decide if we need to change our whole marketing strategy, as far as which amenities we are going to be able to put into our houses and which amenities do we need to look at pulling out. During the recession we were able to put all of this stuff in for free, but now we’re having to look at how to keep our costs down because we’re scared about the prices of our houses getting too high. And we’re talking about all of this without interest rates going up. Our primary market here in Oklahoma City is your second-to-third-time move-up. We don’t want to go away from our energy efficiency, but we’re trying to determine which amenities we can keep in the house and which amenities we can pull out of the houses. We’re trying to make sure we have longevity in 10 to 15 neighborhoods in our market where we can push out somewhere around 250 to 300 homes a year. PB