Small Builders, Big Ideas

Small Builders, Big Ideas
IBS 2015
Small Builders, Big Ideas
JANUARY 22, 2015 || 1:00– 2:00PM
Presenter(s):
Doug Van Lerberghe || KEPHART, Denver, CO
Eric Brown || Artisan Homes, Phoenix, AZ
Darell Schmidt || Allante Properties, Denver, CO
Session Description
Finding new ways to stand out from the competition and serving
niche markets are often the keys to success for leading small volume
builders. During this session, you’ll hear from an architect and two
developers about how they have found success by breaking the mold
and offering unique housing opportunities. The developers will share
insights on how they evaluate sites, how they determine the needs of
the market place and the value of taking calculated risks to be the
first to the market with a new offering. You’ll also receive cutting-edge
approaches and innovative design ideas that can be used as
opportunities for future growth in 2015 and beyond.
All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Learning Outcomes
 Acquire knowledge of niche markets that are emerging and how
serving them can lead to opportunity.
 Discover creative design and building concepts to spark ideas for
your next community.
 Evaluate new sites and design ideas for their potential reward.
 Gain expert insight into how to differentiate yourself from other
builders.
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American Institute of Architects (AIA)
Continuing Professional Education
Credit(s) earned on completion of this course will be reported to AIA CES for AIA
members upon completion of the AIA/CES Session Participation Forms found in
the back of this session room and online at www.BuildersShow.com. Certificates of
Completion for both AIA members and non-AIA members are available upon
request.
This course is registered with AIA CES for continuing professional education. As
such, it does not include content that may be deemed or construed to be an
approval or endorsement by the AIA of any material of construction or any method
or manner of handling, using, distributing, or dealing in any material or product.
Questions related to specific materials, methods, and services will be addressed at
the conclusion of this presentation.
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
2
Small Builders, Big Ideas
IBS 2015
Where To Find the Equity $’s
(It’s not where you think!)
This presentation graphically
illustrates one Big Idea for Small
Builders in today’s market to access
Equity $’s required to accelerate
business growth and to build
profitability.
It will forever change your mind on
getting the equity you need.
Questions
Show of Hands:
• Who uses their own money for equity to do all of their deals?
• Who uses outside equity?
• Friends, family, family offices, institutions, or hard money?
• Have banks insisted on more equity in your deals?
• Who has passed on a deal because of lack of Equity?
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Typical Equity Sources
• Friends and family
• Family offices
• Institutions
• Hard money loans
• Banks
• Credit Unions
OR ?????????????
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Pref, IRR Hurdle,
Clawback, Waterfall?
Those with the
money make the rules!
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
There is a Better Way
Image
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Jump Start Our Business Start Up Act
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
JOBS Act
• April 2012, President Obama passed the JOBS Act.
• Section 201(a) of the JOBS Act required the SEC to
eliminate the prohibition on using general solicitation and
advertising, which has been in effect since 1933.
• To implement 201(a), the SEC adopted paragraph (c) of
Rule 506 in Regulation D, which allows developers and
builders (sponsors) to sell securities and be exempt from
the Registration Requirements for selling securities to
the public.
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For the First Time in 78 Years…
We can advertise and solicit on:
–
–
–
–
–
–
TV
Radio
Newspapers
Magazines
Billboards
Social media
– Anything and everything
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Who are Accredited Investors?
Net worth of $1 Million or more, not counting their private residence.
-OrIncome of $200,000 the last two years and the expectation of
$200,000 or more for the current year. (With spouse, $300,000)
Verification: The company has taken reasonable steps to verify that its
investors are accredited investors, which could include reviewing
documentation, such as W-2s, tax returns, bank and brokerage
statements, credit reports and the like.
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Where To Find Investors
• In your home town
• IRA holders
• 401k holders
• Stock investors fed up with the stock market
• CD holders fed up with the low CD rates of interest
• Real estate investors frustrated with management chores
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Builder Fees
• Acquisition fee
• Asset management fee
• Loan guaranty fee
• Refinance fee
• Sales fee on disposition
• Marketing fee
• Contractor fee
• Warranty fee
• Salaries, overhead, cars, phones, etc.
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How to Generate Investor Leads
• Advertise in media publications, TV, radio, etc.
• Social media
• Press releases in business journals and newspapers
• Website with:
– Questionnaire of buyers investment goals
– Resume and qualifications
– Reprint of investment articles
– Contact page, submission of questions
• Real estate investor association meetings
• Conduct investor seminars
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Get a Bigger Piece of Profits
• Avoid the middle man by going directly to investors
• Add fees and overhead to your offering
• Do not pay preferential returns – not necessary!
• Consider 50/50 with your investors – it is possible!
• Do not go to family offices or institutions. They are the
middle man that takes profit from you and your investors.
• Going directly to investors increases returns for both.
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Why is going Direct a Better Way?
• Investors are waiting for your call.
• They are motivated to place their capital.
• An Investor can do better in a group investment
than he/she can on their own.
• Investors can avoid day to day management.
• Perceive real estate as better than
the Stock Market.
• The Investor and Builder will
make more money!
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Other Secrets?
• Do not delegate. Builder should
conduct all money raising.
• Follow the SEC regulations.
• Hire a knowledgeable attorney.
• Communicate with your State Securities Office.
• Set your minimum investment at ______ (your choice).
Reserve the right to lower it or raise it.
• Do a Mini Max Offering where you can close on the offering
prior to raising all of the money.
• Offer Convertible Notes to gain working capital to start a
deal.
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Other Questions?
1. Does the Developer have to have the deal identified to
raise the equity?
2. How long does it take to raise the money?
3. When can you start raising the money?
4. Consistency of advertising helps.
5. What does it cost? Legal? Advertising? Deal Upfront
Costs?
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
First Steps?
1. Hire a good Securities Attorney.
2. Create a resume and references for Investors to check out.
3. Decide on advertising medium to use.
4. Get your deal under contract. Build in time to raise part of the
money to close on the land. Offer convertible notes.
5. Finalize your design and Proforma
6. Put together an Executive Summary to start raising money.
7. Write the Disclosure document, raise the balance of the equity.
8. Arrange for Bank financing for the difference.
9. Break ground.
10. Communicate.
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Questions
1. Is it hard to manage a group of small investors?
2. What should be the minimum investment?
3. Does the developer need to have skin in the game?
4. What is the most important thing in being successful with
small Investors?
5. Do I have to have audited statements?
6. Average Annual Return vs IRR?
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
How to Succeed as a Small
Builder in Today’s World
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Jack Be Nimble, Jack Be Quick…
• Small Builders have been
squeezed to the breaking
point.
• Reduced demand and small
profit margins have made
first time buyer homes a very
risky market.
• Big Builders are moving into
new segments and locations
to reach homebuyers.
• Your mission is to stay one
step ahead.
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Small Builders Can Have Some Advantages
• Lower overhead can mitigate higher construction costs.
• Rapid response can gain you more development opportunities.
• Local residents may trust you more than the “Big Builder”.
• Many Buyers prefer the personal touch a small builder can offer.
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Social Media – The New Equalizer
• Marketing is much more
affordable than in the
Newspaper / Billboard
advertising days.
• A professional website can
significantly raise the
image of a small builder.
• Small builders can use
social media to connect
with potential buyers just
as well as big builders in a
local area.
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Local Interaction is Everything
Create buzz about the company:
– Word of mouth and personal referral
are more important to younger
buyers than professional reviews.
– Get involved in local issues.
– Use locally owned companies.
– Meet with thought influencers.
– GET RECOMMENDATIONS.
– Create a great event and post video.
– Be on all social media and update
often.
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Create a Reputation
Be known for something…
– Net zero or near zero
energy homes
– Home technology leader
– High-density solutions
– Urban or Modern design
– Custom changes or finishes
– High-end market
– Affordable market
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Design Homes to Meet a Specific Niche
• Homebuyers segments are getting more specific in their
wants. Generic designs will not motivate buyers.
• Know your market area inside out.
• Design the homes and/or community plan for a primary
targeted buyer.
• Offer rooms or features that are tailored to that buyer.
• Create home options for a secondary targeted buyer.
Concerns different buyer segments currently have expressed:
•
The Millennial buyer – total cost vs. energy efficiency & technology
•
The Move-Down buyer – low maintenance vs. room for kids
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Rental Flat / Expandable House
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
The Pop-Top Guest House
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First Time Buyer Market Challenges
•
They want to live closer to where they socialize than to where they work.
•
Many young potential buyers value having more flexibility in their life,
business opportunities and location over owning real estate.
•
Debt, Down Payment and Loan Qualification hurdles will continue to
affect purchase decisions for the rest of this decade.
•
“I don’t want to buy a new home because I can’t add value quickly”.
Solutions?
•
Rent to Own
•
Design income generating properties
•
Offer Sweat Equity Opportunities
•
Build in infill locations
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
The 8 Traits of a Great Urban Location
1. Distinct identifiable areas
2. Density
3. Central gathering places
4. Walkability scores/urban transportation
5. Youth
6. Commerce
7. Arts/culture
8. Sense of safety
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Major Mistakes New Urban
Developers Make
• Not designing the right product in the right location
• Lack of product type experience
• Unrealistic cost and time projections
• Trying to do too much too soon
• Lack of equity, development financing, and buyer
financing
• Understanding the importance of working with
neighborhoods
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Infill Ideas You Should Know
• Find older neighborhoods where prices and sizes vary widely.
• Find the sweet spot between Urban and Suburban.
• Seek out sites that are not on the market with Brokers.
• Err by paying too much for a better site than by getting a steal
on an undesirable site…but don’t overpay.
• Design. Build. Repeat.
– Similar lots, scattered sites
• Find the right mix of affordability, energy efficiency and
technology.
• Don’t be afraid of developing small mixed-use buildings.
• Get in and get out before Big Builders can undercut you.
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6 Big Ideas for Small Builders to Excel
1. Scattered Lot Townhomes
2. Mid-Century Modern
3. Quilting Concept
4. Millennial Preferences
5. Modular Construction
6. Shipping Container
Architecture
D
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Scattered Lot Townhomes
D
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Scattered Lot Townhomes
D
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Scattered Lot Townhomes – Denver, CO
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D
Scattered Lot Townhomes
B
D
1,460 sf
3 story
2 car
18’
A
D
1,365 sf
2 story
1 car
17’
1,557 sf
2 story
1 car
23’
C
1,552 sf
3 story
2 car
20’
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Scattered Lot Townhomes
1818 Clarkson
145’
A
B
C
B
C
D
75’
B
7.5’
D
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Scattered Lot Townhomes
Washington Street
Vine Street
75’
125’
7.5’
C
C
C
C
125’
C
125’
C
C
10’
D
D
C
D
A
D
D
A
A
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
21
Small Builders, Big Ideas
IBS 2015
6 Big Ideas for Small Builders to Excel
1. Scattered Lot Townhomes
2. Mid-Century Modern
3. Quilting Concept
4. Millennial Preferences
5. Modular Construction
6. Shipping Container
Architecture
D
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Mid-Century
Modern
• These homes spend the
shortest amount of time on
the market
• People get their asking
price
• On average they get a
higher price per square
foot
---Data provided by Kentwood City Properties
D
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Mid-Century Modern
D
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6 Big Ideas for Small Builders to Excel
1. Scattered Lot Townhomes
2. Mid-Century Modern
3. Quilting Concept
4. Millennial Preferences
5. Modular Construction
6. Shipping Container
Architecture
D
46
All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Quilting Concept
D
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6 Big Ideas for Small Builders to Excel
1. Scattered Lot Townhomes
2. Mid-Century Modern
3. Quilting Concept
4. Millennial Preferences
5. Modular Construction
6. Shipping Container
Architecture
D
48
All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Millennial Preferences
- Contemporary elevation
Jose Garia
- New materials
- Sports storage
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D
Studio Shed
Resolution: 4 Architecture
Dri-Design
Millennial Preferences
- Kitchen being the heart of
the home
- Large master bath, no tub,
big shower
- Storefront windows
D
dC Fine Homes & Interiors
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AMZ Home
Melton Design Build
All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Millennial Preferences
- Important small details
- Open concept floor plans
- Rooftop decks
D
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Boston Luxury Properties
Chadbourne & Doss Architects
6 Big Ideas for Small Builders to Excel
1. Scattered Lot Townhomes
2. Mid-Century Modern
3. Quilting Concept
4. Millennial Preferences
5. Modular Construction
6. Shipping Container
Architecture
D
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All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Modular Construction
D
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6 Big Ideas for Small Builders to Excel
1. Scattered Lot Townhomes
2. Mid-Century Modern
3. Quilting Concept
4. Millennial Preferences
5. Modular Construction
6. Shipping Container
Architecture
D
54
All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Shipping Container Architecture
Todd Miller
D
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De Maria Design
Shipping Container Architecture
Adam Kalkin
D
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CG Architects
All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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Small Builders, Big Ideas
IBS 2015
Thank you!
Questions?
Darell Schmidt
Allante Properties
Eric Brown
Artisan Homes
Doug Van Lerberghe
KEPHART
303.359.1210
8400 East Prentice Ave.
Greenwood Village, CO
80111
602.625.2091
3141 E. Beardsley Rd.
Phoenix, AZ 85050
303.832.4474
2555 Walnut Street
Denver, CO 80205 57
All plans and drawings in this presentation are copyright protected by the presenters or their
clients. Reproduction in part or in whole without expressed written consent is prohibited.
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