Owning a small business can be rewarding, especially if it’s a homebuilding company that helps families realize their dreams. According to the National Association of Home Builders (NAHB), residential construction is a top industry for entrepreneurs. On the other hand, it can be challenging to compete against public building companies when it comes to pricing, material costs, and securing the funding to get started.
If you’re a private homebuilder ready to level the playing field and become more competitive with large, national builders, consider these three tips:
1) Stay nimble to delight your customers AND grow your margins
Homebuyers are looking to get as much for their dollar as they can. Large national builders typically attack this by using their size to keep prices low. This is an effective strategy, but it’s not the only one. Smaller builders can counter this by using a design tool, like customhome.ai, to offer customizable plans with a variety of design options. You can help your clients choose an architectural style, select a floorplan that suits their lifestyle, and customize both interior and exterior features in real-time, with realistic renderings that delight buyers and can dramatically boost your margins by helping you avoid a race to the bottom.
2) Reduce your materials costs
As you work through the design process above, you will need to estimate the build cost to ensure the home is within budget. This is where a product like BIMQuote.com can help. This tool delivers both estimated quantity takeoffs to speed up the bidding process and, by pooling the enormous buying power provided by the roughly 14,000 homes that have access to BIMQuote, provides key materials at pricing levels like those negotiated by large national builders.
3) Choose your capital source wisely
Finding a capital source with deep construction experience is critical. Recent regulatory scrutiny has caused regional banks to pull back on construction lending, leaving some builders in the lurch. Similar funding crunches happened in 2001-2002 and in 2008-2012. To be capital efficient, negotiate with your land sellers to allow you time to entitle the land. Then, because mezzanine loans and equity partners are expensive, look for a lender who can support your business from rough grading all the way through home completion. The right lending relationship helps your company to grow efficiently and accelerate your success.
Fund your projects and borrow the smart way with Builders Capital nationwide construction lending.
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