Questions To US Master House Builder On Real Estate Construction Series Eleven
Colm here ...
A few months ago I conducted an interview with Master House Builder.
What are the terms and conditions for entering into a fee based agreement for lot development with a third party?
This is dependent upon the experience of both parties and what each has to offer each other. There really isn't a set fee.
For example, you call builder Bob and ask him to build homes for you. What can house builder Bob offer you besides building the homes? Probably nothing.
However, if you hire us, we can provide you with a whole Residential Development Team.
We have the financing, the Realtor, the insurance and as a master house builder we know how to create demand for our homes.
We train our professionals how to quickly sell the properties we build.
We bring a great deal to the table. And, we don't charge any more for doing this. Why because the more profitable we can make you the more likely you'll hire us as house builder for your other properties.
I am assuming that by third party you mean the house builder.
Let me walk you through how you would work with us. First, I assume that you've done your home work. You know what style, appraised value, square footage, etc… your properties are going to be.
You come to me. I am NOT going to ask you what $ square footage you're building. No Master House Builder would. Instead, I would ask you:
1) How much do you have budgeted for the house builder?
2) Does this include or exclude the cost of the land?
3) What is the appraised value of the property?
4) What is the fair market value of the property?
Armed with the above information I can tell you whether I can build your property within your budget or not. This makes it very easy for the developer to work with. No negotiations. No fudging. No worrying about coming back for more money. Either we can work within your budget or we can't.
What are their terms and conditions for entering into an agreement for a lot development joint venture? Will they enter a limited partnership?
Again, terms and conditions are based upon what you and the builder decide.
* What do you have to offer?
* What does the house builder you want to work with have to offer?
* What future work can you offer?
Joint Ventures are always possible. Usually house builders will do a 50/50 split of difference between wholesale and retail with the developer.
Speaking for myself, there's no reason to enter into this type of arrangement unless you don't have the money to build what builders call a "spec" or "demo" home.
I sell million dollar homes without having a spec or demo home.
I would rather teach the developer how to find an investor who will build the first home. Then show them how to pre-sell the other homes.
What I ask for in return is the option to purchase ten of the lots at wholesale and that the developer have an exclusive with my company to build all the homes.
In return, I can bring in the investors, my residential development team, and create a huge demand for homes in their development. This way the developer keeps the lion share of the profits.
I make my money building homes. The developer makes their money selling. It's a "Win-Win" situation for both of us.
Especially how would questions 1 & 2 relate to their Texas operations.
I can't speak for other builders. In our case, it doesn't matter whether you're in Texas or New York or California.
I see my job as ensuring that you're as profitable as possible. I am licensed, insured and bonded in all 48 continental states. If I don't have a Residential Development Team in your specific area I can have one established and trained within about three to four weeks.
My team can provide the financing for the homes, create the demand, provide insurance, bring local investors to the table.
I am sure this session has provoked considerable thought - I think I can hear the brains whizzing around for here. Keep the questions coming in.