Scattered site construction, otherwise known as turnkeying homes on the homeowners’ property, has been the meat and potatoes of the building systems industry for decades. Like comfort food, it’s reliable, tasty enough and filling for the bank account.
But many builders yearn to craft something far more satisfying-full subdivision development. Many say it’s like going from being a short-order cook to the chef/owner of a five-star gourmet restaurant. You craft everything, from the layout of the streets and community amenities to the design of elegant homes that will serve as a testament to your art as a builder. The risks are far greater, but so are the rewards.
For an independent builder to be successful with a subdivision, you must gather the right ingredients, advises Isaac Bette, a third-generation home builder from New Haven County, CT, who recently pulled the trigger on a 99-lot subdivision called Fawn Meadow in Naugatuck, CT.
Bette says subdivisions require the right setting to appeal to your target market, a landowner who isn’t looking for a quick dollar, a modular building system to reduce construction time and increase quality, and a producer who can help you market your homes.
“I initially thought we might have a big hurdle with offering modular homes,” says Bette, principal of Northeastern Development (Southbury, CT), which also includes Michael, Isaac’s cousin; Peter, his uncle; and Bill, his father. Longtime site builders, the company switched to modulars to help combat a chronic shortage of quality craftsmen and subcontractors. Northeastern now opts for structures designed and produced by Westchester Modular Homes. “But not once has it been an issue with any of our buyers. Today with the Internet, buyers understand the benefits. Most have already toured the factory before they come see us.”
The 57-acre parcel in Naugatuck turned out to be an ideal setting for the subdivision. For one thing, it’s within commuting distance to New York City (only 20 minutes from the train station). In addition, the landowner was agreeable to a joint-venture agreement, in which the owner obtains their full asking price, but over time as the homes are built and sold. Bette says it’s the strategy detailed in our May/June issue in “Grab Land Without Owning It? Savvy strategies for small volume builders.”
“Instead of a rolling land option, we call it a joint-venture agreement. The owner is paid off in installments as we complete the phases of the development.” Northeastern Development is pursuing a dual strategy for sales. Four in-house salespeople working on commission (1% of base) are augmented by alliances with local realtors and the MLS. “Our sales goals are fairly aggressive-we are targeting 25 homes a year,” says Bette.
Key selling points are the fast turnaround on homes and a lack of construction noise in the development. By going modular, homes arrive 90% complete and are finished in weeks. “These homes would take a minimum of nine months in this market to stick build and that’s if you get good weather,” he says.
Grand Opening Strategy
The marketing team’s strategy was to advertise Fawn Meadow in southern Connecticut, where real estate prices and taxes were substantially higher than in Naugatuck. It worked. “Most of the leads are coming from that area,” Lucas says. Because New York and Connecticut media markets are expensive, you have to be right-on-the-money with media buys. “We settled on two, high-powered, variety radio stations that ran 60-second spots and live traffic reads during the week of May 10 through 14,” Lucas says. “One of the stations in Southern Connecticut did a live remote. This proved to be very effective.” To support the radio spots on the grand opening, the marketing team placed ads in regional newspapers and on billboards, ran an Internet alert and sent out direct mail pieces. “The local newspapers covered the ribbon cutting with the mayor of Naugatuck,” Lucas says. “We marketed the opening of Fawn Meadow for the family, and created a weekend filled with a festive atmosphere of hot dogs, clowns and balloons plus hayrides for the kids to visit the community’s soccer field. We entertained the children while mom and dad toured the model.”
Nearly 100 prospects turned out for the event May 15-16. This generated two deposits for homes and a third order for a very large colonial to be built on a scattered lot.