Four Ways to Secure Land
By Human Capital Group
15th February 2021
Are you a US builder and can’t seem to secure the land you need at the moment?
Our Managing Director Gerard Ball has recently identified a trend whereby smaller builders seem to be struggling with low inventory. With most markets experiencing shortages, big builders are buying up parcels just because they can and in many cases the land is tied up before it’s even listed by a realtor. This leaves many smaller builders with few or poor options for their projects.
However, there is some good news – land is available for smaller builders, you just have to know how and where to find it! The challenge is knowing how to see and evaluate viable sites before they’re snatched up by the competition.
With this in mind we’d like to invite you to watch our next webinar in the Housebuilder Business Resilience Hub Series: here.
Gerard was joined by Paul Hanson, who has been President of Epcon Communities Franchising in the US and is a Trustee of the Epcon Communities Marketing Co-Op since December 2018. In addition to this, he is also a regular speaker and contributor to the National Association of Home Builders (NAHB).
As anticipated, the session was packed full of insights into how to get the best land deals and utilise resources. If you don’t have time to watch the webinar in full, then read our blog for the four key takeaways!
1. Be strategic in identifying the right sites
Given the challenges that always surround land acquisition, and the fact that is seems harder than usual at the moment, Gerard asked Paul about how you can be strategic in identifying the right sites.
Paul gave these tips:
- Know your criteria. If you have a clear idea about who your intended end-buyer is then you need to ensure the land you buy would be appealing to that criteria.
- Be targeted in your approach and divide the market into desirable ‘submarkets’. Start at the top, map out desirable areas and then move down the list in order to identify new opportunities.
- Do your research. Most municipalities in the US have comprehensive land plans. Make sure you have looked at these and understand the ‘goals’ of the places you are looking at. Sometimes your aim is to understand that a site isn’t viable as quickly as possible so you can move onto one that is.
- Crunch the numbers. Analyse median resale figures in the area to evaluate a piece of land. If your average sales price is with 140% of median resale rate, then you should be OK.
2. Ensure your land manager is working hard
At this stage of the housebuilding process, the land manager is key to everything. Gerard asked Paul how land managers should be operating and what they should be focusing on:
“The Land Manager is very much in a sales position because in many ways they are selling themselves and their company. They have to get potential land sellers to believe in their ability to perform on the contract and trust their skills in taking raw land through the planning process to fruition.
“Land Managers have to be able to sell their story and the history, experience and reputation of the housebuilder they work for.
“For housebuilding SMEs to survive they need to be buying land now so that they’ll have their pipeline in place for the next 2/3 years. This means that Land Managers need to be networking right now with people like brokers, farmers and local engineers who know the marketplace. At the end of the day, many of the best parcels of land never even make it to listings so you have to be ahead of the competition.”
3. Get focused
Gerard and Paul went on to discuss the other areas housebuilders should be focusing on. There are two areas in particular – the sites and land you need today and the land you will need in the future.
Paul said: “Fulfilling your pipeline is a never-ending job and you can’t afford to take a break as you never know when the next opportunity will present itself.
“You have to be at the top of your game when it comes to buying competitively and my advice would be that it is always worth paying top dollar for the best sites – location is the key!”
Paul went on to say that there are two ways in which you can mitigate your risk when buying new sites:
- Try to develop sites in phases and this will give you a margin of flexibility. Similarly, if you are a new housebuilder, make sure you focus on one project at a time, so you have the ability to learn from any mistakes and understand particular challenges before you go on to projects 2, 3 & 4.
- Partnering up is another way to mitigate a risk. You can do this with freelancers and consultants who have great experience and great networks that you can take advantage of is also a good idea. Make sure the partnership is equal so that the busines relationship is a win-win situation. Alternatively, you could team up with another housebuilder who offers a complementary product so you can divvy up the land and work alongside each other and reach wider audiences without competing for the same customers.
4. Expand but don’t redesign
One of Paul’s biggest pieces of advice was regarding the prospect of a housebuilder redesigning their main products to fit a piece of land.
He said: “I would never recommend this and would always try to discourage it. If you look at the big builders, then they very rarely start developing new products to fit the land. It’s much better to stay disciplined, remain patient and find the land to fit your product rather than the other way around.
“If you get tempted to diversify away from your criteria, then I think you should really fight that tendency and urge to do so. As one of our founders says: You can never pay a low enough price for a site that doesn’t fit in with what you do!”
Before we finish, here are Paul’s final thoughts: “I echo what a lot of people are saying in the industry – now is a great time for buying but unfortunately there is a lot of fear. The need for high quality and great housing is not going away. Make sure you capitalise on that, take advantage of any opportunities that come your way and be brave. It’s Make or Break time!”