Home Builders of Carolina, Inc.

                                                                                                                         I owned the third largest home building company in Charlotte in 1981.
                                                                                                                                           I'm going to do it again.  Plan to join me.

The model for this venture is not new to me.  It started in college while earning my BBA in Management and working for a small builder who was finishing developing a 52 lot subdivision.  After working for him a couple years building homes he suggested I build some homes and he'd spot a lot until the home was sold.  So I sold my first homes honing and mastering all the skills of all trades involved in building homes with my own hands.

The recession was hurting my college town so I took a job with American Urban Corp. in Columbus as an estimator.  As the recession continued, I took a job in Charlotte as an estimator with the Ervin Company.  They had been using in-house vendors and their own panel/truss plant.  I introduced a system of inviting vendors to give quotes at half the cost, turning the company profitable.  At the same time I was building a home for sale and estimating for several builders.  Century Home Builders, Inc., a small home builder with two spec homes for sale.  Century had acquired a small subdivision tract and promised I'd receive a raise in three months or we'd both be unemployed.  The two spec homes sold and we started pre-selling new homes taking turns meeting potential customers and competed on how fast we'd get a contract with binder check.  Me, twenty minutes.  Century Home Builders grew quickly under my organizational skills and knowledge.

At Century I had created a purchase order system providing control over the home building process and corresponding accounting system.  This cannot be overstated, a unified administrative control mechanism is key to every business success, which I will discuss in the attached addendum.

Shortly after Century was building in a dozen communities in several cities in a couple states and into condo's, townhomes, and small commercial construction.  A few years later Century was sold for thirty million.

I left to start Horizon Home Builders, Inc. and in four years became the third largest home builder in Charlotte.  Horizon won the Governors Showcase of Solar Homes award.  Constructing primarily entry level, California open contemporary style with great room/split bedroom concept, conversation pit, open deck, redwood hot tub, passive and active solar heat and water heating, Solar Energy model homes in a traditional, brick home city.  We became a sensation, "media darling", industry spokesman with potential clients lining the streets of our model homes on weekends and selling a few homes at the same time.  I helped to contribute to the future return of residential to uptown Charlotte because of this foresight my youngest daughter and her family live uptown on the same street my first uptown project began thirty five years ago.   I was way ahead of the trend.

I built not only single family detached homes but condo's, townhomes, developed subdivisions for my own use and sold to builders, established a real estate company to sell clients existing homes taken in trade and sold model homes to investors on leasebacks.

So why am I looking for startup funding?  Allow me to set this up.  I had executed the plan above with precision and few problems along the way.  We even had a fallback plan but the only thing we didn't have control of was the economy and we had a plan you can see in the accompanying addendum.

Interest went over 15% and pre-sales became no sales when clients with permanent loan commitments no longer qualified or because they lost their job.  So my thirty five presold homes under construction and the forty five presold homes we hadn't started yet disappeared.  I paid the subs their final draw and filed for Chapter 11 bankruptcy reorganization.  There was one last stroke of genius covered in the addendum. 

The only thing lacking all along was capital.  Capital to withstand economic downturn when all other contingencies fail.

I am seeking three million in capital to use a few hundred thousand for start up, land options, things like that, and the balance to justify favorable loan terms and backup in the event of an economic downturn.

Join me on the launch pad.

Lou Weber


Addendum:

Purchase orders

So, I hadn't mentioned I worked for the Ohio University purchasing department on a work study program wile they were building our domed basketball arena which gave me valuable knowledge about the beauty of systems management.  The purchase order system I created when joining Century Home Builders was critical to our success.  It was rumored we were going to fail because our prices were too low.  But we were making good money because we had control.  Control involved first, a strong estimating system, only intimate, first hand, hands on, knowledge of building a home can provide this degree of accurate estimates. 

Second, adequate plans.  Seems simple enough.  My plans used a controversial framing layout, gone was the carpenter using the method he learned in laying out joists, rafters, studs, construction details, floor and roof sheathing layouts.  My plans had these layouts and details (so instead of having ten partial sheets of plywood waste we had less than a full sheet).  Plans were also accompanied by redline drawings representing client changes and color selections.  This information was reviewed by estimating to account for the specifics of the changes to be reflected in the purchase orders.

Upon issuance, the PO became the job cost ledger against which actual costs were posted, the general ledger,  created future accounts payable and receivable for long into the future, forecast future bank draws, estimated future revenue, gross profit, tax burden.  In addition it provided future lot needs, loan needs, cash flow projections, sales commissions due dates, additional employee hiring needs.

Upon completion of the phase of work or delivery of material represented by each purchase order, the vendor submitted the PO copy to the superintendent for approval, he sent it to accounting where it became accounts payable, etc.

Scope of work/job descriptions

Enough can't be said about developing vendor scopes of work outlining specific things expected of them if they are going to work for you.  Including job site rules, trash disposal, job cleanup, respect for other vendors work, defining when a draw is earned, retainages, how to speak to clients, planned vendor group meetings, locking houses up at the end of the day, etc.

Your PO system will not work without concise scope of work, nothing will work, you have no control.

Scope of work for superintendents (including relationships with clients) and sales force (including responsible  for client walk-through and selections and loan approval), as well as detailed job description for every employee on the staff is tantamount to an organization being organized.

Company Culture

Establishing the company culture is giving life to an organization.  While there are many fashionable culture types, like a child, if they know they're loved, little else maters.  So teat them and teach them to treat each other kindly.  Acknowledge employee accomplishments to others.  We had a news letter highlighting positive responses we got from clients weekly.  One employee told me he kept every one he received.   Create regular opportunities for different groups within the company and the whole company as a whole for a kind of family get-together, picnic, trip to the beach for bonding and fellowship.  Take the time to not only describe the job description by why its done this way.  We are not building houses, we're building relationships that turn into a place a family lives.

Lines of credit: Acquisition/development/construction loans

The industry playing field always allowed for more than 100% financing.  Insinuating yourself into appraisals, competitive cost control of labor and materials, payment terms and material supplier discounts, cash flow management,  quick construction cycle as well as retainages held from vendors, you can outlast the competition and recession and make what a lender thought was a 75% LTV a 100% loan.

One aspect I've frequently observed among builders is the inability to build a million dollar home that didn't cost a million.  Square footage alone cost less the bigger the house is, how you outfit it completes that thought.  So a 2500sf house can sell for $250,000 or $660,000 depending how you build it.  Its not hard to accomplish this but you have to reign in the ego.

How to get good vendors in this market?

And this is key when starting up, the way to get going and attracting good subs and suppliers with good prices and availability is to be able to pay them fast, not waiting for the next draw.  Most builders can't do this and the big builders actually require you wait to get paid, thinking, if you want to work for them you have to be able to carry yourself sixty-ninety days.  This works until you don't need it anymore.  I know, I used to do that.

The backup plan for a bad economy

That plan in a bad economy was convert our supervisory staff into subcontractors to build homes.  We had eighty homes under contract with thirty five having permanent load approval and under construction and forty five in loan processing and not approved to start.  We had six months of work without a new sale.  Should a slow down continue we cut our markup margin to the bone so as to maintain the core employees until the economy turned around.  With lots on an option contract, land developers would have no other market in a recession so they would likely forbear voiding our contracts and agree on new terms fi necessary.  However, the problem became the 15% plus interest rates and clients no longer qualified for a permanent loan and our presales disappeared.

I wasn't finished yet.  Caterpillar, in bankruptcy, had a reorganization plan giving creditors stock of equal value to the debt in exchange for a new credit line to resume production.  I presented the same plan to my creditors and it was met with not only approval but relief.  One vendor out of all of them refused and the plan collapsed.