In 2021, Charlotte, North Carolina-based Northway Homes built and sold nine homes. This year, they will build and sell over 200.
In an exceedingly competitive market saturated with national home builders, how did this Charlotte, North Carolina-based privately-held home builder scale their business so quickly?
Dominion Financial Services’ Jack BeVier and Craig Fuhr interviewed Northway Homes principal and co-founder Danny Hirschberg to find out. Danny shares the Northway Homes story in Real Investor Radio podcast Episode 62, Scaling Success: Navigating DSCR Rates, Market Trends, and Homebuilding with Danny Hirschberg.
Northway Homes’ success came, in part, from sourcing deals and building their pipeline through diverse channels. Their proactive outreach includes cold calling as well as wholesaler and direct-to-seller approaches. Danny applies the Northway Home story to real estate investing with two tips for how to benefit from your real estate investor’s edge.
Understanding the Competitive Landscape
According to the National Association of Home Builders, the top ten national home builders produced just under half of all new homes in 2023. Common challenges investors face when competing with national home builders in hot markets include:
Access to capital– Securing funding is tough, especially since national builders have established lender relationships for quick financing.Establishing contractor networks – Building a contractor network is vital, because national builders have extensive connections for sourcing skilled labor.Contractor loyalty and availability – Maintaining contractor loyalty can be difficult, particularly since many subcontractors prefer larger firms for consistent work.Availability of land – Access to land is critical, notably because national builders can acquire prime locations, leaving fewer options for smaller investors.Knowledge of local zoning rules – Understanding zoning regulations is complex, especially as national builders have dedicated teams to navigate these issues.Zoning/permit delays – Delays in approvals can impact timelines, given that national builders may have streamlined processes that smaller investors lack.
Benefiting From Your Real Estate Investors’ Edge
TIP #1: Pay Subcontractors Quickly
National home builders are limited by standard payment terms and smaller subcontractor pools. Use your edge over national home builders to implement speedy payments to subcontractors. The results will help you scale your business and compete with national home builders in hot real estate markets.
Benefits of speedy payment terms:
Attracting skilled subcontractorsAllowing subcontractors to scale their own businesses Fostering subcontractor loyaltyCapitalizing on local subcontractor knowledge of area zoning rules
And by “speedy” you mean…
Craig Fuhr:
What is considered fast, by the way, in terms of payment?
Danny Hirschberg:
If we get an invoice on a Sunday, the check is in their hand four days later … In our industry, that is really quick.
TIP #2: Target Scattered Site Land
Smaller lots and minor subdivisions do not fit building strategies for most national home builders. Privately owned businesses can identify smaller land opportunities that national home builders overlook.
Benefits of smaller, scattered land opportunities:
Selling more quicklyCompeting with fewer national home buildersExperiencing more flexibility than with larger-scale developments
Why go small and scattered?
Danny Hirschberg:
It doesn’t make sense for the largest home builder in the nation to set up shop for an eight-home subdivision.
Next Steps for Real Estate Investors
With this understanding of the competitive landscape and the potential for an edge over national home builders, you can navigate successfully even in hot real estate markets. Listen to the full podcast or one of the other informative and entertaining Real Investor Radio podcasts to learn more about Northway Homes and other investment tips.
Reach out to Dominion Financial Services for expert guidance and tailored financing solutions, including short-term bridge loans and long-term rental financing.
