Tuesday, 26 September 2017

How to Spot the Best Builder for Your Next Big Investment

Written by Posted On Wednesday, 13 July 2016 16:12
How to Spot the Best Builder for Your Next Big Investment Shutterstock 383354212

Builders have been placed under intense scrutiny ever since the housing crash. The down market caused dozens of companies to fold, but now that things are rebounding, those who weathered the storm are fighting tooth and nail for your business. 

 

It’s risky to assume that a builder knows what it’s doing just because the company survived the recession. Unfortunately, plenty of bad apples managed to hang onto their branches as the bottom dropped out. 

Every big project — the timeline, the budget, and the overall quality of the finished product — hinges on its builder. So before you embark on your next investment in new construction, it’s key to ensure you can spot the right choice from a mile away.

 

Bad Builders vs. Good Builders

 

Sadly, bad builders don’t come with a big, bright warning label that tells you they’re terrible and should be avoided. But with a little forethought and research — whether that’s reading reviews or consulting with other investors — there are some easy ways to differentiate the good from the bad. 

A bad builder will agree to a specific timeline but won’t stick to it. The project will slow down, and your houses won’t close on time. When the timeline flies out the window, so does your proposed budget. Additional money is spent and wasted, and bad builders will make it your responsibility to cover those costs. 

Don’t expect quality workmanship from a bad builder, either. Because they usually don’t build that many homes throughout the year, they haven’t nailed down the best techniques, vendors, and workers. They’ll claim to be finished, but you you’ll groan with disgust during the final walkthrough when you see their shoddy workmanship.

 

On the other hand, a good builder’s word is law when it comes to your timeline. This builder will ensure everything gets done in a timely fashion and will quickly address any bumps in the road along the way. In the event of cost overrun, a good builder will have the money to cover it and be more than willing to do so. This type of builder has discovered the best practices for getting a job done efficiently, and if imperfections arise, a good builder will make sure that the house gets fixed before close date.

 

3 Qualities to Look For in a Builder

 

Once builders line up at your door and vie for your business, you’ll likely hear tons of lowball estimates and empty promises. Cut through the noise by looking for these three crucial characteristics:

 

1. An Extensive Track Record. Good builders won’t be newbies in the industry, and they won’t only have a few hundred projects to their name. Rather, they’ll have an extensive track record of successfully handling larger projects, and they’ll build thousands of homes each year.

 

Because of this vast experience, the right builders will have their building processes down pat. They are familiar with what people want, they know the most popular designs, and they know how to build a darn-good home at a darn-good price in a darn-good time frame.

 

Any rookie can build two homes a year and make a profit, but not everyone can do that quickly and to scale. Look for a builder who can complete a project really fast and really efficiently while staying within your budget. McBride in St. Louis is a prime example of an experienced builder. They build thousands of homes every single year that are a great value. They nail all of their closings and are quick to address any problems.

 

2. Innovative Thinking. Innovative builders think outside the box. They won’t shy away from new ideas, they’ll be flexible when issues arise, and they’ll be eager to find creative solutions. Furthermore, they’ll present their own unique layouts and forward-thinking features when discussing projects with you.

 

Lennar, for example, just launched a new line called NextGen that offers an innovative home layout for multigenerational families. The primary bedrooms are all built upstairs, while downstairs, there’s a nice little apartment for grandma where she can have her own entrance, living space, and even garage.

 

3. Favorable Funding. A bad builder might ask for a 20 percent down payment, a “cost plus” deal, or for you to take on the risk of a construction loan. Any of those three requests should raise immediate red flags. An ideal builder, however, will be willing to fund the entire project, offer you a guaranteed price, or ask for a much smaller down payment. DR Horton is an example of a large builder that in some neighborhoods can build you a home with a down payment as low as $500.

 

Builders that ask you for only small down payments are clearly confident in their abilities to handle your big project.

 

Don’t let an ambitious, exciting investment in new construction fall apart because of a bad builder. Take this decision seriously, and closely examine the companies competing for your business. 

While there are still some bad apples among the builder bunch, it’s easy to toss them aside and pick one that will make your project as profitable as possible.

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Mike Kalis

An entrepreneur at heart, CEO Mike Kalis leads the team at MarketplaceHomes.com, a Detroit-based brokerage that specializes in new construction sales and property management. Marketplace has sold more than $3 billion in new construction homes and gained a controlling interest in more than 2,500 single-family properties. It also offers new-construction homebuyers a guaranteed lease on their previous properties for up to six years. It is currently the third-largest property management company in the United States.


Mike has been featured four times on the Inc. 5000 list, and in addition to his managing partner role at Marketplace, he is a venture capitalist and investor for ZipTours. The startup helps homebuyers and renters view homes with agents who stream live to their smartphones. It has conducted tens of thousands of tours since March 2015. When he’s not busy creating new real estate solutions and helping investors purchase new-construction homes, Mike loves wakeboarding, playing guitar, and spending time with his family.

 

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