In “Small-Volume Strategies for Tying Up Land and Lots,” a seminar offered at the 2004 International Builders’ Show, attendees learned how to control land without owning it and how to find the best parcels.

The seminar was presented by Jay Grant, president of Grant Homes in Morristown, NJ, Tim Hernandez, president of New Urban Communities in Delray Beach, FL, and Barry Rutenberg, president of Barry Rutenberg & Associates in Gainesville, FL, and was moderated by Bill Lurz, senior editor of Professional Builder magazine. Here are some of their strategies to try in your market.

Don’t Go It Alone

Consider doing a joint venture partnership or a rolling lot option contract with a land owner. In either case, you need a seller who’s wealthy. He or she must be able to sit tight and go without money while you build and sell homes. You’ll split the proceeds after the project is complete.

To get the best land:

• Bid only on the best parcels.
• Prepare to pay 90%-100% of the asking price (if it’s reasonable).
• Schedule a meeting with the seller. “Relationships are built on mutuality of trust,” says Grant. “That’s why face-to-face meetings are so important. The seller gets to know your track record and past successes.”
• Bring photos of your homes and literature about your company, and tell the seller about awards you’ve won.
• Offer to build one or two “quick delivery” (spec) homes. “You must be financially prepared to do that,” Grant points out.

Your spec home must be well designed. It must be competitively priced not to make a lot of money, but to absorb lots. The land owner wants to know that you’re a good bet to do business with.

Don’t Dawdle Over Land

When Hernandez finds out about a piece of land, his goal is to sketch a site plan, prepare a pro forma, and send a letter of intent within 24 hours.

“If you can do that, you won’t miss out on the opportunity,” says the builder. “You’ll at least be in the conversation. Many times, it’s the first guy in the door who gets the most attention from the seller.”

To enhance the likelihood of getting a deal approved:

• Be familiar with zoning so you can develop a pro forma and site plan to suit.
• Identify your risk. “Only issue a letter of intent if there’s little or know risk of getting hurt,” Hernandez advises.

Here are some tips to reduce your risk:

• Know who’s likely to buy homes on the land you’re considering
• Know about the local regulatory environment
• Know how long the project will take to complete.

If a national builder is eyeing the same parcel, you may have the hometown advantage. “Since you’re local, you know who to call and can probably get the information sooner,” says Hernandez.

To reduce your risk further, get a financial partner to invest in the land. The goal is to use as little of your money as possible to tie up land and get it developed.

Alternately, you can go in on the land with another builder and split up the lots. “Obviously, you’d differentiate your product so you’re not going head to head with each other,” says Hernandez.

Whether or not you go in on a parcel with another builder, it’s a good idea to differentiate your product. “If you build what everyone else has, you won’t get the land unless you’re related to the seller,” says Hernandez.

Set yourself apart from the competition by perhaps building more density, building a product no one else in the market does, or perhaps doing a mixed-use project. Determine what the seller envisions for the property and deliver on it.

“The key to this is getting into the mind of the land owner and finding out what they want,” says Rutenberg. “If you can find a common thread — whatever they want and what works for you — that’s fine. It’s a good deal.”

A well-run, focused business gives you the mettle to compete for the best land. Get yours in order by picking up a copy of the PRO Builder Business Plan Guide. The book offers step-by-step exercises and proven methods for establishing your company’s goals, developing strategies, setting priorities, and evaluating results. It includes an electronic spreadsheet on CD for developing the financial section of your business plan. The price is $22.46 for NAHB members and $24.95 for non-members. Call 800-223-2665 or select this link to order it online.

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