Business Description
For sale is a 29-year-old land development, home builder, and realty company. The company specializes in building Master Planned, Mountain Home, and Golf communities in the growing suburbs of desirable cities. It has built over 3,500 homes, has 7 active communities with open building lots, and 46 homes currently in production.
The company does not build spec homes or finance a home buyer’s construction. The buyer either pays cash or takes out a construction loan. They also have land options instead of buying land outright. The average net earnings per house are currently 9% to 15% of the construction costs.
The business partners with financial backers who front the capital for the projects, while the homebuilder runs the operations. One investor gets paid back as each house sells. In the current agreement they will recoup $25k for each sold house until they reach $2.5m as the current outstanding debt owed to them. The partnership will transfer to the buyer and the buyer will inherit this debt unless they’d like to propose a different deal structure. Thus a buyer could think about it as being a $7m deal debt-free, or $4.5m with the $2.5m debt.
While the business has generated great cash flows historically, the true value of this business for a buyer is in the land options and existing operations for someone to continue growing.