Single Family Building/Development Modeling Resources??
Does anyone know good resources to learn more about the process of Single-Family Development, specifically modeling, understanding the process, costs associated on both a smaller/regional type builder to the major players such as Toll Brothers, Lennar, etc? Any courses, textbooks, general resources that are good quality would be very much appreciated.
Very interesting space, not sure why it isn’t discussed much more
Not a helpful comment, but I have yet to encounter any such resources (or at least good ones). It’s an interesting space that, to me, seems much more fragmented than other corners of real estate. I don’t know if others here would necessarily agree with that, but if true, such fragmentation might explain the paucity of useful public resources.
If others have a different viewpoint I’d definitely be curious.
It's best to think of home building in terms of manufacturing and land development merely as a means of producing a widget. The modeling you are accustomed to in commercial real estate is going to be dramatically different in single-family land development because ultimately the home builder is trying to feed the machine and as long as they can sell the home for a profit they will continue to build. Think of it more in terms of a consumer discretionary good rather that a real estate investment.
If you, or anyone, has some very specific questions - more than happy to answer with what I know.
Thank you for the response and willingness to help. If you get a chance I would love to hear your perspective on the following. Please let me know if you like me to add/edit for clarity.
(i) How much different is the analysis between a institutional/national type shop relative to a regional developer aside from scale? Is the analysis similar or are the top players building extensive models where as the smaller firms more BOE?
(ii) How do you make accurate assumptions on costs for large scale projects? Is it all subcontractor bids, pricing software, or just learned over time?
(iii) What are considered good returns for both a large scale transaction vs the regional shops? If Toll Brothers Reported a Gross Profit of 21.6% for 2Q2023 and are like a fine tuned machine is that the top end of where projected returns should be? What other variables are considered to make a deal more/less appealing?
(iv) would you recommend anywhere/resource/anything that I could work off to learn how to model either a larger scale deal and/or regional/smaller type development?
Just to clarify, are you talking about land development or home building? They are different, but complementary, businesses. And yes, some home builders also have in house land development - but they are still separate functions.
As an example, a DR Horton ($DHI) both develops land and builds homes. But Forestar Group ($FOR) just develops lands. Then there are yet other builders that only build homes and do not develop land.
Although I am curious about both. I was more so referring to home building.
I will answer the question from a home builder's point of view and then let you, or anyone else, follow-up with further questions or questions on land development, which is a completely different business.
A major difference between SFR models and other development models is that SFR developments can cycle cash. You can use the sales proceeds from units completed and sold earlier to fund the construction of later units. So the amount of equity you need to raise from outside investors is less than the overall amount of non-debt cash you need to complete the project.
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