Hillwood Homes: Building in Utah

December 15, 2023 00:17:32
Hillwood Homes: Building in Utah
Deeds in the Desert
Hillwood Homes: Building in Utah

Dec 15 2023 | 00:17:32

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Show Notes

Join Pat Vassar, Director of Underwriting, alongside Sidney Allsop and Troy Turner from Hillwood Homes. Delve into the details of their construction ventures in Utah, with a special spotlight on the ongoing Silver Creek project. The trio also shares a glimpse into the exciting plans lined up for the next year, exploring topics such as interest rates, impacts on sales, buying incentives, sale prices, and an update on the progress at Sky Meadows. Tune in for an insightful episode on the dynamic world of real estate with Hillwood Homes.

Hillwood Homes is a custom home builder that was created in 2018. The three owners have combined experience of over 30 years building high-volume production homes as well as custom homes.

Explore more about Hillwood Homes and their innovative projects by visiting their official website: https://www.hillwoodhomes.com/

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Episode Transcript

[00:00:00] Speaker A: Welcome, listeners. Welcome, listeners. [00:00:03] Speaker B: You're listening to the deeds in the. [00:00:05] Speaker A: Desert, the place where real estate investors tune in for the latest news and available investments at Ignite funding. If you're on the hunt for a low effort passive income stream, then turn up that volume and pull out the hammock as we get ready to feed you your weekly dose of real estate investing insights. [00:00:30] Speaker B: And welcome back to another episode of Deeds in the desert. I'm your host, Pat Basser. And today I'm joined by the masterminds of Hillwood homes, Sid Olsup and Troy Turner. Welcome, guys. [00:00:40] Speaker C: Thank you. Thanks for having. [00:00:42] Speaker B: Well, you know, this isn't Kansas anymore, as totem might say, but you guys are down from Salt Lake City to visit us here in Las Vegas. How's the weather treating you guys out there? [00:00:53] Speaker D: It's fine. I mean, really, we're used to much worse. And so right now, when you're in this transitional weather, it's actually pretty nice. I don't mind it. [00:01:01] Speaker B: And the reason I bring it up is the weather changes. Obviously, up in Utah, you have some freeze thaw cycles that you have to deal with. How does that impact what you're doing down here? [00:01:10] Speaker C: We don't have any of that. Yeah. So we have to pay close attention to storms that might be coming in. When we're digging foundations, we can't leave them open for very long. They'll freeze, which causes problems with footings, et cetera. So we pay close attention to that. One of the things that really gets us right now, this time of year, is how quick the sun goes down and the trades can't work when it's dark. So it cuts their hours from eight to 12 hours a day down to six, maybe, that they're actually on site working. And then last year with the winter we had, the cold guys just move slower. So it just takes a little longer in the winter. [00:01:48] Speaker B: Got you. So not just from a temperature standpoint, but the sun being out standpoint. What trade specifically or what construction phases are specifically impacted by the cold. Concrete. Anything else? [00:02:00] Speaker C: Concrete for sure. Framing the cold, they'll just. [00:02:04] Speaker B: Slower. [00:02:04] Speaker C: They hit their hand with the hammer. It hurts more kind of thing. So those guys, the mechanicals, when we're doing the four way, the hvac, plumbing and electrical guys, they're inside. But, man, those houses hold the cold up there in. And they just. It's just cold. They move slower. [00:02:21] Speaker B: Absolutely. Speaking of Park City, that's the pride and joy of one of your communities, Silver Creek. Right. What do you guys have going on up there. What have we done for you? And maybe more importantly, what we have in store over the next maybe twelve months or so. [00:02:37] Speaker D: So what we've done to date, we've had one acquisition that included about 33 lots, and then we've had some follow ups with that. And total, I think we've built about 45 homes up there, and they're all single family, detached, reloaded homes. And we are in the process currently of closing on an additional 31 homes with another phase coming up of 34 more lots. They're finished lots. So there's something that we can get into construction and contract with pretty quick so that we can have people excited about it as we're continuously moving forward. [00:03:08] Speaker C: Yeah. And you guys have provided the construction financing for. I mean, right now I think we have four out. Three. [00:03:15] Speaker B: I believe it's three currently. [00:03:17] Speaker C: We just closed one about a month ago, but, yeah, so three out, all of those are sold and the next one will close in a couple of weeks. And it's just up there. We're seeing if you can build it, people will buy it. So it's still a pretty good market up there. [00:03:34] Speaker B: Absolutely. And when you say sold, what does that really mean? Obviously it doesn't mean close because you still have a loan outstanding. But what does that sales process or sold mean to you guys? [00:03:45] Speaker C: Yeah. So for us for it to be sold, you've come in, if it's a spec home, you've obviously seen the home that we're building, signed a contract for an agreed price, and we're just basically trying to finish the home for you. And then when it's done, we'll close on it. They bring in their long term financing. We have a preferred lender. Cross country mortgage is our preferred lender, but we can't make anybody use them. So most of the people up there in Park City are cash. Like, for example, this guy that's closing in a couple of weeks, I think he's bringing in three quarters cash on a $1.3 million home. So then I'll just get a small loan for the rest and it's pretty easy. [00:04:23] Speaker B: Got you. And is that what you're seeing a lot of is a lot larger down payments given the interest rate environment we're in. We are. [00:04:30] Speaker C: And what we'll see is, for example, this person will put about 800,000 down and use some of that to buy his rate down. And we're going to give him a little bit of an incentive to help him there as well. And then he'll be, I'm just guessing, but his interest rate will probably be in the low sixes, high fives, and for on a couple of hundred thousand dollars. And he'll be happy with that. [00:04:53] Speaker B: Great. And when you talk about incentives, what type of incentives are you offering right now? You hear a lot of home builders struggling because of the current interest rate environment. What is an incentive? Is it on the interest rate side? Is it on upgrades, lot premiums? What does that really entail? [00:05:11] Speaker C: Yeah, so the incentives we offer right now will include a free finished basement. So all the homes we build in Utah have basements and the base price does not include the finished basement. So we'll offer that as an incentive anywhere between. That's a value of 30 to 50,000, just depending on the size of the basement. So we'll throw that in if you don't want that. We are also offering to buy your interest rate down, basically give you more points towards closing costs that you can then use to buy the rate down with our preferred lender. [00:05:38] Speaker B: Great. And that's just a way to get more people in the door. More closings happening. [00:05:43] Speaker C: Exactly. People. Right now, interest rates are the biggest talk. [00:05:47] Speaker B: Right. [00:05:47] Speaker C: Everybody's worried about it and that kind of thing. So we were spoiled when rates were in the threes and fours. Don't know if we'll ever get back there, but if we can get someone right now we're finding if someone can get in the low sixes and high fives, they're pretty excited about that. [00:06:03] Speaker B: Got it. How has that negatively impacted your sales? Last year when you guys were in here, this is obviously your second time around, you were projecting certain amount of sales for 2023. How has that been impacted by the rates, by the delays, by whatever else that we are seeing in today's market? [00:06:22] Speaker C: Yeah, we've definitely seen an impact on the sell side. A lot of stuff that we were closing in 2023 versus selling was sold at 2022. And we've been able to close all of that out. And then what we're seeing is the difference in buyers. Right. The buyer profile. You used to have a buyer that had sold a home or was in the process of selling a home and moving up a move up buyer like we call it. [00:06:45] Speaker B: Right. [00:06:45] Speaker C: And now really the people that are buying are the people that don't have anywhere to go, like their rent is up or their lease is over or whatever. They're moving for a job. Those are the buyers we're seeing right now. You're not seeing a lot of move up buyers at this point. I think they'll come back, but we're probably a good six months away from seeing more of those. [00:07:04] Speaker B: Got it. And the price point where you're currently operating in Utah is what, compared to the average new home price out there, we're probably. [00:07:12] Speaker C: Our average sales price is in the high, mid to high eights, I would say we're actually. [00:07:17] Speaker D: The prices that we're closing are high eights into the nines on average. But we do have homes in Spanish Fork, a community called Sky Meadows, where we start a little bit lower than that, and that'll be more of a market rate kind of family oriented community where our communities up in Park City midway are more catered towards a buyer that probably won't use the home as a day to day home. [00:07:42] Speaker B: Gotcha. And the buyer that will be using the home as a day to day home is buying in Sky Meadows, another project that we help you guys finance. What is the latest and greatest there? [00:07:52] Speaker D: So right now, we own all the lots, and we're in construction on two homes. One of them, I believe, is framing, is finishing up this week. And the other one, drywall, is supposed to be done or was done last week. [00:08:06] Speaker B: Okay, great. So the first two of 29 are going up. Is that accurate? [00:08:11] Speaker D: 34. [00:08:13] Speaker B: 34. [00:08:13] Speaker C: That's right. We have a few more in for permits and seeing people moving down there. That's obviously a very rate sensitive buyer down there, because starting in the mid six s to low sevens for about 2100, average finished is where you're at right there. And in Utah, you're seeing a 400 $500,000 square foot home is either a townhome or a fairly older existing home. So a lot of new construction in that square footage is in that six to seven range that we're seeing. [00:08:50] Speaker D: Yeah, we believe we're right within the market band for that price or, sorry, for the square footage. And for the lot size. [00:08:57] Speaker B: Great. And of those 34 lots, you're already building on two, you said you have a few more going in with the city right now to get permits on. What is your thought process on building specs? How many spec homes do you want to have compared to presold homes? And what is the rationale behind that decision? [00:09:13] Speaker D: We would like to have some specs coming into spring next year, so that'll provide us with inventory. As we're seeing people come back to the market, as the rates have dropped over the last few weeks to a month, we're seeing more activity, whether it's people walking in, calling in, or just reaching out to our agents and we feel that if we have a few specs per community, one to two specs per community, that that'll provide someone that comes in and wants a home or needs a home now, something that they can get into quickly. And once we get that spec into contract, it would incentivize us to then go get another spec started so that we can continue momentum in the community. [00:09:49] Speaker B: Great. Yeah. And obviously, having a product that they can walk through and see is one thing, but also having one move in ready or close to it, is it a whole different ballgame? What is your average time from when you sign a contract to be able to deliver it to a homeowner with a presold home? [00:10:07] Speaker C: Right now, from time you sign a contract to the time, we're about ten to eleven months. [00:10:12] Speaker B: Ten or eleven months. So does spec obviously changes that? When you typically sell a spec home, at what stage do you typically sell it, and how long is that from selling it at that point to close? [00:10:23] Speaker C: No, good question. We don't list the home to be as available until framing is complete. If we're specking it, just because that's a little easier for us to build it without people wanting to change stuff. So that's one thought process with the specs, is get it to a certain point where we're comfortable with what we've selected and then put it up on the market. And really, once from framing to complete where you can move in, you're looking at 60 days to 70 days. From that point on, we're moving pretty fast. [00:10:53] Speaker B: So that really shortens the cycle. If somebody's moving to Utah now, they can buy a new home without waiting that ten to eleven months. Perfect. And that ten to eleven months is not that long in the future, but it is a little bit unknown. Right. None of us have a crystal ball. We don't know where things are going. But if we had to prognosticate as to where the market is going in Utah with single family homes, where do you see that going over the next twelve to 24 months, hopefully in the. [00:11:20] Speaker C: Next twelve to 24 months, we see rates continuing to drop. We're kind of hoping slowly, slowly and steadily, instead of just one big drop, because I feel like there's a lot of pent up demand in Utah right now for people that are needing a home, but they might be renting or maybe even living with someone else at this point, just waiting for rates to drop because there's not a lot of inventory out there, even with existing homes. There's just not a lot in Utah right now. So we anticipate in the next twelve to 24 months that rates come down, that we want to start as many specs as we can smartly in our different communities, and just be ready for the next big building cycle. [00:12:00] Speaker B: Absolutely. And speaking of building cycles, how is the building cycle out there? Obviously, we all know that home sales drops off in the wintertime. When does it typically pick up for you guys, and when does it typically start to die down? [00:12:14] Speaker C: We will see a big increase, but we'll start to see it ramp up the middle to end of January and by March, April, May. Those are the big selling times in our market. A lot of people know that there's a build time cycle, so they plan for that accordingly. And if what we see continues to happen with interest rates and things, we call it kind of a perfect storm could happen march, April, May, where rates are low, that's the peak selling season anyway. And here they come. So we got to be ready. [00:12:45] Speaker B: Absolutely. And being ready means having some sticks going vertical for you guys on the Stackholm side and having some permits in place on the presold or new home construction side. Where did you end up finishing in 2022 compared to 2023 with your new home closings? And how do you envision that being over the next? Let's call it 24, maybe even in 25. [00:13:10] Speaker C: Yeah. So we doubled our closings from 2022 to 2023, and a lot of that 2023 closings were the first of the year due to the middle of the year with stuff we had sold in 2022, but we were able to do that. And then we anticipate now. At that point, we were really only in two of our communities going, and now we're in six. So we anticipate closings for 2024 to double as well, as long as we can build them. Building them will be our biggest restraint, I think, at this point, because we don't have a spec right now that is past framing that hasn't been sold. So it started as a spec, got to framing, we listed it, and it's sold. So all of those are sold. We do have some specs that are not quite to framing or not ready yet to list, but we feel as soon as we list those, they'll go quickly, too, and all that will close in 2024. [00:14:00] Speaker B: That's great. What does that mean for a lot count, typically? Kind of. The rule of thumb is most home builders want a two year supply of lots. Where are you guys currently with your lot count? And do you see that expanding, given the fact that you expect sales to. [00:14:17] Speaker D: Double in this next year, as we currently are today. We've got enough inventory to last through 2024 and through most of 2025. These new lots that we're acquiring will get us through 2025 and 2026 with the increase in sales. And we'll be looking for more things to purchase coming up probably in the next three months as we're closing on those in Silver Creek, but then an additional one in another community in West Jordan. [00:14:43] Speaker B: Perfect. With these new acquisitions that you currently have in the pipeline as well as ones that are coming up in three months, are they fitting into the classic Hillwood Homes brand? Is it all the same type of product, or are you guys expanding out into different type of products or maybe even different geographies? [00:15:00] Speaker D: So the West Jordan property, which is in Salt Lake county, is just north of where we're doing some homes in spanish fork. And that's going to be project that's going to be similar to, you know, similar kind of lot size, similar product type, similar price point. I would say we're probably sticking with what we know, and the reason for that is we know what our costs are. We know how to build the property, or I should say, how to build the home. And so we kind of want to stick to that, stick to a formula that works. [00:15:28] Speaker B: Got it. Any parting thoughts you want to bestow on us and our investors as we wrap things up here? [00:15:35] Speaker D: The news out there is KSL is the big kind of news entity, I guess you want to call it anyway. They're projecting or stating that as of today, the Utah market is 30,000 units short. And that's why I wanted to portray as there's going to be more buying activity. There's not enough inventory. There's not enough people building homes. And so we see this as a time where when we're looking at ramping up in 20, 24, 20, 25, 20, 26 that as we. What do you want to call it? Reload or continue to build up our inventory? We should be well positioned to be successful to hit that. [00:16:09] Speaker B: Absolutely. And I love that. It's kind of the same thing or same lines I talk to our sales staff about, and I call it the field of Dreams modeled. If you build it, they will come. Right now because of that shortage, it's just pent up demand, waiting and waiting patiently or in some cases impatiently for that next few sticks to go up in the air before they pounce. And as you guys have seen, once you start building those specs, they will come. They come. [00:16:35] Speaker C: Absolutely. [00:16:36] Speaker B: Well, I appreciate you guys stopping by. Hopefully we were able to get you out of the cold weather for a little bit and hopefully not too long so you can get back at it and make sure those sticks are going up. [00:16:46] Speaker C: Sounds good. Thank you. Thank you. [00:16:49] Speaker A: Thanks for joining us this week on deeds in the desert, where short term investments meet long term investors. We hope you enjoyed the content so much that you share it with all your friends. Who doesn't like learning about passive fixed income, right? [00:17:05] Speaker B: Night. [00:17:05] Speaker A: Still hungry? For more education, visit our [email protected], or if you're ready to take the leap and start investing, give us a call at 702-7610 and schedule a free investor consultation.

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