Derek Nelson faced the toughest call of his homebuilding career in summer 2009: Start a business from nothing or go to work for someone else.
Nelson had been a superintendent and later president for the Lakewood Ranch-based Arthur Rutenberg Homes franchise for the previous 25 years. That franchise was run by Pete McNabb, a well-known local builder, and Nelson's stepfather. It was a successful franchise, too, with 95 employees and 125 home sales a year at its peak. That was good for $100 million a year in annual sales.
But the recession led to a big sales drop, and McNabb retired in 2009. The franchise was left inactive, which is why Nelson had what he calls his “come to Jesus” moment. He had offers to work for some local homebuilding firms, but he ultimately decided to launch his own Arthur Rutenberg Home franchise.
The effort began with two lots in Lakewood Ranch that cost $700,000. No bank would give McNabb a loan, so he paid for the lots from his and his wife's savings. “While we were nervous,” says Nelson, “we felt like the market had bottomed out.”
The decision turned out well. The firm, an Arthur Rutenberg franchisee, run under the name Nelson Homes Inc., is now one of the fastest-growing niche builders in east Manatee County. It had five sales in 2010, its first full year, and it more than doubled that count in 2011, with 12 sales. The firm sold 33 homes in 2012, and has 18 sales through April 2013, which includes 10 in March.
Annual revenues at the firm, where the average sales price is $711,253 and several are in excess of $1 million, are up 236%, from $5.3 million in 2011 to $17.8 million in 2012. The firm has 20 employees, including seven hired at the end of 2012. Three more were hired early this year.
“We are busier than ever,” says Nelson. “We are excited about the future.”
Nelson attributes some of the success to a turnaround in the high-end market, something several other homebuilders up and down the Gulf Coast have also seen. Inventory in that segment is also low, a supply-and-demand factor that aids homebuilders. “People are tired of waiting and putting their life on hold,” says Nelson. “They are willing to buy a second home now.”
They will even pay more: Nelson says he's raised prices 12% to 18% per home on most models in recent months — not an insignificant feat in the $1 million and up market. About 75% of the buyers pay in cash, says Nelson, so financing isn't often an issue.
One internal challenge Nelson wrestles with is finding and keeping top employees. Other fast-growing builders in the region have struggled with a labor shortage, and Nelson will monitor that situation during the current growth phase. In addition to Lakewood Ranch and The Concession, a luxury community in east Manatee County, Nelson's firm builds custom homes on Longboat Key, Siesta Key and Lido Key.
“I'm not looking to be the biggest guy,” says Nelson. “I'm in the business because I enjoy seeing a piece of raw dirt become a home.”