The “five Ls” is a term recently coined by National Association of Home Builders Chief Economist Robert Dietz in describing builder challenges going into 2019. He notes that labor, lots, laws, lending and lumber – the five Ls – will create significant challenges.

Dietz was on target in highlighting these issues. But, creative approaches to addressing them can lighten the load. Doing exactly that has helped our firm, Rotell(e) Studio(e) to weather the market, and grow in the process.

Our parent company, Rotelle Development, has been in the residential building business for 30 years. We were, and in some respects still are, a traditional builder of communities ranging from luxury residences to starter homes, mostly in Pennsylvania. But, in 2011, we made a dramatic shift in our business approach with the creation of Rotell(e) Studio(e), a custom-home-building studio focused on helping buyers create affordable, custom homes.

Our new business model was based on research that showed there were many potential buyers of custom homes who believed that custom building was too costly, and the process too difficult.

While Dietz’ concept of the 5Ls hadn’t been verbalized at the time, our new approach addressed them. We simplified the custom home process by doing more up-front to lessen the impact of issues relating to lots, laws, lending, labor and lumber.

Here’s how we’ve addressed the 5Ls:

Lots and Laws

These go together, because the great majority of laws challenging the building industry have to do with land. Restrictive regulations at the federal, state and local level make it incredibly difficult to find buildable lots. Our Lot Scrub program makes it easier for ourselves and our buyers. We help buyers find land, then do the work upfront to make sure it is buildable. Our land experts will calculate the cost of the land and infrastructure improvements and identify all zoning or regulatory issues. Buyers commit to building a home on the land ONLY if it meets all cost and building requirements.

Lending

While lending restrictions have eased a bit over recent years, there are still barriers for buyers of custom homes. We help by vetting lenders every six months, reviewing their track record of approvals, their cost structure and their interest rates. We look for lenders who will provide a construction loan that will evolve into a 30-year fixed mortgage. Also, we find lenders with a float-down option from a higher-to-a lower rate if rates decline by the time construction is completed. We don’t have an affiliation with these banks, but we do refer our customers to them. That makes it easier on the buyer, and increases the likelihood that they’ll secure a mortgage.

Lumber

Whether the cost of lumber is low, high or fluctuating, we forecast our home prices a year out – and commit to maintaining those prices for that year. In 2018, as the market experienced an explosive increase in lumber prices, we took a hit in our returns. Since then, lumber has dropped significantly. We’re in for the long term, so we take the good with the bad. As a private company, we don’t have to please Wall Street. That allows us to maintain stable prices for our clients, and a solid reputation for our company.

Labor

There’s no question that finding quality talent in the construction industry is difficult. At Rotelle, we attract quality people and have very little turnover, thanks to a positive and collaborative corporate culture. We bring our crews in every other week for breakfast, listen to their feedback on job site issues, and provide trainings. Having fun and relaxing is important, so we treat our workers to sporting events and outings. We also honor family and personal time and give our workers schedules that allow them to enjoy both. We respect our people, and always pay them on time. Our ability to retain our workers allows us to exceed expectations in project completion, as we’ve significantly reduced the time it takes to build a custom home.

The Sixth, and Most Important “L”

The Rotelle(e) Studio(e) business model is what we call an open “sandbox” where clients can enjoy the process of creating exactly what they want and need. In doing so, we’ve realized the most important “L” word of all. We love what we do.