Offering entry-level homes is not difficult. The difficulty comes in trying to build an entry-level model that is successful and profitable.

Eric Lipar, CEO of LGI, has proved successful in this somewhat margin-challenged area of home building. With more and more housing conversations centered around affordability, finding the right formula to build entry-level homes is critical. Lipar has built that success by creating a model that operates on four key forces:

  1. Targeted marketing
  2. 100% move-in ready homes
  3. Highly trained, professional sales force
  4. Focus on high-growth markets.

In this short video, Lipar explains the different aspects of each of the four forces. The model has brought LGI astounding year-over-year sales growth and also led to expansion into several new markets. Last year, the company moved into Colorado Springs, Colo., Jacksonville, Fla., Nashville, Tenn., and Seattle. In 2017, it has moved into Portland, Ore., and Raleigh, N.C.

The entry-level model can be sustained by this systems-based approach, even in an environment when the costs of building are increasing, Lipar says. The system has to maintain itself and allow the flexibility to make the adjustments needed to counter the challenges like mounting construction costs.

Lipar is betting that the value proposition of homeownership will continue to be attractive to renters. And at the same time, he knows that affordability will be key. So, LGI will be looking to offer smaller square footage and at the fit and finish of the homes in order to offset the rising costs and to keep already thin margins in place. Lipar predicts these challenges will not end any time soon, going well beyond 2018.

LGI also is focusing on using targeted marketing. The company uses a combination of science and art to analyze and execute on data. It tracks the amount that is spent on advertising and then breaks it down to understand the true effectiveness and ROI of the advertising. Lipar says that the company knows the cost of a lead and how many of them turn into sales, breaking them down into a true cost per lead and cost per sale. LGI is then able to use this data for training and coaching with individual sales representatives.