You know that moment when you’re staring at a project and wondering if you’re about to make a fortune or lose your shirt? Brian Coffman, Director of Homebuilder Finance at Sound Capital, has been on both sides of that conversation thousands of times, and he’s got some real talk for builders ready to scale up.
Michael Krisa sits down with Brian to tackle a question that keeps a lot of builders up at night: what separates those who successfully jump from 10 houses to 50 houses from those who flame out trying?
Turns out, it’s not what most people think. It’s not about having the best crew or knowing the slickest subcontractors in town. It’s about understanding money, and more specifically, understanding how to work backwards from what a house will actually sell for to figure out if you can afford to build it.
Brian walks through the brutal math that trips up so many builders.
You’ve got your land cost, your build cost, and your expected sale price. Sounds simple, right?
Wrong. There’s financing costs, carrying costs, closing costs, and about a dozen other expenses that can turn a profitable-looking deal into a money pit.
He talks about builders using “big, fat, fuzzy numbers” when they should be accounting for every nickel, especially when they’re using other people’s money to scale.
“They use really big, fat numbers. They look at, here’s what I can sell this thing for, here’s what it’s going to cost me to buy the land, and here’s what it’s going to cost me to build, oh, look at all this profit I have. They don’t account for, well, you have closing costs, you have cost of funds.”
“Any successful builder needs to look at a project from the end of, here’s what we think these things will be worth, and they need to reverse engineer it back to the very beginning.”
The conversation gets into the real differences between working with traditional banks versus specialized construction lenders. Banks want you to check 20 boxes in exactly the right order, every single time.
Sound Capital’s approach is different. They focus on the relationship and whether the deal makes sense overall. Brian explains how once you’re approved with them, you don’t have to jump through the same hoops for every project. No more sending tax returns repeatedly or re-proving your experience they already know about.
“I’ve heard some ridiculous numbers of a guy who needed to borrow a million dollars to build houses. And the bank said, no problem. Just deposit a million dollars into our bank. And it’s kind of like, well, if I had that, I would just use my own million dollars.”
There’s this moment where they talk about builders who want to make the leap to development, buying raw land and creating subdivisions. Brian doesn’t sugarcoat it. He’s seen too many builders get excited about that “great deal” on farmland without asking the hard questions. Where are the utilities? What’s the municipality going to require? That cheap land can turn expensive fast when you realize environmental studies and infrastructure costs weren’t factored in.
The conversation touches on something most people don’t think about: builders actually help each other succeed. It’s not some cutthroat competition where everyone’s trying to steal business. If you’re building quality houses in an area, that sets good comps for the builder down the street. Everyone wins when the neighborhood improves.
Brian shares some war stories, like the builder who hit a boulder the size of four Greyhound buses during excavation. Budget went from $350,000 to $800,000 overnight. That’s why the 10% contingency isn’t just a suggestion, it’s survival insurance.
“You should probably always build in a 10 percent contingency on their budget, unless it’s some particular house… that, Oh, we’ve already built this house 14 times in the last six months, we know to the nickel, how much it costs to build.”
Michael and Brian discuss Sound Capital’s approach to builder relationships, including their ambitious goal of funding one million doors over five years. It’s not about chasing the biggest, flashiest deals. It’s about helping builders create attainable housing that working families can actually afford to buy.
The episode wraps up with practical advice about staying focused on what sells. Don’t get distracted by the fancy houses that look good in magazines. Build what people can actually afford to buy. The successful national builders didn’t start with million-dollar custom homes. They started with cookie-cutter houses and built more and more of them.
“Don’t get distracted by shiny objects… Build a product that the amount of people that can show up and buy it from you when you’re done is the largest chunk of society possible.”
This isn’t about getting rich quick or no-money-down fantasies. It’s about the real path from being a tradesman to being a business owner, and all the financial realities that come with making that transition successfully.
“10 percent compared to split in half, your profit is still cheap. We’re a cheap partner, so to speak, even though we’re not your partner, because we’re not going to tell you what we want you to do with the house.”
About Brian Coffman
Brian Coffman brings extensive real estate and finance expertise to his role as Director of Homebuilder Finance at Sound Capital. He began his career in sales with a Fortune 500 company, advancing to senior management before transitioning to private lending in 2007.
Brian successfully navigated the financial recession while building a portfolio of over 250 properties and founded a hard money lending company in 2009 that funded more than $1 billion in loans. His hands-on experience includes personally valuing over 10,000 properties, giving him deep market insight that benefits Sound Capital’s clients.
Brian has been a valued member of the Sound Capital team for nearly four years, where he leverages his comprehensive understanding of both lending and real estate investment to drive homebuilder financing solutions.
Brian Coffman on LinkedIn: https://www.linkedin.com/in/briancoffmanaz
Sound Capital’s website: https://soundcapital.com
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