Making a Good First Impression Kara Homes

March 5, 2005 -- Karagjozi, the president and founder of East Brunswick-based Kara Homes, has been getting home buyers' attention and keeping it long enough to have been named the fastest growing homebuilder in the nation by BUILDER MAGAZINE in 2002.

Kara Homes, which has 13 developments in Monmouth and Ocean counties, topped the magazine's list by going from $1 million in revenue in 1999 to $34 million in 2001. For a homebuilder, revenue is the value of sales closed during a particular time period.

Kara remains small in comparison to long established builders such as Middletown based Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, which had revenue of $1.74 billion in fiscal 2001. But Karagjozi said the company has made big strides since he started with four employees in a leaky sales trailer in October 1999. He now has 140 employees.

Karagjozi said he tries to grab a home buyer's attention by combining features usually found in an upscale home or mini mansion with a price that is still within reach of most middle-class people.

Buyers want more-

Home buyer today do not want the house they grew up in, he said, they want something more grand. One key element is the two-story-high entry, Karagjozi said. "That's what you always you always saw in the movie."

Other features are a balcony that overlooks the first floor, high ceilings with skylights, a lot of sunlight in the kitchen and dining areas, whirlpool tubs and impressive kitchens and bathrooms, he said.

"Kitchens and bathrooms help sell homes," Karagjozi said. "And the family room, the family room has to be awesome, whenever possible. That's the hook."

Kara Homes attempts to offer these elements at a price the middle-class buyer can afford, Karagjozi said. The average price of the company's single-family homes, which range in size from 1,700 to 5,000 square feet, is about $400,000 he said.

Good timing-

Karagjozi said that he picked a good time to start the company, given the low mortgage rates that have fueled booming housing market, over the last three years.

Karagjozi, who received a bachelor's degree in marketing from Boston college in 1981, said he was reminded of a quotation he once read from the head of a company that had been successful: "First was timing, second was luck and third was talent."

Karagjozi was not always lucky. In his first attempt to make the transition from real estate to developer be encountered several obstacles.

Karagjozi had purchased an option on site in Old Bridge in 1986 and had received preliminary approvals by 1988. "That was the beginning of the end," he said. "And I knew it was going to happen because I was 28 years old at that time and didn't know anything. My professionals are telling me I need off-site improvements that cost about $3.5 million I'm saying, "What's an off-site improvement"

In addition to the legal and engineering costs needed to get the project approved, Karagjozi and his parents had to spend $25,000 every six months to keep their option on the property alive. They also had to purchase eight other parcels near the site.

Meanwhile, the demand for housing slackened. Of the initial $915,000 invested to try to get the project started, Karagjozi said he risked $400,000 personally. Some years his wife, Lysbeth, earned more money at her job as a flight attendant then he did, he said.

"You know the old saying 'No pain, no gain" he said with a laugh. "I've had a hell of a lot of pain."

Eventually Karagjozi and his partners teamed with an established developer Matzel and Mumford, and the project, High Pointe was completed with 188 homes. But Karagjozi said it was not until 1995 before he recovered his initial investment and began to see a profit.

Karagjozi and his wife and daughters, now live in High Pointe. He believes the key to the housing market is the monthly payment. As long as it does not cost much more per month to buy a house than it does to rent, homes will sell, he said.

Keith T. Gumbinger vice president of HSH Associates, a Butler based company that tracks mortgage rates, agreed.

Rates create demand-

"The decline of interest rates means more people could afford to buy homes," he said. "That helped produce demand in the market. That keeps affordability at a relatively high pace."

As long as mortgage rates are low, and they are currently near 40-year-lows Gumbinger said, people can afford the monthly payment to buy a house, even at what would used to be considered "high" prices. Average rates for a 30-year fixed rate loan are at 6.13 percent and borrowers can get lower than 6 percent on a 15-year loan.

Karagjozi truly got into the market at a great time. Karagjozi said he knows boom times won't last forever. He said his goal is "to be able to stay financially solid for the worst of times. Many builders cannot make it."

One option is to acquire more capital by taking privately held company public. "We might entertain that," Karagjozi said," We're analyzing it." Kara's web page is www.karahomes.com

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