Finish-Your-Own Houses

For harried house hunters in 21 states across the southern tier of the U.S., the real estate ads seemed too good to be true: "Jim Walter Homes. Priced from $1,395. Nothing Down, 100% Financing!" But true they were. The houses were shell homes--frame dwellings completely finished on the outside, but with plumbing, heating, wiring and interior decorating left as unfinished business for the enterprising buyer. So enticing have they proved that, despite a general housing slump this year, the Jim Walter Corp., the biggest U.S. builder specializing in finish-your-own houses, last week reported earnings up 21.4% to $3,424,465 for the year ending Aug. 31 on shell homes sales of almost $37 million.

In five short years the Jim Walter Corp. has climbed into the No. 2 spot among the nation's builders of homes finished or unfinished (trailing only National Homes), built and sold nearly 14,000 in its last fiscal year. More remarkably, since shell homes do not qualify for FHA or veterans' mortgages, the Jim Walter Corp. financed and insured most of its house sales itself, often with no money down, only the pledge of the land (which the buyer must own outright) against default. The company's assets have grown from $5,000,000 in 1956 to nearly $80 million today; sales increased nine times, profits ten times.

The Best Risks. The man behind the phenomenal growth of the company is a lanky, cigar-smoking Florida salesman just turned 38. Jim Walter was a truck driver in 1946, when he saw a newspaper ad for a shell home for $1,195. It looked like a bargain, and he borrowed the money to buy it. It also looked like a good business, and he borrowed some more to go into partnership with the builder, O. L. Davenport. In 1948 he bought out Davenport for $49,000 and struck out on his own, finally in 1955 was big enough to form the Jim Walter Corp.

Walter had difficulty raising capital in the early days. Banks were leary of his financing proposals for the house buyers, but Walter knew that the people who bought unfinished homes would be mainly people who worked with their hands--and not likely to have ready credit. He was gambling that buyers who would have to spend at least as much as the purchase price to finish their houses, plus countless hours of their own labor, would turn out to be the best risks. They have: Walter homes have a repossession rate half the national average. Since Walter has a lien on the land plus the house improvements, he usually comes out ahead.

$4,000 into $102,000. His first boost was from Walter E. Heller Co. (TIME, Feb. 15), which loaned him $1,000,000--at 10% interest. In 1955 he raised more capital by selling bonds with warrants convertible into common stock. The stock-bond package offered at about $4,000 in 1955 is now worth $102,000, and seven of the investors who gambled on Walter have made more than $1,000,000 each since then.

Today Walter offers some 45 different styles of shell houses, employs 530 three-to five-man crews of subcontractors, who put up the shell on the home buyer's plot. Walter houses sell for $1,095 to $3,495 depending on size and style, and he keeps costs down by paying his builders a fixed fee per house, supplying everything except lumber for the construction from his own Dixie Building Supplies Inc. Last year Walter cleared an average of $1,000 profit on every house he built, on an average sales price of only $2,500. Even so, the home buyer saves 20% to 25% on his shell, claims Walter, compared to the cost if the buyer contracted on his own to have it built.

Since the 90% of Jim Walter Corp. house buyers who finance the purchase through the company pay as much as 12% interest on four-or six-year terms, Walter last year grossed more than $5,000,000 in interest payments, some $1,600,000 more than the firm paid out for its own interest and bank charges. Beyond this, there is the profit of the subsidiary company that insures the shell homes against fire and theft. Adding it all up, Jim Walter has made an estimated $9,000,000 in shell housing.

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