After two years of being in the home-building business in Annapolis, Robert Lipson and Dennis Gilligan are holding their own, which may be considered a small triumph in this difficult time for beginners as well as established builders.

The partners maintain that builders cannot survive in a tough housing market without being "mostly right" about the basics of their business.

Here's how they say they are surviving:

Product. Their staple has been a line of two-story, semi-contemporary town houses in Painter's Hill, part of a total 45-acre tract. Presidential Realty Corp. started the project in the mid-1970s and sold out to RLDG Inc. (Lipson and Gilligan) in 1979. Only 10 of a total 148 "towns" remain unsold.

The partners have recently opened a line of three new, highly contemporary detached houses on a center part of the development between Hilltop Lane and Forest Drive. Models were completed a few weeks ago, and six contracts have been signed.

The single "Stonecreek" homes are on relatively small lots, have three or four bedrooms, flowing floor plans, plus skylights and vaulted ceilings. Architect Paul Marks of Towson and Robert Hammond of Annapolis designed the houses, which range from 1,609 square feet of living area to 1,820.

Models are a two-story saltbox, a front-to-back split-level and a one-story rancher. The basement is optional in the ranch model that has one-level living designed to attract empty-nesters. "This model provides an in-town alternative to the adult community of Heritage Harbor," Gilligan said.

Financing. "While our commitment with a Baltimore lender holds out, we have 13 1/2 percent fixed-rate loans and 13 percent for readjustable rate mortgages, plus FHA and VA" financing, said Lipson, an attorney who handles financing and marketing. He said attractive financing is a competitive must in this market. Buyers stretch their personal finances and often put more than 30 percent of their net income into monthly housing payments. "There's an intense desire to own and upgrade. Even so, some young professionals just can barely reach it these days," Lipson added.

Price. The average price of new town houses in Painter's Hill is $70,000. Six were sold in March before an April 1 price increase. However no April sales have yet been made. The Stonecreek single houses are priced from $90,000 to $98,000, but almost everyone takes optional items, such as fireplaces, sun room or a finished basement. Result: the average contract price is $103,000. "You have to understand that those prices are competitive in this area," interjected Gilligan.

Location. The development on a site, which once was a farm settled by Richard Young in 1748, is only a 10-to-15-minute walk from downtown Annapolis and convenient by car to the Baltimore-Washington corridor. The building site has a city sewer and water, some trees and an attractive land plan done by Land Design Research Inc. of Columbia.

Some of the streets and model houses at Painter's hill are named for Maryland artists, one of the most notable being John Hesselius, who married a daughter of Richard Young in 1763 and lived and worked on the site.

Now the general neighborhood consists mainly of town houses and rental apartments. "The single-house-buyers accept the existing apartments and town houses because we have an urban-living situation," said Lipson.

The majority of the population in and around Painter's Hill are young professionals, one or two working persons per house, or couples whose children have grown and gone. "It's not the suburban subdivision market for the family with two or three kids," said Gilligan.

Gilligan and Lipson worked well together when they were at Presidential Realty. They got a chance to buy the development in Annapolis and took it.

"We manage to survive by providing a personalized touch and by keeping our payroll small and working closely with our lender and sub-contractors," said Lipson. Gilligan said it's worthwhile to be a Home Owners Warranty builder with a warranty program for buyers, "mainly because it protects the buyer and also defines the limits of our responsibilities to buyers."

Lipson jests that he got married twice in 1979. He first took a wife and then formed the RLDG building partnership with Gilligan. "Both are working out nicely," added Lipson, whose home is in Chatham Lane, where their firm earlier developed 17 single houses on small lots in an enclave near the Painter's Hill property.

Asked about competition in the Annapolis area that continues to attract more people who work in Washington's environs, Lipson said that most of it comes from the town houses nearby at The Gentry and at Annapolis Roads West. "Our single houses, being contemporary, have no closely related competition because subdivisions of contemporary singles are hard to find in this area and those smashing contemporary town houses at Wood's Landing, off Route 50, are higher priced."

Partners Lipson and Gilligan share an optimism about the future despite the uncertainties of long-term financing and lack of a strong national commitment to housing as a priority.

"We stress affordability in residential construction, but we're also thinking of moving into some commercial projects in the area. We could do a garden apartment condominium or in-town renovations," said Lipson. "Both of us prepared for careers in this business and so far the market seems to be accepting our products."

Lipson and Gilligan operate modestly out of a trailer parked on the Painter's Hill site. They dress informally, talk easily and manage to maintain a strong interest in all aspects of their residential development.