Managing Your Rehabs and Still Buying Houses?
Are you managing your rehabs and still buying houses?
I pose that question because if you are the only one in your Fix and Flip Real Estate business doing both of these things successfully, I want to meet you! I want to take you to coffee and pick your brain on how you do it because that is an amazing achievement. I say that because the truth of the matter is that very few fix and flip investors are able to keep up with buying houses while they are in the process of flipping one or two properties. At least not on their own
If you've attended any real estate investing education, you know that most educators, worth their salt in this industry, teach "scaling". Every business owner who wants to grow knows the importance of this vital strategic growth concept. In order to scale, you MUST put the right people in the right seats. Meaning, you have to get away from doing things that you are not good at and get someone in place to fill that void in your business or you won't have a business for long. The same thing applies to growing your fix and flip real estate business.
So what are you good at in your business? Are you a great closer but find it hard to make it out to your job sites because of your overloaded schedule, meeting with sellers, private money lenders etc? Or are you good at wielding the hammer and making sure the rehab gets done on time and on budget but find it hard to get your marketing campaigns dialed in and sellers closed at the dining room table? I would venture to say that not many of you would profess to be good at both of these at the same time. Where are the empty seats in your business? What areas do you need someone to step in and make sure the job gets done? Let's explore the first of the two scenarios -because I really can't help you with buying houses...Call Tom and Jason at Right Path Real Estate for help with that! Where I can provide valuable information is with regards to managing the rehab so let's take a look at what you can do if your strength lies in marketing and buying deals and not in managing the flips.
HIRE A GENERAL CONTRACTOR:
This choice makes the most sense. Hiring a reputable general contractor will make your life much easier! They have the resources and expertise to ensure the work is done on time and on budget. There are pitfalls to this choice as well and I will address those toward the end of this blog post.
If you are good at buying houses, but need someone to oversee the construction side of the business, why not partner with someone in the industry who's strength is in project management and general contracting? You don't have to form a full business partnership but perhaps partner with them on a project by project basis. This is often the least favorite of the options but it is a very viable one. First of all, make sure they are reputable, do your due diligence prior to forming the partnership. Layout firm financial boundaries as well as scheduling requirements and have those drafted in a legally binding contract and then each of you go to work doing what you do best...making money!
HIRE A PROJECT MANAGER:
If you feel you are at a juncture in your business where it makes sense to have someone in-house take care of your project management for you, this might be the route for you to go. J. Scott from 1-2-3 Flip on his blog wrote about this in a blog post How I Manage My Rehabs: "I hired a full-time project manager to be my eyes and ears for all my rehabs. His job is to interview contractors, get bids, negotiate prices, schedule work, verify that quality is maintained, ensure that we stay on budget, write checks for completed work, procure materials and basically keep me informed about everything that I might need to know without me having to visit the property every day"
A project manager can take the myriad of project management tasks off your plate and free up your time.
Now, let's talk about the cons of these choices real quick and then wrap this up with a solution we have come up with.
GENERAL CONTRACTOR: They tend to be more expensive than if you were to manage the project yourself. You have to be sure you have a iron clad contract with timelines and milestones. They often lack the ability to finish strong and deal with all issues to compete the project.
PARTNERSHIP: You have to share more of the proceeds of each project, however they can potentially save you money in the long haul. You have to be sure you have a iron clad contract with timelines and milestones.
PROJECT MANAGER: This person will need to be added to payroll. For some small businesses that is an accounting task they would rather not deal with. Good project managers are hard to find and when you do, generous compensation is a must to keep them.
REI Design Solution!
So here is a solution we have come up with and it is gaining momentum. We have found that even with the above options, the workload of a Real Estate investor, when it comes to their rehabs, is still too heavy. Even if you choose to use general contractors. Mike Simmons, a coach with House Flipping HQ, in this blog post perfectly summed up just one of the draw backs you are up against when dealing with general contractors. "Your biggest job as the investor is to monitor and manage your general contractor without getting in the way or impeding their ability to get the job done on time and within budget. Making sure that the subcontractors are on the job site when they’re supposed to be is important. Too often contractors have many projects going at the same time, and if they get in trouble or behind on another job, they may decide to pull the workers from your job and move them on to a different project. This is not okay, and cannot be allowed. If you allow this to happen, before you know it your project is behind schedule."
What we have found is that there are still many tasks that are required of you which take you away from your important "house buying" tasks. Even with a GC, you still have to answer the myriad of calls, order and pick up your fixtures and finish materials, check on the job progress and chase after last minute punch list items that "weren't in the contract" etc.
What we found helpful to many investors is hiring a firm who can provide "Project Oversight". Who can be your eyes and ears for your projects, who will ensure that everyone is doing what they say the will do. Who will track down materials, fixtures, specialty trades etc. Who can fill that gap and make it possible for you to focus on what you are best at--------> buying houses!
And of course, REI Design Solutions provides such a service. If you'd like to learn more about our Project Oversight Services click here.
to your success,