So our flip company is doing very well, we are finding plenty of great houses and have several good investors right now, Problem we are having is getting our houses built. Some of our houses sit for 2 weeks before we start construction. We use a great contractor who is a part of our company and does phenomenal work. However his crew can only do so much. Looking for some insight on how to scale our company to rehab more houses. Currently we are on track to do 20-30 our first year. Next year we would like to get to 50-60. any thoughts would be greatly appreciated!
@John Mathewson - If you are having trouble getting your current volume churned, I'd advise extreme caution on growing your numbers. You need to solve your problem of scale first, otherwise, you may find you are sitting on properties for 4-6 weeks instead of 2. You can only squeeze so much more productivity out of existing team members, so if your current team has no more capacity, the only option is to build a bigger team.
If your contractor is great, he should be pretty well connected to refer you to other great contractors. Some people are hesitant to refer people away from them because they want more business, or "more pie." But what I think too many people fail to realize is that there are two main ways to get "more pie." The first way (that most people think of) is that they are fighting for a bigger piece of a single pie - in order for anyone to get more, someone must be getting less. The other (and better) way, though, is to just make more pies. Sure, you might get a slightly smaller piece of each pie, but on the whole, you're going to have a lot more pie, and so is everyone else.
If you can't make more money bringing on other contractors to do your 50-60 flips, then it sounds like the basic economics might not make sense.
What kind of numbers are you seeing on your typical deal? And what were you doing before you started your company? Had you done flips before? Buy and holds? I see that you're a broker so you were definitely familiar with real estate values. But what is that you attribute helped you go from startup to that pace?
That really is an amazing ramp up there. Nice job.
I like what Lance said. Mohave caution and contact other contractors! Great job btw. Mi am interested in how you got into flipping as well.
Thanks for the feedback. I have just started in real estate about last November. Before I was in healthcare marketing. I had some really good contacts I was able to meet some people in previous work that had a lot of trust in me and were willing to invest. From there it was the team that I brought on and made partners in my company. We have 3 partners 1 is contractor 1 brought on some new great investors and handles relations with them and I put my mind to becoming an expert real estate agent at finding and selling properties. I became a licensed agent in December and just put my nose down and went to work and learned more in 6 months than the last several years. To this date all of our houses have sold within first 3 weeks of being on market. most of them selling within 3 days.
Our numbers: typical deal our investor funds purchase and construction anywhere from 85k-125k. All of our investors make about 12%-15% ROI in 3-6 months.
As others have said, if you haven't thought through the scalability of your operations, you're not ready to scale. It sounds like your current contractor is a partner as well -- I would highly recommend segregating the contracting work from the partner relationship, as you'll in a really tough spot should he ever not perform well as a contractor or should he not work out well as a partner. Plus, if you want to scale to those numbers, you need to learn how to build crews of contractors and not just rely on one guy and his subs.
@J Scott Our only thinking in bringing him on as a partner is because he has done just that, he has brought on other contractors and we are planning on him moving to more of a project manager overseeing other GC's that are getting the work done. We know that is where we will really begin to grow our business. Interested to know thoughts on that?
I've never been a big fan of partnering with contractors just because they're contractors. The big problem is that you're locking yourself into using him as your contractor for as long as he's an equity partner -- for me, contractors are the biggest wildcard in this business and I'd never want to lock myself into one.
What happens if his quality isn't good enough?
What happens if you find cheaper subs you want to use?
What happens if he can't keep up with the work (as is happening)?
If his job (as partner) is to handle all the rehab work, then it's HIS job to figure out how to scale the renovation side of the business. It sounds to me like he's not doing that job, which makes me question what value he's bringing as a partner?
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