Vertically Integrate House Flipping?

2 Replies

As a house flipper, would it be an ideal goal to vertically integrate my business at some point?

I say this because of the trouble that comes to dealing with so many contractors for various companies. I realize how difficult this would be, but developing house flipping into a seamless process would be extremely advantageous. 

This may be a pipe dream, but perhaps some of you have found success in doing so?  

I think that all depends on the volume of business your moving through your business every year.

When I was running my development company it made more sense to remain smaller and agile which allowed for shifts and changes that can acure quickly in markets. Remaining agile is much more difficult when you have a bloated payroll to make each week.

We contacted everything out except for deal sourcing, financial analysis, and capital stack strategies. Everything from architecture to cleanup was subcontracted.

Would it be easier to have a full time crew to work your projects, yeah I imagine at times it would. However, it could also cause more trouble as you expand your business.

Where most small developments incite the greatest challenge is in managing projects. And that's perhaps where you might want to hire someone. A good project manager will eleviate the struggles and challenges of physically managing each project and free up the time needed by an I veto to source new deals, over see marketing of current deals, and manage the enterprise.

Successful Development is more about managing the individual processes involved in the developments as I opposed to actually managing all of the people involved in those individual processes. Hiring good capable people to manage those individual processes might be the "vertical" end goal your are seeking.

Vertical integration certainly has it's appeal.  A ky challenge may be managing different disciplines in a single business - such as marketing & sales, general contracting, property management, brokerage, etc.

If you build such a business, there are advantages that I think you already understand.  To play devil's advocate a bit, the disadvantages may be (1) keeping the integrated team busy, having enough in the pipeline to fully utilize your staff and run efficiently all the time, and (2) when the market goes south, and it will, if you employ a lot of people, it's really hard to downsize quickly enough to stay efficient.  Really just capacity and staffing challenges that are manageable if you have a great mgmt team...

We have a client - Spartan Value Investors in Birmingham, AL - and I think they are a lot like what you're describing, and it helped them build a business that was recently named # 246 on the Inc. 5000.  I think their contractors are still subs, but the rest of their business is soap-to-nuts integration of real estate operations and it works.  WELL.  =)

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