Should you use property management companies for flips?

Question

I know a few good property managers in my area that have construction arms and also do flips. Do you think they cost more than a traditional GC for flips? If I am not planning on leasing it post flip should I just find traditional GC's? I am a turnkey provider so I have not done any full flips, just unit turns and leasing. Curious to know if anyone has tried using property managers for flips and their experience with it!

Matthew Irish-Jones · Answer

Maximizing your profit on every single deal is not always the best strategy, which sounds counterintuitive but its true.  You want to maximize your opportunities.  That means having a happy Realtor, happy GC or PM, and happy vendors across the board.  You also want to maximize your future relationships, as well as business systems.  As you buy more and more homes and provide more and more work to subs you will start to maximize your profits through efficiencies and volume.

In the short term you can maximize your profit by over negotiating with subs and having them do more for less.  In the long term the best way to negotiate is to have volume.  That allows subs to want to provide a discount instead of feeling like they got shafted.  For example, we get a large discount on plumbing and HVAC work.  I didn't reach out to the plumber and ask him to work for less.  I reached out and said we have on average $200,000 worth of plumbing work a year.  We would like a to build a relationship with one or two vendors for our volume.  We pay on time, and you only have one client to deal with.  We can also integrate you in our system to maximize your efficiency and allow you to stack jobs one on top of another in a geographic region.  That provided an opportunity for him to cut logistical costs, accounts receivable headaches, etc... and allowed for us to get a volume discount.  It was a win win.

I am not saying you have done this but, I have seen investors haggle over every single line item to the point where they get the work done but, a quality vendor doesn't want to work with them again in the future.  That is ultimately their loss in the long run.

Kerry Noble Jr · Answer

ive been the "project manager" on flips......im not a GC nor a Property manager...but im that unbiased individual to help see things through

Dom Battezzato · Answer

Hey Beau, I think it always comes down to the under writing. I have worked with many PM who have great contractors who charge 10% management fee but get the project done on time (Or before) or budget (or Less) who ended up saving me a lot vs normal GCs who get spread thin with other work

Will Barnard · Answer

I personally believe you would be better served to go direct the the general contractor or hire each individual sub if you feel you can manage that. The PM company is just another middle man to pay for the service, your GC should be able to handle their part. Finding that great GC is always the difficult part but once you do, your better off.

Matthew Irish-Jones · Answer

I am a property manager with a construction division that specializes in the BRRRR strategy for investors.  We have the following divisions, property management, brokerage, and construction.  The construction division has been the hardest to build, and the hardest to make money in.  We choose to lose money on many jobs to keep our reputation in tact while we ironed out the kinks.  Our customers always got a great product and a good price, often times at the cost of our profits.  2 years later we have 4 teams working full time with a full time sales person, and a full time admin.

This industry takes A LOT of experience.  Getting a cheap quote from a PM who has a glorified maintenance division vs a full blown well run construction division are two very different things.  Your PM may do a great job but, I would want to know more about the person quoting.  Is he a qualified project manager?  How much does he know about building code.  You DO NOT want to find out post work being done you needed a permit for all mechanicals, asbestos test for demo, etc... You will be ripping it all down.  Do they know code, permit process, and do they have the capability to do the work with experienced guys?  If so.. yeah use them.

Beau F Borinstein · Answer

Nice man, I work in Indy as well, mainly the secondary and tertiary markets! My main specialty is acquisitions, not so much the construction side. So I'd rather make a little less buck and spend more time finding more deals!

Beau F Borinstein · Answer

Thank you all for the great replies, I have a few property managers in my market which is Indianapolis that are great and have their own staff. I am just used to property managers more and have a few great ones that I trust and do quality work.

My goal is not to make the maximum amount of money on every project, it is to acquire more and more off market properties with a simple and easy process to disposition.

Jake Knight · Answer

Are you in a good spot to coordinate the work with the contractors?  Having boots on the ground here locally is usually a good idea so you can make sure getting things done correctly and to spec.  The quality aspect is a rather large aspect imo. I have a client that hired different GC's to do the work only to find out they didn't do some or a large part of it.

Kerry Noble Jr · Answer

ahhh yes! imma send you a message.....lets connect and see if we can be of value to each other

Drew Sygit · Answer

@Beau F Borinstein

From our experience, a GC charges 25%+ markup for their services.

As long as a PMC is competent and charges the same or less, why would it matter which you use?

While we don't have a separate division, like @Matthew Irish-Jones does, we do many renovations and target only a 15-20% markup.

Should you use property management companies for flips?

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