When to scale your buisiness? Should we hire general labor?
My husband and I have an LLC flipping houses. We are currently working on our 3rd investment property. He does most of the labor, I do all the designing / bookkeeping and painting. With him being the only person on the job site flipping an entire house, (aside from major repairs such as foundation or roof replacement) it takes several months. This is his full time job. At what point did you decide to use hired help? It will decrease our profit, but will increase the time between one finished deal and another. (Fast Nickels vs. slow dimes) I can't justify paying someone labor, because it will cost more to pay them than what our holding costs are. So that math equation didn't work out. At what point did you decide to scale up? Any advice is appreciated.
I think I would hire help when you get to the point that you're missing out on great deals because you're too busy working on existing deals.
Furthermore, if your flipping strategy relies on you and your husband doing almost ALL of the labor, your business model may not be very strong. Or maybe the deals you're finding aren't very good. I'm sorry, I don't mean to criticize. What you're doing is admirable. All I'm saying is, you may need to work on finding better deals so that you can afford to pay a GC and other contractors while still turning a profit. Unless, of course, you WANT to be doing the work yourselves and enjoy doing so, which would be very different.
Hope that helps!
Based on "hourly pay," the amount you calculate is how much you work in the business. For example, the profit (minus materials) of the project divided by the number of hours would give the "hourly pay". Assuming for a moment that it is $75/hour....Is it completely worth working as a handyman for, say, $20/hour? Working as a handyman may seem like you're saving $20/hour, but in reality, it is costing you $55/hour. Figure out what those lower-level tasks are that can be subcontracted out, allowing you to start the next project while a handyman (or GC) is doing the heavy lifting. To start out, perhaps he can hire a handyman or two and see how they work out. It is important to know the level of work and what they can do based on the licensing requirements for the state. Perhaps hire a CG that will deal with the grunt work. Everything you have mentioned—designing, bookkeeping, painting, and labor—can all be subcontracted. Finding the right people to accomplish those tasks for you is the most difficult, but it is the only way to scale.
Quote from @William Graham:
Based on "hourly pay," the amount you calculate is how much you work in the business. For example, the profit (minus materials) of the project divided by the number of hours would give the "hourly pay". Assuming for a moment that it is $75/hour....Is it completely worth working as a handyman for, say, $20/hour? Working as a handyman may seem like you're saving $20/hour, but in reality, it is costing you $55/hour. Figure out what those lower-level tasks are that can be subcontracted out, allowing you to start the next project while a handyman (or GC) is doing the heavy lifting. To start out, perhaps he can hire a handyman or two and see how they work out. It is important to know the level of work and what they can do based on the licensing requirements for the state. Perhaps hire a CG that will deal with the grunt work. Everything you have mentioned—designing, bookkeeping, painting, and labor—can all be subcontracted. Finding the right people to accomplish those tasks for you is the most difficult, but it is the only way to scale.
Thank you for this. I have often said "I will clean the gutter, you keep working on xxxx project in the house" for example. He is skilled trade. He loves doing what he does. He is a problem solver and he is great at fixing things. I'm good at the "clean up". Sweeping up the mess, cleaning up the yard....the grunt work. I thought hiring a handyman to do more of the "lower level tasks" would save money and time. I think hiring out the lower tasks makes sense for us. From this view point, I do think its a good idea. You gave me a different viewpoint to look at. For that, I thank you.
Quote from @Ben Firstenberg:
I think I would hire help when you get to the point that you're missing out on great deals because you're too busy working on existing deals.
Furthermore, if your flipping strategy relies on you and your husband doing almost ALL of the labor, your business model may not be very strong. Or maybe the deals you're finding aren't very good. I'm sorry, I don't mean to criticize. What you're doing is admirable. All I'm saying is, you may need to work on finding better deals so that you can afford to pay a GC and other contractors while still turning a profit. Unless, of course, you WANT to be doing the work yourselves and enjoy doing so, which would be very different.
Hope that helps!
Constructive criticism is helpful, so thank you. For now, yes, he does want to do most of the work. He actually enjoys a good part of it. We went from part-time flipping with both of us having W2 jobs,to earn some extra retirement money... to him quitting his W2 and this being his full time gig. That said, out business model isn't exactly concrete at the moment. Still trying to find the best way to do things while keeping the bills paid.
Quote from @Kellie Powell:You're welcome. A different perspective is necessary especially when your heads down doing the work.
Quote from @William Graham:
Based on "hourly pay," the amount you calculate is how much you work in the business. For example, the profit (minus materials) of the project divided by the number of hours would give the "hourly pay". Assuming for a moment that it is $75/hour....Is it completely worth working as a handyman for, say, $20/hour? Working as a handyman may seem like you're saving $20/hour, but in reality, it is costing you $55/hour. Figure out what those lower-level tasks are that can be subcontracted out, allowing you to start the next project while a handyman (or GC) is doing the heavy lifting. To start out, perhaps he can hire a handyman or two and see how they work out. It is important to know the level of work and what they can do based on the licensing requirements for the state. Perhaps hire a CG that will deal with the grunt work. Everything you have mentioned—designing, bookkeeping, painting, and labor—can all be subcontracted. Finding the right people to accomplish those tasks for you is the most difficult, but it is the only way to scale.
Thank you for this. I have often said "I will clean the gutter, you keep working on xxxx project in the house" for example. He is skilled trade. He loves doing what he does. He is a problem solver and he is great at fixing things. I'm good at the "clean up". Sweeping up the mess, cleaning up the yard....the grunt work. I thought hiring a handyman to do more of the "lower level tasks" would save money and time. I think hiring out the lower tasks makes sense for us. From this view point, I do think its a good idea. You gave me a different viewpoint to look at. For that, I thank you.
Quote from @Kellie Powell:
My husband and I have an LLC flipping houses. We are currently working on our 3rd investment property. He does most of the labor, I do all the designing / bookkeeping and painting. With him being the only person on the job site flipping an entire house, (aside from major repairs such as foundation or roof replacement) it takes several months. This is his full time job. At what point did you decide to use hired help? It will decrease our profit, but will increase the time between one finished deal and another. (Fast Nickels vs. slow dimes) I can't justify paying someone labor, because it will cost more to pay them than what our holding costs are. So that math equation didn't work out. At what point did you decide to scale up? Any advice is appreciated.
Honestly, only you would know if it make sense. You do the books, so you have the numbers to play with. As a consultant/accountant, I would need to review your P&L and BS to see if it make financial sense to sub out the work.
@Kellie Powell you guys sound just like me and my husband! We did it all our 3 then hired a general laborer. We haven't flipped anything in a couple years now. We started using BBBR method instead. Takes a strong couple to make it through everyday next to each other. I remember a year or so we couldn't go to Lowes without having an argument lol. That doesn't happen now.
I have mixed some of mine up lately - plumbing/electrical/tile basically all the hard **** I'll hire out.
If I have free time I'll do drywall/paint/fixtures/basic plumbing/basic electrical etc. I do the smaller easy **** and leave the hard stuff to the pros.
the hard stuff is what takes the time and slows my roll. the easy stuff I can generally breeze through
I also don't want to work full time as a general laborer so I hire most of it out
I will say though - be prepared to go through your fair share of "contractors" and "handymen" though. there are a lot of good ones and there are also a lot of bad ones. I had found what I thought were some good ones then fired two back to back on my last property
"I can't justify paying someone labor, because it will cost more to pay them than what our holding costs are. So that math equation didn't work out. At what point did you decide to scale up?"
-Our last project was a BRRRR, where my brother and I did a substantial amount of the labor on a very intensive rehab/restoration. I hired two outside contractors to help us. You probably want to test the waters by bringing on a contractor to do 1 or 2 specific tasks. We get quotes for painting and, given the amount of time that it would require, it made sense to hire someone else to paint the entire interior and exterior. It would not have been worth our time. We also hired a contractor to install tile flooring and a new concrete entrance. For me it came down to evaluating the time to do the job vs the bids from a couple of contractors.
I think you should start small in order to get some experience working with contractors, getting bids, and weighing whether to do a job in-house or sub out.
Your specific project is unique, so only you can compare those options and determine the best way to go.
In general, people grossly over-hype 'flipping' and make it seem so easy to do. It is easy to show a before and after photo, and ignore all the analysis, estimating, bidding and management that is required. It is hard work to identify a property that will be profitable as a flip. And if you are lucky to have an operation in place, and a consistent ability to source leads, then you will be far more competitive than a beginner or part-timer who has little to no experience in either, and difficulty finding contractors willing to take small jobs with someone they don't know.
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Quote from @Kellie Powell:
My husband and I have an LLC flipping houses. We are currently working on our 3rd investment property. He does most of the labor, I do all the designing / bookkeeping and painting. With him being the only person on the job site flipping an entire house, (aside from major repairs such as foundation or roof replacement) it takes several months. This is his full time job. At what point did you decide to use hired help? It will decrease our profit, but will increase the time between one finished deal and another. (Fast Nickels vs. slow dimes) I can't justify paying someone labor, because it will cost more to pay them than what our holding costs are. So that math equation didn't work out. At what point did you decide to scale up? Any advice is appreciated.
Hi, I have never " swung a hammer " I build crews of about 25 or so and have done about 2k renos. repairs with about 500 flips in my market. I just get good deals. I would rather make a bit less per deal but do 100s vs just a few here and there. We are starting to buy in Mississippi next week. Well I am not doing anything but looking at deals, all while I am on the beach in FL. As I have posted 100xs, ITS ALL ABOUT YOUR TEAM, and Knowledge
Good luck to you
Kellie - I don't know what the rules are in IN but in my state (AZ) you have to hire out most of the work to licensed contractors - even if you are the owner. If your intent is to sell and its not your primary residence you can't do the "skilled" work yourself. Plus there is way too much liability especially anything to do with electric or plumbing.