Flipping houses when you have to sub out work?

Question

Is it possible to make a flip profitable if you have to hire someone to be your general and do all the work?

Owen Dashner · Answer

Account Closed, how you approach the project management of your flips depends on if you are wanting to scale your business or not.  Being a hands-on flipper means that you will likely be able to do 3 or 4 per year, max.  If being onsite and doing the construction and project management yourself is what makes you happy and allows you to save some money, that's totally fine and lots of people do it.  Just keep in mind that you are buying yourself a job each time you buy a property, and being hands-on means that you won't be able to spend that time finding deals, marketing, raising money, etc.

If your goal is to make flipping a profitable, scale-able business, you can absolutely do that too.  But to do so you can't fall into the trap of wanting to do all of the jobs yourself.  Your job becomes more about marketing, networking and working on your business, not in your business.

There is no one right answer for this, it's all about what your goals are, and how you prefer to spend the hours in your day.Good luck!

Tyler Frost · Answer

I have come across one foundation issue but it was caught before closing. I tried to negotiate the cost from the owner before we closed but they were already just breaking even and there were other offers so they declined. The cost was only about $1,500 so it wasn't a huge deal. Unforeseen issues that arose after I bought the house have included some electrical issues where the previous owner changed all of the outlets to 3 prong plugs but none of them were actually grounded. That was about a $2,000 fix just to do the minimum to meet code. I've also had some issues with some old galvanized plumbing that had to be changed, which was a $3,200 unforeseen cost.

Tyler Frost · Answer

Make your life easier and hire someone to do most of the work. I typically do some light demo, keep the place cleaned up, landscaping, and painting. All of that saves me a couple of thousand dollars but doesn't hold up progress for the contractors to do their work. For now that is the most sensible thing for me personally. The ultimate goal is to only be looking for deals and delegate everything else out.

Chris Brown · Answer

In my case, no. I would be paying him to oversee, which is what I am trying to avoid. That being said, he could. But at that point, it may make more sense to just have him use his crew and/or his own subs. By using my subs, I am able to save the GC's 15% or so markup.

The flip side of that is if you have the GC do everything, you have one point of contact for scheduling and issues.

I also run a GC business, so sometimes it makes sense to use a GC and they can bring a lot of value with experience and contractor pricing. If I am engaged as the GC on a project, I am trying to get all of the work I can.

Chris

Chris Brown · Answer

I have a GC I use for most large items like removing walls, framing, siding, cabinet installs, etc. I then sub out my other work like plumbing, countertops, flooring, roofing, etc to my own guys. This way I can have the GC and his crew working on some items and my own subs working on others so I can compress my schedule. Depending on my budget and time availability, I do some demo, connecting sinks and faucets, installing lights and fans, pine straw, etc. I don't have to do anything but I like to stay active, be on site and save as much as feasible.

So I really do a mixture of hiring out, subbing out and DIY. I have done projects where I have not lifted a finger and where I have done almost all the work. It all depends on the project and the time I feel like spending. But, absolutely, you can hire it all out and still make a profit.

Best of luck!

Chris

Brian Pulaski · Answer

I would say a lot (maybe even the majority) of flippers don't lift a finger and hire out either a GC or subs to perform all the work. If the deal has enough meat on the bones to hire a GC and still make money then yes. I have heard others say paying a GC can cost 10% more on top of what you assume rehab costs will be, however I have never hired one so I can't confirm.

Just take the correct steps to hire the best gC you can, because once you are down the road with one, of things go sideways, it can be stressful.

Another note, if you are hiring a GC and crunching your numbers that way, you might be competing against flippers who aren't hiring GCs and their offers might be a bit higher. It may take a little longer to land a property, but it should be doable!

Paul Bowers · Answer

Absolutely.  The most successful flippers do virtually no hands on work, they concentrate on finding deals.  Obviously you will have to account for the additional costs in your numbers but you also get a huge advantage in time.  I am working on my first flip and because of budget constraints (and lack of knowledge from BP prior to buying) I decided to do everything myself.  The problem has been how long it is taking me.  I work 50-55 hours at my W-2 job so I've been working both my days off 10-12 hours per day since March trying to get done.  I've probably tripled my carrying costs and missed the prime selling season because I didn't hire out.  I'll still make a little more profit but I have also lost the use of my money all summer.  I could probably have done 2-3 flips in the same time frame if I had hired out.

Account Closed · Answer

@Tyler Frost Thank you for sharing specifics as to what can happen and cost. Good info to know.

Account Closed · Answer

@Tyler Frost You are fortunate to have a GC that readily works with you. You must be keeping him busy!

How often to do come across an unforeseen repair like a foundation issue etc?

I appreciate the insight and your time.

Account Closed · Answer

@Tyler Frost Thank you for your perspective. When you consider a flip do you bring all your subs in and your GC to give you an estimate or do you buy sight unseen and base it on pics/video?

Flipping houses when you have to sub out work?

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