Growing your fix and flip business

18 Replies

Hello.  My husband and I started our fix and flip business about two years ago and are currently halfway through our fourth property (single family homes).  My husband is a general contractor and has quit his other job to free up time and speed up the turnaround time on the properties.   We hire out the electric, plumbing, HVAC, drywall, but my husband usually does all other finishing work.  We now have enough buying power (via cash and access to loans) to handle more than one property at a time.  I am interested in hearing success stories on growing a fix and flip business.  For our specific situation, we are currently kicking around two possible options.

1- bring on an experienced general contractor to manage a second property in tandem to my husbands property.  My husband would still check in often, however this other GC would be required to manage the day to day work and do the finishing work.  This would require us to figure out the salary and benefits and officially hire an "employee".   Example objective in this scenario is going from 2 flips a year, to 4.  I know there are a lot of variables depending on salary expectations, and profits per flip, but I can say that based on our past profit margins we will likely be able to recoup the cost of hiring that GC with the profits of one flip.

2-hire a less experienced hourly worker to occasionally assist my husband on the same property.  We would only have one property in motion at a time, but the hourly worker would be able to shorten the rehab window.  We would likely not offer benefits and pay a flat hourly wage.  Example objective here is to go from 4 months timeline per flip, to 3 months.

What was your strategy and why do you feel it was successful?  Any feedback or suggestions you can share are greatly appreciated.  Thanks for your time!

Hi @Tiffany Foy . I am in Columbus too! Recently transitioned from a BRRRR to a fix n flip late last year. So I don't have a business model in which to provide you, but my two cents:

1) Identify what your main bottle neck is in the process. Sounds like freeing up your husband's time is a priority in order to move faster. Write out what all he covers and look into subbing any portions of those things out to other sub-contractors. That way you are avoiding hiring a real employee that may benefit your husband but will cause a whole lot more work for whoever does your books with payroll taxes, benefits, etc. 

2) Start the process to acquire your next flip sooner. This all depends on if you need the funds out of your current flip before buying a second. But closing takes roughly 30-45 days unless all cash, which if you're doing 4 flips a year that can add up to 4 months. Overlap as much as possible but to the point where you're not wasting money in holding costs. 

3) Build the renovation process out per sub-contractor. If you have different contractors doing different things then line up projects where your teams go in order through multiple projects. AKA demo team can go from 1 project and then start on the next while the drywallers go in, then painters, then finishers etc. That way you are keeping your crews busy all the time (maintaining talented workers is the hardest thing in RE) and you can do multiple projects that are at different stages at the same time.  

Hey Tiffany,

Sounds like you have a really good process in place!    I am sure you are saving a lot of money on rehab costs without hiring a contractor.   In my opinion, I hire out everything in order to have multiple projects going at the same time.  I know of some investors that have up to 8 projects actively being rehabbed at once in Columbus.    However, That requires a steeper discount on your purchase price.   I think for what you are looking to do, I would probably suggest hiring help to assist your husband and keep that high quality of craftsmanship. 

Originally posted by @Tiffany Foy :

Hello.  My husband and I started our fix and flip business about two years ago and are currently halfway through our fourth property (single family homes).  My husband is a general contractor and has quit his other job to free up time and speed up the turnaround time on the properties.   We hire out the electric, plumbing, HVAC, drywall, but my husband usually does all other finishing work.  We now have enough buying power (via cash and access to loans) to handle more than one property at a time.  I am interested in hearing success stories on growing a fix and flip business.  For our specific situation, we are currently kicking around two possible options.

1- bring on an experienced general contractor to manage a second property in tandem to my husbands property.  My husband would still check in often, however this other GC would be required to manage the day to day work and do the finishing work.  This would require us to figure out the salary and benefits and officially hire an "employee".   Example objective in this scenario is going from 2 flips a year, to 4.  I know there are a lot of variables depending on salary expectations, and profits per flip, but I can say that based on our past profit margins we will likely be able to recoup the cost of hiring that GC with the profits of one flip.

2-hire a less experienced hourly worker to occasionally assist my husband on the same property.  We would only have one property in motion at a time, but the hourly worker would be able to shorten the rehab window.  We would likely not offer benefits and pay a flat hourly wage.  Example objective here is to go from 4 months timeline per flip, to 3 months.

What was your strategy and why do you feel it was successful?  Any feedback or suggestions you can share are greatly appreciated.  Thanks for your time!

 Hi Tiffany, 

We're seeing a lot of the investors we work with doing more flipping.  Also there is a growing trend to either diversify one's portfolio by investing in other areas like Cincinnati and some first time investors are getting great deals in Cincinnati too. Good luck with everything!  

Tiffany, you'll probably find that subbing out more of the work that your husband is doing will allow you to grow faster than hiring an employee, but it just becomes a math problem to figure out if increased labor costs are offset by the higher overall revenue generated by doing more flips each year.

Thanks @Sean Cole .  I think we've come to that conclusion as well as there are more complexities with hiring an employee.  I'm curious, are you in this line of work and have you overall had positive experiences with your contractors?  We have been lucky to find a great electrician, plumber and HVAC contractor, however we are pretty particular and are concerned with the workmanship of others doing the "finishing type work".   There is a little fear on my end in giving up control on those areas ;)

Originally posted by @Tiffany Foy :

Thanks @Sean Cole.  I think we've come to that conclusion as well as there are more complexities with hiring an employee.  I'm curious, are you in this line of work and have you overall had positive experiences with your contractors?  We have been lucky to find a great electrician, plumber and HVAC contractor, however we are pretty particular and are concerned with the workmanship of others doing the "finishing type work".   There is a little fear on my end in giving up control on those areas ;)

 I've been rehabbing and wholesaling since 2012.  In the beginning, I did a lot of work myself to try to save money, but eventually realized that I was only saving money because I wasn't assigning any value to my time.  I haven't "swung a hammer" on a rehab in quite some time - probably since 2013 or so.  I project manage now, which isn't necessarily easier or better, it's just more efficient with my time as I have other businesses that generate revenue, including new construction/custom remodels and a thriving real estate agency business.

Contractors have always been the biggest challenge for me in the business.  We'll find a good one that's priced right and then get him so busy that his prices go up and/or he wakes up stupid one day and never shows up again.  Then we have to find a new one.  It's a bit more expensive, but I've been a big fan of hiring a GC with his/her own crew over the last couple of years.

@Tiffany Foy   For the first 7 or 8 years I was flipping I was doing exactly what you are.  Doing 1 or 2 at a time, but doing most of the work myself in order to keep expenses to a minimum and maximize my profits.  I made a decent profit per flip, but with this model I was maxed out at 4-5 flips per year with no option for growth.  

About two years I began the transition to what my model is now.  At any one time now I have between 5 and 8 flips going in different stages and this year I expect to close 15-20 deals.  I've got a full time crew that does nothing but work for me.  And I've got subs for hvac, flooring, plumbing, electrical, and anything else that comes up.  These people are your most important resource if you want to grow the business.  Treat them right and pay them what they deserve to be paid.  

And to your point, if you find someone who can do quality finish/detail work do whatever it takes to keep that person on your team.  They are hard to come by.  As a guy who likes to be in control of every detail of my projects I know how difficult it is to step back and pay someone to do a job that you know you could do better yourself.  But if you want to grow your business building a team of qualified subs who can work to your standards and within your budget is a vital step.

Your husband only has 40-50 hours to work per week. Hourly value of skilled labor would be in the area of $30-35 per hour x 50 hours= 1500-1600 per week. Can his time be better spent? I’m guessing if he finds one extra deal per month and you make 20k on that transaction your positive hiring the work out is a plus 15k.. and your husband just assist or manages workers that complete your projects. My wife and myself manages our flip business in Indianapolis and do over 40 houses per year with no full time GC.. Dave Short

I think ultimately you have to find ways to get out of working in the business and get into working on the business.  

Your bottleneck might not actually be your husband's time working on finishings, it might be your deal flow, or it might be your ability to raise enough money, so address those.  Then new bottlenecks will show up and you'll need to work on those. 

So for example if you have access to more capital than deals, then how do you solve for deal flow.  If you have more deals than hands to work on them, then how do you find help to execute on them.  Then when you're doing 10 at a time then your bottleneck might be capital again and you have to figure out fundraising again.

I don’t believe that you’re option 2 listed is a good idea and option 1 needs quite a bit of tweaking.

My first local flip went well but times were different back then. After I completed my first 4 deals, I started doing 2 at a time, then 3 at a time. I then started going up in price and doing more expensive properties until I reached a point where I had 3-4 multi million dollar properties going all at once. It was a stepping stone process and along the way, I built up more private money investors, more sub contractors, more GC’s, and more suppliers with better discounts.

Look more RE into building the business and less into how much labor your husband does on the jobsite with his own hands. My first deals I as very hands on in the sense that I did demo, installations, and other physical labor. It was a good learning experience but your husband is already a cobtrac Or and has that experience so I would skip it and move into building up money, finding more deals, and finding more sub contractors. Your husband should easily be able to manage 3 projects at once so long as he s not doing any of the physical labor.

I may be going against the grain here.. but I'd look to find a really decent young carpenter/trades person that's just out of school and looking for work. Hire them hourly and put them under your wing... this is basically like the interview process... you groom the individual slowly giving them more and more responsibility over the next 2-5 years until they can run the job site on their own with minimal input from  you and can clearly communicate any issues that may arise.