Question for Rehab to retail investors
Real Estate Investor · Garland, TX · Member since 2010 · 86 posts · 34 votes
Question for Rehab to retail investors
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Real Estate Attorney · MO · Member since 2010 · 57 posts · 64 votes
15yI have a day job, about 50 hours a week, and purhcased and re-habbed about 30 single family houses in 2010.
I buy close to home, act as my own general, and use the same subs each time. If you can get a routine, (hide key in same place for everyone, same type of carpet, paint, etc.) it will go a ton easier.
My wife handles the utilities, and helps out where she can, and i have two sons that love to make extra money in the evenings.
We go hard in the good weather and slow down a lot this time of year.
22 Replies
- Developer · Garland, TX · Member since 2008 · 8k+ posts · 4k+ votes15y
I act as GC myself because I've had the time and the interest. If I scaled my REI rehab business, I would hire a GC.
I do have another job (business), but it allows me a very flexible schedule. I find that many people getting into REI want to cut the cord with the day job before their REI business is mature enough to pay all the bills and fund its own healthy growth.
- Real Estate Investor · Garland, TX · Member since 2010 · 86 posts · 34 votes15y
Originally posted by Jon Klaus:
I act as GC myself because I've had the time and the interest. If I scaled my REI rehab business, I would hire a GC.I do have another job (business), but it allows me a very flexible schedule. I find that many people getting into REI want to cut the cord with the day job before their REI business is mature enough to pay all the bills and fund its own healthy growth.
Thanks Jon,
I appreciate the input, getting out of the day job is my long term goal but as I have to put three boys through college I don't think it will happen soon :D
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes15y
I started out by using a GC, but didn't feel like I had enough control if I weren't on the job site much of the time...
Ultimately, I hired my own project manager, who in turn hires, manages and oversees the subs on a day-to-day basis.
Occasionally, we'll still need to bring in a GC to pull permits (legally, I can't do it myself on an investment property, only a GC can) or to tackle an exceptional large part of a job. But, we still generally specify who the subs will be and we manage and pay the subs ourselves.
I don't have a full-time job, but only devote about 10-15 hours/week to my flip business on average (some weeks 40 hours, some weeks none).
- Real Estate Attorney · MO · Member since 2010 · 57 posts · 64 votes15y
I have a day job, about 50 hours a week, and purhcased and re-habbed about 30 single family houses in 2010.
I buy close to home, act as my own general, and use the same subs each time. If you can get a routine, (hide key in same place for everyone, same type of carpet, paint, etc.) it will go a ton easier.
My wife handles the utilities, and helps out where she can, and i have two sons that love to make extra money in the evenings.
We go hard in the good weather and slow down a lot this time of year.
- Residential Lender · Columbia, MO · Member since 2010 · 90 posts · 26 votes15y
Sorry Stefan to get a little sidetracked but....
Jon, you took the words out of my mouth regarding your comments about Steve. 50 hours at day job and 30 rehabs per year is quit impressive!
Steve, are you solely flipping single family property? Any multi-family? What is your primary source of finding deals? What is your average profit per deal if you dont mind me asking?
- Real Estate Attorney · MO · Member since 2010 · 57 posts · 64 votes15y
We have a great group of contractors and we really let one project run right into the next, if that makes sense.
we use the same carpet, the same laminate, the same paint, same landscape stones, red mulch, plants, etc.
We use all local contractors and rarely do we wait for them. They jump right in, they know each other, they work well together, and then they bill us.
We have had rehabs that take 5 months and we have had some done in a few weeks.
- Real Estate Attorney · MO · Member since 2010 · 57 posts · 64 votes15y
My model is a bit different.
Right now we buy foreclosures. We have flipped a few, but most we finish, take photos, put online and do lease option or Contract for Deed.
We try to cash flow about 2500 per year per house. We mark each house up depending on what the market will support. We try to get a few thousand down to help re-coup some of the money we use to rehab the property.
We find houses at auction, bank REO, HUD, and local Multi List has plenty of foreclosures.
We finance each one individually with local banks.
- Real Estate Investor · Atlanta, GA · Member since 2009 · 339 posts · 126 votes15y
I was able to flip while holding a full time job. The question about hiring a GC vs. doing it yourself really depends on three things: 1) Your time and availability, 2) The scope of your project (simple vs. complicated rehab) and 3) how comfortable you feel managing a rehab project.
My first house flipping project I hired a GC because I did not have the time to oversee the project, did not have the contractors and it was a significant amount of work to do. I think hiring the GC was the right call. Sure, it cost me more but in the end the job was first class and I still walked away with a good profit. Without a GC I am not sure how I would have fared on that job. For my subsequent flips I now had extensive contractor recommendations, had more time and felt more comfortable taking on a whole project myself.
Finding deals on labor and materials comes down to two things: asking referrals from other investors and shopping around a lot! I have met a lot of investors and if there is something they all have in common is they are all cheap ;-) So my best contractors so far have been found by asking around. When you are talking with a new contractor tell them what you do, who referred you to them and that if they do good work you will call them again. Once they understand where you are coming from I have found that they now give you the "other" set of pricing, the one that is not advertised. It works...
Also, understand that they might not be super cheap on the first job you give them but if you call them back for another one and then another one then they will definitely work with you.
The scheduling of a rehab is very important. If you mess it up it can cost you time and money. If you nail it then your rehab can be smooth sailing (mostly) and get done in the least amount of time. But what you really want to do is go get yourself a copy of the book Flip by Rick Villani. That book is essential for any flipper and it goes into detail on how to schedule your contractors. I have created my project management spreadsheets based on this book.
Finally, there is no substitute for experience. Just be patient, educate yourself, do a rehab, learn from it and do it all over again...You'll get it.
- Real Estate Investor · Atlanta, GA · Member since 2009 · 339 posts · 126 votes15y
Originally posted by Steve Crawford:
I have a day job, about 50 hours a week, and purhcased and re-habbed about 30 single family houses in 2010.Holly molly Steve :clap: how do you pull that off? Do share...
- Real Estate Investor · Garland, TX · Member since 2010 · 86 posts · 34 votes15y
Thanks everyone, great responses,
Steve, I don't know what to say other then wow, I recognize the 50 hour weeks but to be able to flip 50 houses at the same time, you rock :lol:
- Rehabber / Flipper · Simi Valley, CA · Member since 2010 · 597 posts · 259 votes15y
We're currently using a General Contractor, mostly. It's nice having someone who can deal with little issues that pop up along the way without having to worry about getting another specialist sub. Also, the GC can deal with getting permits. And the GC already knows sub-contractors who do good (or at least acceptable) work for a good price.
- Real Estate Investor · mokena, IL · Member since 2011 · 33 posts · 1 vote15y
How do you fund 50 flips in one year? I thought I was agressive at 4, I GC my own b/c my budget is kind of small. I average 6,000 repairs per flip. I've been holding on to them b/c the market is down, but I will sell if the price is right. Good luck to all and have a great 2011
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes15yPat, then you are not really flipping teh properties if you are holding them. Two different business models and why you can't do much more quantity as you would need a lot of capital to hold that many.
Originally posted by Pat Opiola:
How do you fund 50 flips in one year? I thought I was agressive at 4, I GC my own b/c my budget is kind of small. I average 6,000 repairs per flip. I've been holding on to them b/c the market is down, but I will sell if the price is right. Good luck to all and have a great 2011I too flip full-time and I act as the GC. I do hire a licensed GC for the larger projects but I get the work done without a great deal of mark-up on his part and I continue to hire my own subs for certain items such as tile and carpet product and installers. I too use similar carpet each time, same paint schemes, and same tile/granite/travertine.
My acquisition amounts are higher than most since I am in So CAL so what one purchase at $300k here could equal 5 purchases in other states.
As far as doing this biz along with a full time job, I would say it is quite difficult to accomplish. Steve's example of flipping 30 homes while maintaining a 50 hour a week JOB is very out of the ordinary and quite extrordinary. Anything can be accomplished if you put your mind to it, however, in my opinion, one would stand to make much more profits per transaction WITHOUT a JOB to deal with.
Problems come up and decisions need to be made. If you are at a full time job, you can't be making those calls and as such, must rely on others which ultimately costs you money. So the key is how much more could you make by acting as your own GC, quitting the JOB and doing more rehabs at once in comparision to your W-2 income? I think most will find that once they do one or two projects, it makes more sense to go full time RE flipper than try to keep the JOB and the part time RE flip biz. - Residential Real Estate Broker · Grand Blanc, MI · Member since 2008 · 885 posts · 316 votes15y
I also act as my own GC. I've never hired a GC or PM to oversee any of my projects. I'm on the job(s) daily checking on things. I also provide concise direction before and during the renovations. Granted my contractors know me and my expections quite well, I still like to be involved.
Flipping and landlording is my primary business (although I'm also a Broker). It's taken a long time to build up my business to where I am now. However, with a lot of focus and tenacity, you can kick that day job to the curb. I'm living proof!
- Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes15y
I do very large, studs-out type renovations. I've tried management a variety of ways. We've used an external project manager overseen by an internal liaison. That didn't work so well, as we had multiplication of efforts and just too much cost associated with the whole thing.
Then we tried an external GC. The GC had a foreman who did the day-to-day. That worked really well, but also cost mega bucks. The biggest advantage was that the GC dealt with the permit requirements and the whole thing went really seamlessly.
So finally what I have ended up with is that I act as the project manager with a foreman (who is also my lead carpenter) on the ground handling day-to-day business with the subcontractors.
I outsource someone else's GC license in order to get permits pulled, although I'm about on the brink of getting my own GC license so I can pull permits directly.
What we ultimately learned was that there's really 2 layers of management needed in a large rehab.
You need a foreman, period. Someone must be on-task to watch the day-to-day proceedings, and he needs to be there all the time. He also needs to be skilled and working. This person will probably be the highest paid individual on your on-the-ground construction team.
(In business terms, this is the tactical manager)Beyond that, you need someone to manage the project at a strategic level. Watching the tactical manager is part of that person's job.
He needs to be the one to account for all receipts for every nail, board, and tile that goes into the job.
This is the guy that needs to make payroll every week. Pay the subcontractors directly. Manage the t-accounts and ledger on a real-time basis to make sure that everything is going correctly.Also make trips to the job site at least a 3 times a week to drop in and ensure that everything is on schedule and looks correct, and is proceeding according to the time schedule and the physical layout specified.
In other words, the guy who sees beyond the day-to-day tactical execution of the project and ensures that strategically, everything is going smoothly. This is really not an easy job. You need someone who has a very strong ability to think like an accountant but who is also able to effectively audit what's going on with your carpentry crew, sheetrock, flooring, etc. etc. etc. ad naseum.
In smaller jobs, both of these positions may not really be needed. If all you're doing is painting walls, installing flooring, and new countertops, then you may nott really need all that management... or those guys may not be doing as much as they would otherwise be doing.
However, when you cross over into really large projects where you've got multiple different trades in and out, lots and lots of material purchasing going on, a dozen different checks flying around at any given time, and above all else a house plan that needs to be translated into bricks and sticks correctly THE FIRST TIME, then having that much management becomes, IMO, essential.
So to answer your question, I outsource my foreman and act as my own strategic manager. It took a long time for me to be competent to do the job, but ultimately it's the only way I can satisfy my need for control while not having to be at the job site 100% of the time.
- Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes15y
So how much do you pay a GC on average??
I have my best friend who I can trust with a construction background.
He has proposed he will work daily on site to coordinate the flip and workers.He wants 2,000 per flip.
Basically with most flips taking under a month he would make 500 a week.The other 2 months the property is under contract ready to close I wouldn't pay him to have idle time.
So for him to make 24k a year I would have to have going 1 flip a month.He also mentioned getting a few percent of the profit as a potential bonus.I am open to these ideas.
While I will drop in a few times a week on the job site I am a commercial broker doing real estate deals for clients.I want to be able to work both lucrative niches.
Any insight appreciated.
- Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes15y
Joel -
(This is a bit rambly, and I apologize in advance.)
It really depends. Is your friend licensed? What's his experience, and how recent is it? Is he used to doing the kind of work you're asking him to do?
The amount I'd pay for someone to be on site like that really varies by the type of work being done and what exactly their role will be.
If all they're going to do is watch work getting done, that's one thing. If they're going to be carrying a toolbelt and making things 'go-faster', then that's something more valuable to me.
Are they going to be handling money? Accounting? How is the guy at excel? Is he detail-oriented enough to account for every penny that passes through his hands?
More importantly, do you want the same guy who handles the day to day jobsite to be the guy who handles the money? Most GCs that I've met want to do both the day to day management and the money management... something that has never made me comfortable and has gotten me into trouble 99% of the time.
On a personal note - IMHO, be careful working with your friends. From a management perspective, never hire anyone you couldn't fire and walk away from without it tearing you up inside. The day you pay someone to do a job for you is really the last day you can truly be bosum friends with them. How will it effect your friendship if you have to upbraid the guy some day, or dock his pay for a job done poorly? How will he take it when you have to remind him that he IS, in fact, replaceable?
I may love a man as a brother - but if I hire him, and then the time comes that he needs to get on down the road because he's hurting my bottom line, then I will not hesitate to tell him to get on down the road.
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes15y
Aaron -
Sounds like we do things pretty similarly...
For us, we have one full time project manager, whose responsibilities include getting bids and negotiating, hiring the subs, managing the subs day-to-day (to whatever extent is needed considering our subs have been with us for a long time), writing the checks and procuring materials.
Basically, between the day the property is purchased and the day the last punchlist item is completed, this guy is in charge.
Now, he takes direction from me -- I determine what will get done and not get done, I set the budget, I set the schedule and ultimately all the receipts come back to me for accounting purposes.
I guess I'm the second guy in your equation, but I'm able to do this part of the job in about 10 hours/week (doing about 10-15 rehabs per year), so for us, having someone else independent of me isn't really necessary.
I'm curious what your specific role is in the rehabs if you have someone dealing with the day-to-day tactical stuff and someone dealing with the higher-level strategic stuff? Have you been able to remove yourself from the business or do you focus on other areas (acquisition, marketing, etc)?
- Contractor · Atlanta, GA · Member since 2008 · 978 posts · 985 votes15y
J Scott -
Similarly to include floating on the internet on a rainy Monday afternoon. I was actually thinking about looking at houses today, but dang if this weather doesn't make my coffee pot look a lot more pleasant!
In my equation, I'm the strategic manager. I have someone else, who is more a craftsman than myself, handle the tactical management of the rehabs.
- Investor · Rancho Cucamonga, CA · Member since 2008 · 1k+ posts · 684 votes15y
This is an interesting thread. My business is similar to J Scott's and Aaron's... we do major rehabs, probably average about 25-30k per house (it might be a bit skewed as we did two projects in 2010 with around six figure rehab budgets).
My business partner acts as the GC... he is getting his official contractors license next week. He pulls permits right now as an owner user.
We have a group of independent contractors and usually work them from house-to-house. They all do some side-work so they are not classified as "full-time" employees.
We both work full-time. I'm in acquisition, sales, renting/property management and fund raising. My partner is in acquisition and repairs mostly. We also have two crew leaders (one for rough work and one for finish work), we also have a third guy that can lead a small crew. We are usually running a couple jobs at once.
The transition and timing from a job to full-time is very difficult. My partner quit his job first and about three months later I went full-time.
The most difficult part is the capital transition. If you start doing once house a time and ramp up to doing 3 or 4 at a time, you will need 4x the money, plus to draw a salary and you won't see a return on investment for the 3 to 4 month sales process is up.
A lot of retail fixing/selling activity needs to happen during business hours. So I think you need a flexible job to be able to do volume at both.
- Real Estate Investor · Garland, TX · Member since 2010 · 86 posts · 34 votes15y
Thanks for all the great replies, there is truly no better place then here to find information.
I have learned a lot from your responses and I think that as long as I am doing this part time it is probably worth hiring a turnkey company for the rehab with their own GC and subs, and be very active in my monitoring of them (daily visits, different time every day).
Once the business grows and we start doing multiple jobs at the same time it sounds like it is definitely worth hiring a PM or similar type role while focusing on the more strategic and financial aspects of the business myself.
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