Rehab Systems...what, when, and how?

Question

As a beginner investor/rehabber, I keep hearing how important it is to have your systems in place. What all does "systems" entail? Seasoned investors, what's one piece of advice you'd offer a new investor as it relates to establishing as close as possible to fail proof systems?

Lina Bibikov · Answer

@Shayla Collins I will start off and say, I am not a seasoned investor, did a few deals, however, wanted to warn you about getting hung up on the details and not starting investing. I learned everything I could for at least a year before I was able to pull the trigger and do a flip. It was doing the flip when we learned the most and started to realize what processes we need to have in place in order to do another more smoothly. Start investing and documenting. You will work out a system as you go.

Mitch Messer · Answer

Hi @Shayla Collins! Building systems is all about defining, documenting and executing the actions required to deliver your product, in your case a beautifully rehabbed home, to the marketplace.

So, for example, let's say there's a certain way you walk through a house that you're considering purchasing. What exactly are the steps that you would have someone perform to deliver a complete scope of work (SOW) for the renovation? Where in the property should they start? What level of detail do you want. What's the format of the SOW?

The goals are consistency and quality. When you can train someone else to deliver an SOW that looks exactly the way you would have done it, you'll have built a system for doing the walk-through and creating an SOW.

Once you've built a system for every significant function of your business (e.g., performing the actual rehab, doing a final inspection of the home, turning the property over to the new owners, etc.), then you'll have an actual business that you can hire other people to work within, while you focus on working on making the business better, more profitable, etc.

Miller McSwain · Answer

I'm currently reading J Scott's "The Book on Flipping Houses". He dives deep into many of the systems he has in place. For example, in the chapter I'm reading right now, he outlines the order in which he conducts the stages of rehab. He follows this order for every property he rehabs, ensuring he never misses a step.

If you want to learn about specific systems and checklists used by the pros, I'd recommend checking the book out!

Shayla Collins · Answer

@Greg Dickerson Greg, this is solid advice. Thank you. I've done two flips but my process was really bad and caused me to lose money. What you've noted about knowing constructions costs and time for completion are lessons I had to learn the hard way. Both of my flips went way over budget and took way longer than they should have. However, my next one will be a success as I am taking the time to make sure I get every aspect of the process right.

Shayla Collins · Answer

@Mitch Messer thank you! I definitely appreciate your response and realize how taking this approach can add value to my process. Your approach really takes things down to the granular level!

Shayla Collins · Answer

@Lina Bibikov thank you! I've actually started. I've done two so far but my process pretty much sucked and caused me to lose money. I"m taking some time off to make sure my process is super tight. You're right, the school of hard knocks is real when it comes to rehabbing. You learn the most when you actually start doing it.

Greg Dickerson · Answer

You need multiple systems to operate efficiently and profitability on a consistent basis. The most important thing is to educate yourself on the market and the business. You need to know your market intimately. Next is construction costs. Whether you hire contractors turn key or self perform you need to know how long things take and how much it costs to do all the things you plan to do but the most important of all is the market. Get that wrong and nothing else matters.

Rehab Systems...what, when, and how?

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