Challenges with scaling rental portfolios in the inner city
You have been offered a SFH in (Detroit, Memphis, Cleveland, Baltimore, etc) for $45k. The rehab is $40k and the ARV is $127k. Rent estimates show that you can expect $1,600 per month. Lets add that you have a good team which includes a reliable realtor, knowledgeable lender, good contractor who can turn over the rehab in 60 days, and lastly you have a responsive PM who you feel comfortable with. So, you pull the trigger and things go great- so you think "on to the next one". At this rate you could do 5-6 projects per year. Let's say you want to scale by doubling the number of rentals in year 2? How do you do it?
Is it as simple as multiplying your team by 2? Absolutely not. Mainly because your current team is tested and trusted. Creating the same level of trust with a second team will take time and may require multiple rounds of hiring and firing which will take time.
Do you multiply the workload of your current team? That can be problematic especially as it relates to a contractor who has a finely tuned team which He/she is a part of. Many contractors lack the ability to manage "multiple" teams and trying to do so may reduce their effectiveness and weaken performance. This increased workload may also be problematic for a property manager who lacks the internal staff to handle such a rapid influx of new rentals to market, tenant and manage.
Of course, scaling is possible, but what is the best strategy?