Growing Pains, Flipping Multiple At A Time

I recently discovered in the past couple months that there’s this unique area in my business that has been causing me a bit of tension. Firstly – I’ve mentioned this a few times before, but my goal is to transition into multifamily or commercial real estate – something with a more passive residual income aspect to it. Because let’s face it, flipping is great for short-term gains, but I don’t want to have to keep cranking that lever for a paycheck forever until I’m old.

That’s not to say there aren’t business operators out there who aren’t crushing it in the flipping business and scaling it to great heights and doing 50-100 flips per year, because that is very possible (with the right crew of people and likely a few project managers overseeing it). But I’ve heard some rumors on what it takes for them to maintain that level of operation and it’s really not my cup of tea. I’m in this game to become Wealthy and not just Rich. There’s a big difference between the two.

So what was the big discovery? Well… long story short, I had this great crew that was working on my projects one by one. I recently acquired two projects at once. My original crew flips houses too and found a project and couldn’t promise they would be able to work on mine. I then had to scramble to find two reputable crews to handle my projects. As of the day of this post, I am half done with the first project and barely started on the second. Here’s the problem:

I am no longer small enough to rely on just one crew but also not big enough to handle more.

Let me elaborate. Let’s say I am working on only one project. It’s very manageable but the payout feels small because I just spent 3-4 months on a single house for all of my effort. This is clearly inefficient as I have enough capital to handle doing two at once and I should be putting more effort in expanding (scaling is good). But because I am only providing that crew with temporary work and they get sent away after each project is complete they don’t rely on only me for work and could be too busy next time I need them. Everybody has their own interests to look out for and I understand that’s part of business. Now let’s say I have 3-5 projects going on at once, or about 12-15 per year. This could be enough to keep an even bigger crew busy enough and I could persuade them to work exclusively for me and it could be cheaper to use their services. The problem with this is; a) I never planned to scale this large in the single family flipping business and, b) In order to keep a crew like this busy all year round, I would need to keep acquiring flip opportunities at such a quick pace I worry I may choose properties that I wouldn’t normally choose and be impatient and even accept less profit margins to keep them around and that may lead to break-even profit situations or even worst case – profit loss situations.

So what did I learn from all of this? That’s to…

Lesson #7: Never Compromise on Quality for Quantity.

I know, this probably isn’t super relevant because you came here to learn how to handle the problem of growing out of that awkward area of doing just one deal while not being able to handle more than a couple at a time yet. If you’re really looking to scale a flipping business I think the best answer is to just keep doing singles until you save up enough capital (or find an equity partner to fund more deals) and have enough deal flow coming in to handle the volume to hire a crew full-time. That or I just got unlucky with the timing of my guy finding his own flip. Again, staying small in flipping is where I want to be because I am focusing all of my free time and extra capital on breaking into the multifamily space.

What are your thoughts on scaling a flipping business? Do you foresee any “bottlenecks” in the near future while handling your own business and how do you plan to overcome it? Leave a comment, I’d like to know your thoughts.