This is a topic that gets tossed around a lot in the investing world, but I personally have never actually seen/read a real in-depth discussion on this aspect of real estate investing: Should you (and why should you) bring in a qualified, professional interior designer onto your investing team or project for a flip or flip and hold?
The Basics:
Before I dive in, I’m going to go back to the basics of business, because this is very crucial and important to remember throughout this post/discussion. The first question when getting started in your investing business is “what are your goals”? This will dictate the answer to the next very important question, which is “how will you run your business?” You can’t be scatter-brained in this business. What is YOUR role as the investor? How much work will you leverage out? What is your end goal? Do you plan on stepping out one day and having someone else fill your shoes and you become just the owner of the company? There are many questions to ask (which we could talk about more in-depth another time). But you really need to know these answers before diving in. I can’t stress this enough: it is extremely important for an investor to know what they are doing in their business. Once you are clear on your goals, it’s important to determine who is going to fill in the parts of your team. There are three key roles in any well-oiled team. The most obvious is the need for a couple different contractors. Ones that can handle big projects, ones that can handle smaller projects, and everything in between. Next, who will or how will you be financing your deal? Getting a loan? Know where your money is coming from. Third having a really good investor-savvy agent who can hunt down and negotiate these deals for you is important.
However.
You are going to have some limitations.
You’ve got a few team members you know and trust, but how many projects can they handle at once? How fast can they move? This is where finding wholesalers, private lenders, and interior designers - all people who are highly specialized in one area - comes into play…
As your business grows, you’ll want to be faster, be more efficient, and control your costs. The more you can control a seemingly uncontrollable environment, the more you will thrive in business and financially. So, to do that, you will want to specialize people as much as possible.
Workflow Example:
Here is an example of how a deal would flow if you had a larger team in which people were specialized to work in one specific area. In this example, the end goal of the investor is to step out and just be an owner of his/her own company.
Your agent finds you a deal. You, the investor, approve it. You go to your private lenders to get funding for the project. You tell your interior designer about the project and your total budget. Your designer then will walk the property and they create a scope of work with materials, what to change, and what to update (electric, HVAC, plumbing, etc). That scope of work is then sent to you and you approve it. The designer then passes it off to the contractor. If the contractor has any questions, they talk to the designer. The contractor rehabs the property according to the scope of work. You re-list the home with your agent and you move on to the next deal.
In this example, everyone does their one job that they do best. Rather than being a “jack of all trades, master of none”, you are controlling your costs, streamlining, and working efficiently. No one has to worry about 100+ tasks or decisions. Everyone gets one job to do really well that they focus on. This also allows you to take on additional projects simultaneously because your focus on each project is just one thing.
That is a general how and why you hire an interior designer.
The Perfect Relationship:
You need to find someone who is willing to plug into your business, not the other way around. For an investor, it is a numbers game. Period. Some designers are not willing to compromise their artistic design choices in order to compensate for your budget. There is nothing wrong with that. Nothing. That is their business and they are successful at it. They are simply just not the right match for you. Remember, there are many business models. They all work. This is why we go back to the basics in the beginning and why it’s important to know what your goals are and what is going to work for you and your business. If one particular designer doesn’t work on your team, it doesn’t mean they were bad or that you were bad, it means that the match was bad. Again, this is why it is critical to lay down your goals and understand how your business is going to work before you put your team together. So many investors have a bad taste in their mouth when it comes to contractors, agents, or other key parts of their business due to bad experiences. But we can save that for another post. The point is to move on from those experiences and continue to find a good match for you to fill that necessary position. This will make your business flow so much better. Know what works for you and make adjustments as necessary.
When adding a designer, factor in about 15-20% of your budget to pay them for their services. When you meet with them, lay out your goals from the beginning and see how they might fit into your business model.
A qualified and experienced designer should also be able to conform to your budget. In other words, your designer can be working on a project where the ARV is $150k one day; then the next day they can be working on a project the ARV is $1.2 million without any disruption. (Here in the South Jersey (SJ) / Central Jersey market, you run into that wide range in a short distance.)
Why A Designer?:
Your designer is crucial. They will be a time saver for you and will also be able to manage the project. They will know what designs will sell in a certain area and when you might need something more custom. They aren’t just for house flippers either. Designers can help create a rental space suitable for any tenant. With a designer on your team, you no longer need to worry about building relationships with suppliers for materials or finding an architect. Your designer has access to all of that and more and they understand how to put all the pieces together so that the project flows like a well oiled machine and everything is completed on time. They handle the project while you are out looking for the next deal.
Some of you may ask, “why hire a designer when my contractor or I can do all this?” A contractor is better at building than picking materials. While some may have an eye for design, remember their job title is ‘contractor’ - not ‘designer’. Someone who does both will be more expensive… or may not actually pick materials that will sell a home and look good. Most contractors just want to do the work. They just want you to send them a scope of work with materials already chosen and - boom - they just get started on the job. While a contractor will also have access to exclusive pricing on materials, a designer’s access to this as well as their keen, trained eye will be paramount in higher-end flips where you will need to have an edge over the competition in order to sell high and fast.
So in conclusion, let’s review: Know the basics of your business. What are your goals? What part(s) do you want to fill? What does your team look like? Having a full team with all positions filled and everyone specialized makes multiple projects at one time possible and seamless. It is important to find someone who fits your business, not you fitting theirs. And lastly, a designer can save you time, money, and countless hours of researching to keep up on latest designs.
And to sum it up into one sentence: the right designer can be your best friend.
