Last week I declared to all real estate investors that it’s time to take action! But what do you do when you’re ready to take action? How do you decide what your first step should be?
Do you sit down and make a list of everything you have to do? Do you spend time doing research to first learn about whatever it is you plan to do and talk to a bunch of people to find the best course of action? Or do you find somebody that teaches exactly what you want to do and sign up for a step by step plan to follow to get your goal accomplished? Or do you just go out and hire somebody to do what you want done?
There are plenty of ways to get something done. Sometimes different goals require different plans of attack. But there is always a way to make faster progress. And that way is the critical path.
Understanding your critical path is a bit like analyzing bottle necks but it’s not the same thing. A bottle neck is the one spot that can hold up the whole process. Every thing relies on this one thing being ready or available.
Critical path is a bit different. A critical path is more about the order the tasks are done in and the time each task takes to complete. Understanding the critical path allows you to reduce the time it takes to complete something.
If you’re flipping a property, every day the property takes to be fixed up is money out of your pocket. If you’re wholesaling you have to find a buyer for the deal before you close – time is of the essence. If you fix ’em and rent ’em you have to finish your work, stage the home and show it to tenants as quickly as possible to maximize your return and if you’re a landlord every day you have a vacant property is a day you lose money. Understanding the critical path for your project will enable you to save time, and as a result, make you more money!
With critical path the time to complete and the dependency each task has on the other are the key ingredients.
When you get the critical path figured out you will know what tasks can slow you down and you can focus your energy and resources on getting those tasks done as quickly as possible. But you won’t know which tasks are the potential problem areas in your process until you take a look at which ones are on your critical path. Because, contrary to what you might think, not every task is of equal importance.
So … what do you need to figure out the critical path?
- A list of everything you have to do.
- The time each activity takes.
- Which activities are dependent on the others.
For example, when we buy homes for our rent to own program we like to have tenants move in within a few days of taking possession of the property. Quick turn around maximizes our return because we begin collecting rent sooner and don’t have to pay to carry a vacant property.
But, a quick turn around becomes challenging when work is required as was the case on our latest purchase. The home is older and needed some repairs. Tenants that saw the home before the repairs just thought the home was in too bad of shape. In order to even show the property we had to do quite a bit of work so we had to carefully plan what got done in what order to minimize the time it all took. We also wanted to know where it was important to spend a little bit of extra money just to ensure the work was completed correctly and on schedule.
So we started with a high level to do list:
Laid end to end the time required to complete all these tasks is about 7 days. That might not seem like very long to many people, but we feared that it would be at least 30 days after somebody saw the property before they would move in so every day we waited to show the property was a big deal to us.
To finish up quicker than 7 days we figured out which tasks could be done at the same time and which ones depended on each other. That’s where you start to see the critical path.
By drawing it all out in a critical path chart you can visually spot the areas where things take a lot of time, and where there could be bottle necks and potential issues. The two major issues that jumped out right away were the windows and the painting.
I was able to get the paint prep work done while the windows were replaced and we doubled the number of painters on the job so the painting job was done immediately after the windows and it only took one day.
Knowing this I made sure the windows were the first thing our carpenters did when they arrived. And I also spoke with my painter and added more guys to the job.
By understanding where my critical path issues were I could speed up the process and get the important tasks done right away. The entire project actually took 3.5 days to complete and before we were done we had rented it to new tenants and they moved in the day the carpets were cleaned!
Just like there’s always a fastest route to where you’re going when you drive there is always a fastest route to getting your properties rented, sold or financed and using the critical path tool can help you do that faster and easier!