I want to start by saying I will share the podcast I was on if you want to take a look at that on the Blackjack Real Estate Facebook Page or see it below. In there I talk about scaling a business and not just creating another job for myself. I will write more about that today but check out the podcast if you want to hear some more about me and what I’ve been doing lately.
Without a ton of tangible progress and deliverables to write about this week I figured I would take some time to write about the growth I have going on and how I’m scaling my business. With a full time job, it was easy for me to do one flip at a time or pick up one or two rental properties per year and manage them all myself. However, if you read last weeks blog post you will know that we have purchased 6 houses (yes, one more came in on Tuesday) in the last 10 days to flip. I would not have been able to do anywhere close to that last year and it has been a struggle to get the train moving on them this year as well. I’ll tell you why…
The first thing we should look at is what kind of work goes into each of these flips. You will find that even the little tasks eat up a lot of your precious time. It starts with generating the lead; that could be direct mail, MLS, email from a wholesaler, word of mouth and networking, or just calling a FSBO. From there, the due diligence starts and you have to run comps, calculate the After Repair Value (ARV), project some holding costs, determine the rehab costs, and then ultimately find the MONEY. Then you will negotiate the price, do the inspection (hopefully you do this step), get it under contract, and coordinate all the deadlines and logistics of getting it to closing. During that time you have to come up with a scope of work, interview contractors, get bids, negotiate pricing, and come up with a timeline to get the work done. All this and you haven’t even closed on the house yet (hopefully you can get all the bids in and have a contractor lined up prior to closing, but it doesn’t always work that way).
Just prior to closing, you will need to get a builders risk or vacancy insurance policy on the house, setup all the utilities in your name, take before photos (optional), and put a lockbox on the house so the contractors have access. Then you will be at the property every day or two ensuring the contractors and doing what they need to be doing, shopping for materials and picking finishes, choosing paint colors, buying appliances, dealing with unforeseen contingencies as they come up, and fielding calls with issues from said contractors every few days. During the months that the flip is going on you are paying utility bills, paying draws on the construction budget or paying the individual subs, continuing to manage the project or manage the managers, and watching the market to see if there needs to be any adjustment in ARV.
When the project is complete you need to do your final walkthrough, ensure any last minute punch list items are done, buy the staging materials and stage the house (again optional), take after photos to put them up online, decide on the final list price for the home, advertise the property yourself or on the MLS with a realtor, show the house to prospective buyers if it is FSBO, and field calls or emails about the property from other interested parties. Decisions may need to be made on a price reduction if the house sits on the market a while stagnant, you will continue to pay the utility bills, HOA, and possibly taxes on the property over this time as well. Finally you will get a contract on the house and the selling negotiations will begin. You will go back and forth on a few items in the contract to include amount of EMD, closing date, offer price, seller paid concessions, inspections, type of loan, and whether or not to pay for a home warrant. During the one to two month process of waiting to close, all of the inspections will be done and you will be crossing your fingers hoping that the buyers loan gets approved before the closing date and you don’t have to start all over with another buyer a month later. Lastly, you will sit at the closing table and sign 3 documents and receive your cashier’s check or wire transfer. Then it is time to do it all again.
CAN YOU DO SIX OF THESE AT ONE TIME IN YOUR BUSINESS RIGHT NOW?
I hope the answer is yes but I suspect it is no way. That list certainly didn’t include swinging a hammer and doing the work yourself because I hope all of you are not even thinking about doing that right now. But, it wasn’t long ago that I was so that should be one of the first things you give up if you are still working on your projects. I wrote all of these steps out in excruciating pain above because last year, that is what I was doing! ALL OF THAT (minus the staging which I hired out completely). I also failed to mention finding the subs and hiring and firing multiple sub contractors. But, keep in mind that this post is about building a business and not a hobby or a job. So, if you love working on the houses or running the projects, by all means continue to do what you love.
How has my process changed?
I truly rely on other people to help me get these things done. The first thing I wanted to get rid of was managing the renovation from start to finish. I figured that if I could get rid of all that mess, I would save myself a ton of time and energy. The biggest problem I had on my flip last year was that when I was finished and the house was under contract, I didn’t have another one to start on because I spent all my time focused on that one. This was a problem! So, this year I brought on a contractor who will manage all my projects. I wanted to find someone I was comfortable throwing the keys to when I bought it and picking them up when he was finished. This allows me to focus on the acquisitions of more properties and finding the funding for each of them, which is where my time is best spent. I have hired a photographer to take before and after photos so I don’t have to. I have a plan to bring on a transaction coordinator who can handle all the back and forth dealing with the purchase and dispositions of the properties as well as the utilities, insurance, scheduling, and other small tasks. For now that is handled by my lead manager or myself but it needs to be addressed soon as my lead managers main focus needs to be on answering the phones and setting appointments with sellers.
My advice to all of you is to break down all the steps I wrote out above and put them into a job description for 2-3 people who work in your business. Once other people can start taking these tasks over, you will be able to step back and take that 10,000-foot view of your business and see where your time is best spent. I can assure you that will be on networking, finding funding for your projects, and figuring out how to increase volume without increasing risk.
I hope this was helpful for some of you, I know it was helpful for me to write it all out and see what I can do to shed more tasks coming up here shortly. If you are reading this and haven’t liked our Facebook page please do so you can see all the updates we put up including new blog posts, photos of properties we have completed, and properties we have for sale.
Thanks for reading and see you next week with our new listing!