How to create the perfect business model

Question

So currently its me,my wife and 1 employee that run this business. We have 8 units 1 duplex and 6 SFH's. I find the deals and run around and try and keep it all together doing it all with some construction stuff and keeping everyone together, my wife does the bills mostly and marketing online and we do tenant screening together and meeting new tenants and pretty much it all. We use cozy,transunion smartmove,craigslist and facebook for most of everything. We have 1 employee that does mostly all the construction stuff and bring other people in when needed to help. Hes on payroll and we usually keep him really busy but slow now because all houses fixed up and rented just doing some little maintenance stuff now. We have a heated storage unit we have built into one of are houses with all construction material for him. My wife keeps up with most of paperwork and receipts. I feel in a way this business is all over the place. My wife does not to seem to have her head in it like mine also we almost had are employee quit the other day and has been acting weird so im expecting him to leave soon or a matter of time. We have built this alot around him more then we have should. So wouldnt know what to exactly do if he left. So we have 8 places. How in the world do people have 20-4000 units dont get it. Any help would be greatly appreciated. Wanna get this all organized running smoothly

Levi T. · Answer

Your trying to mom & pop it to much man.. You need to change if you want to grow. Think about streamlining everything and getting out of the way.

Forget hiring employees as handymen. Find a good GC/Handyman that has subs, when you have hundreds of units you need dozens of subcontractors.

You can even have a GC for handyman work, and GC for rehab work if you have the volume. If the GC sub or their employees quit, it's not your problem, it's the GC or subs problem, and they have to deal with it, not you.

We operate on 1 real estate agent per 200 units. They handle leasing, evictions, and coordinating with the GC or other vendor for turnover and repairs.

We sub payments and bill to a larger accounting firm. This means you better have you ducks in a row, your vendor pricing pinned, and your operating model right. It's about running within operating margins, not running on the cheapest dollar.

Checkout Appfolio or Buildium for managing accounting, payments, billing, and more.

I do nothing but buy properties, and my wife only listens to me ramble about buying properties, she has no idea what or where we own units.Goodluck!

Levi T. · Answer

I started at 10-15 units on the first year when I got into the business. This is what I did back then:

PM companies want 10% just to manage, this does not include leasing vacant units, which will be at the cost of 1 months rent. All late fees and admin fees the PM will keep. So yeah... you have to decide how to peal that. Most will self manage, but who wants to deal with all those showings and calls!

Find local real estate agent that wants some side work, post on CL, give them a flat fee to fill vacant units and see if they will include handling calls from tenants if they get all the leasing. You'll still be in the process, but at least the bulk of it's off loaded and only cost some money when a unit turns over.

Find a local contractor to do the handyman work, and have the agent send them when there needs to be a repair vs calling you.

Always keep a few backup numbers in your Rolodex for vendors. Small vendors flake out every few years.

I pay our CPA firm to pay all the bills for the business, run the books, etc. basically I have all bills mailed or emailed to them and they take care of it and keep the books up to date and balanced. It's cheep compared to a employee.

That's just some of the things you can do. Keep in mind what works at 1-3 don't work at 10-20 units, and likewise at 50-100 and beyond. Just keep looking for ways to streamline the business and keep things growing.

Your 69% net margins is strong bty!

Joshua D. · Answer

Could anyone by any chance give me a step by step business plan to follow. I wanna give me and my wife more freedom and not depend on are handyman. Not sure where to start to make this as hands off as possible. Wanna just find the deals which im very good at and have everything else managed. The problem with me is i feel no one will run it as good as us and try to penny pinch and make the money we can. Please any and all advice would be so appreciative. Wanna make this business run smoothly and get out of my construction job and stop doing all the run around with this.

Jeff B. · Answer

A manager makes assignments (aka delegates), make all major decisions (aka tenant screening) and steps back to allow the assignees perform.

Unwind the wife - - Heir a bookkeeper and let her do the 'fun stuff' - - run ads, post to social media, et al.  Might have her pull the Credit reports, but don't stress  her out on REI.

Develop your support team.  I'm 120miles and 2hrs one way from my 6-plex.  I hire out everything possible and directly participate in tenant selection and screening.

Been doing this 19yrs now.

Joshua D. · Answer

@Levi T. Thank you so much bro! I really appreciate and agree totally with your insight. What would you say is the first step for us to  begin this process? We talked to a local realtor and property manager and he does do property management for a 10% fee and 1st months rent for any new tenants that they background check and bring in.  Didn't know if it would be worth it or not, what do you think? They don't do the construction side of things/rehabs. We live in a small town, which creates some challenge in finding a big enough company who has both a GC and subs. That would be the perfect scenario for us. Right now, we have 1 flaky employee who we pay $11.00/hour who does all maintenance calls and rehabs for us. However, he is kindof unstable and emotionally a mess, I often feel like I am babysitting the guy and feel unsure when buying new rehab houses because you never know when the guy is going to have a meltdown and be out of order for the week.  I wish I was kidding. Lol.

We are bringing in $7,902/month right now gross and $5,500/month net.  Do you have a suggestion where I could find the GC and subs? It sounds like you have an awesome operation going, my goals exactly.

When you say that you sub payments and bill to a larger accounting firm, can you explain that more in detail? I was unsure, in my still-newbie status, of what this meant.

Thank you so much, I really appreciate your insight

How to create the perfect business model

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