Flip Concept - Is This Crazy?

Question

Hi all - I'm at the very initial stages of considering a flip business.  I come from a finance background, but honestly have 0 real estate expertise.  I know there are year(s) of learning and business plan formulation that need to be done before I take a leap.  But my hope today is to bounce a concept off of experts to see if it is even feasible before I invest years of my life prepping.

General concept is not much different from my understanding of a "typical" flip.  My main responsibility would be assembling/managing a team of advisors, doing market research and finding deals, and securing funding for said deals.  The difference comes in performance of the fixup.

I know I would need a GC to cost estimate and oversee work, but I was wondering if it was possible to have control of the people who perform the work.  My purpose is to hire recently released felons (drug offenses) and give them a chance to support themselves and their families, while also gaining relevant skills.  There are some agencies in my city that could provide some amount of pre-work training, but the GC might need to help train on specific tasks.

My questions are these:

- What is a "typical" % of total work done (in terms of cost) by a GC on a single-family home, and how much is outsourced to specialists?  Does a GC usually work alone on a project of this size or do they manage workers?  How many (again for a "typical" single-family lower/middle income flip)?

- Is it reasonable to assume that a significant portion of fixup work could be completed by relatively unskilled workers who are "trained up"?

- Would it be impossible to find a GC willing to partner in this way?  How much of a cost premium should I expect that they might demand?

- Am I totally crazy trying to create a business in this space that also, in some ways, is equally focused on social good as profit margin?

Thanks in advance for your perspectives!

Joshua D. · Answer

@Tyler Kosnik

You have a great heart man!  My brother had a job once where he helped transition folks outa prison. It was eye opening for him. Major problems for these guys.

From an investing standpoint I would also recomend that you become successful first at flipping houses and then look to adding some guys to your crew but easing into it in a way that will help mitigate losses. Become a business owner firstand get good at that, then go for the heart stuff!

At least that is how it seems to work for most folks

Matt Moldenhauer · Answer

I like your idea, but i think you'll be hard pressed to find a GC that's willing to do that. Finding a good GC and even a good, reliable sub contractor is hard enough. I would think trying to find a GC that's willing to babysit a group of guys with a prison mentality, teach them, provide the tools and probably a ride to and from the job site would be next to impossible. Say you buy a house that needs $50,000 worth of work and that GC's cut is 10%. Would you be willing to take on a project with those headaches for $5,000?

This would be more of a business plan for a GC, not the person hiring the GC. The GC typically chooses the sub contractors. A good one chooses them based on cost, reputation, product lines supplied and the list goes on.

Those are my two cents.

This would be more of a business plan for a GC, not the person hiring the GC. The GC typically chooses the sub contractors. A good one chooses them based on cost, reputation, product lines supplied and the list goes on.

Those are my two cents.

Tyler Kosnik · Answer

Joshua - yep!  80% of employers will dismiss someone who "checks the box" out of hand, no chance to interview or provide context.  Denied benefits to short-term welfare, food stamps, housing assistance, etc, they are not afforded the time required to seek out the other 20% before either becoming homeless or returning to illegal activity.

Matt/Johnny - Thanks, this was exactly the type of expectation-setting I needed.  Doesn't have to be flipping - this was just top-of-mind when I though of potentially profitable businesses that might also offer the desired level of control over hiring opportunity.

Johnny Kang · Answer

@Tyler Kosnik

I agree with @Matt Moldenhauer. If you want to find a way to give these people a second chance, go become successful, and hire them to work for you in other capacity (marketing manager, acquisitions manager, admin, etc).

Jim Adrian · Answer

A GC typically won't do a lot of the work as they use sub contractors.  The percentages will vary based on what is being done at each property.   It sounds like you may want to have a GC or construction crew as part of staff so you an control him better.  If you ever watch the flipping shows on HGTV or DYI channels on tv, they all seem to have their own construction crews.

James Maradits · Answer

I support the idea of helping people get back on their feet all while getting yourself potentially cheaper labor, but it really sounds too complex to make sense for a novice flipper.

It sounds like you're trying to start a contracting company AND a flipping business at the same time.

I'd recommend getting your feet wet with just doing a few flips first and go from there.  It will be a lot easier to manage and focus on the task at hand.

Nathan Letourneau · Answer

I think you have a worthy goal...one which is attainable, but I think you should go at it a bit differently.  My suggestion is to flip your first house or two without the added complexity of trying to incorporate the people who are looking for a second chance.  You will learn a ton by doing your first few flips ( I know I did).  Problems will arise that you never thought of and you'll have to work through them.  You need to find a good realtor/contractor & subs/closing company/etc, which can be difficult in itself.  Once you are successful with a flip or two, then start slowly incorporating helping the other individuals into the process.

Flip Concept - Is This Crazy?

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