How big can a rehabbing business become?

Question

I'm just curious as to how big people have grown rehabbing businesses and how big people think is possible and/or economically makes sense. Nationwide? Across continents?

Thanks.

Glenn Gayet · Answer

I think if you can circumvent the problem of people thinking they could do the same working for themselves that it's doable.

Chris C. · Answer

@Dante Pirouz I have put a lot of thought into that very thing and your post may just be the little eye opener I needed to make it a priority.

@Glenn Gayet I think Dante may of just given a very legitimate way to at least go national.

Could a business as complex as a rehab business be franchised?  I know a home builder could. Not as many variables starting with dirt and building a home.  There are already some great national builders.  There are a lot variables in rehabbing a home and each home is different.  Does this home get a roof? Does this one need a floor joist replaced? Does this one have foundation issues?  Does this one already have the panelized doors we usually instal to update a home?

Do not want to hijack Glenn's thread so this may be a discussion for a new thread.

Dante Pirouz · Answer

@Chris C. create a franchise model and let all us BPers buy in...we don't do enough franchising in RE!! I would rather buy an RE franchise than a Subway but most of my friends who have done well in RE have looked to fast food franchises in order to have a place to park their money and build businesses that they can eventually sell without necessarily having to be hands on once they pass it to a good store manager...

Chris C. · Answer

@Glenn Gayet There are many great plumbers but very few own their on business.  Most work for someone else who knows how to obtain financing, find jobs, manage people, etc.  The list continues on endlessly with the responsibilities of running a business as opposed to just being a good plumber.  The same holds true for a renovation company.  The ability to manage a rehab project does not mean that they could also run a wholesale business to find properties, find investors to fund the deals, and then market the properties after completion.  And then after all those task are mastered all the back office work of taxes, paying vendors, etc.  That is why most people on this board are successful because they can perform these many task until they reach a point to higher specialist and start to leverage other people's time.

@Michael Hassell This is how we run our rehab business with a very standard process.  Local real estate agents know one of our homes as soon as they walk in from the finishes.  The difference is that all of our rehab proceeds go to build a rental portfolio to smooth out the ups and downs in the markets.  That's the theory anyway.

All that being said I am still trying to figure out how to take my local business to the next level much less branch out nationally.

Michael Hassell · Answer

I think it's important to understand the cyclical nature of real estate.  I recall reading about a guy in maybe 2007 who was doing hundreds of rehabs fro banks via their REO departments.  The guys thing was to maximize the economies of scale and keep the pipeline full.  He met this by buying the same appliances for every house, doing the same paint color, everything...in this way he always had stock ready and he could estimate jobs with relative ease.  Through the mid 2000's  everything climbed, he couldn't go wrong, it almost always appeared that his "remodels" were profitable...almost everything proved profitable....until it didn't.  Not to argue that a profitable rehab business is a bad plan, but it is one where you have to really understand and watch the market.  Building sidelines in addition to the rehabbing is critical for long term success.  Of course, if this guy banked 50% of everything he made it may not have mattered what the market did.

The other thing is that real estate is such a local game.  It's possible to invest in multiple markets, even desirable from a diversification standpoint, but taking it nationwide would require an experienced and nimble crew for sure...and global would be a whole different ballgame.  The US market is quite distinct from most of the rest of the world.  Russians still live in socialist style apartments, the Japanese regard a rehabbed house as a "used house".  Those are just buyers perspectives.  Heck, I used to have trouble getting the drywall guy to show up on time and sober...and you want to run a crew across the country or across the world...has to be an easier way to make a living.  :)

Glenn Gayet · Answer

@Chris C. It seems like it would be completely plausible if people were willing to work for you. The biggest obstacle is why would someone in a different region of the country work for you and find properties for your business when they could do it working for themselves?

Chris C. · Answer

I am also interested in this.  Currently stuck in that spot between my wife and I handling it and hire a project manager.

Consistent deal flow seems to be my limiting factor.