Any contractors doing their own flips?

Question

Hey everyone. I've been lurking this forum for some time now and have been learning so much. I'm a contractor skilled in all trades (jack of all, but a master of none). I've always wanted to flip/rehab a house, and since I started reading through this forum, I've been itching to find my first deal more and more. What I'd like to do is buy a distressed property, fix it up myself (with some helpers of course), and then sell for profit. I understand this will take more time than subbing out all the contracting work, but I love doing this type of work. So for the first few deals, I want to do it myself. That way, too, I will have a better idea of what to look out for, how to better price materials (which I think I already have a pretty good grasp on), how to manage/budget time, etc.

I haven't read anything here on BP about any contractors doing their own flips. Are there any of you out there? If so, any recommendations/tips for a newbie rehabber? Any benefits/drawbacks to share?

Brian Levredge · Answer

I'm a GC and have done and continue to do flips.  There is a tendency (from a GC standpoint) to want to "fix" everything when you get into a remodel since that is the best time due to everything being opened up.  Avoid that mindset (if possible) and don't overdo the property.  You want to get a quick sale but you don't want to go crazy adding features that don't necessarily increase your ROI.

Account Closed · Answer

Thanks for your responses everyone. You're all great.

Good point about not overdoing it. Luckily, I'm being subconsciously trained in this right now lol. I do a lot of work for a local realtor who has me prep her houses for the market. Although, yes, I do indeed want to fix EVERYTHING in these houses, I still only do the basics that the she wants/sees fit to be done. She has an excellent grasp on the local market's wants/needs, so I think I have a good idea going into it what to do and what not to do. But we'll see. I'll use what I've learned from her as a starting point, and learn from each previous flip what I should and should not do next time.

I would eventually hold some properties for cash flow. I actually have a duplex right now which I'm holding for a real nice CF. However, I want to make a sum of seed money first to then be able to reinvest into properties that I will be holding for CF. I feel investing for CF is more long term (which I definitely plan on doing), and rehabs/flips are more short term investments to realize a "quick" (hopefully) ROI. I don't have much money to invest for CF now, so I want to invest what I do have in rehabs and make as much money as possible in a relatively short amount of time to reinvest in more properties for cash flow.

Thanks again!

Account Closed · Answer

Oh, and for the first few flips, I wouldn't mind breaking even on the deal, but still essentially just getting paid to do the contracting work. That's fine with me for the first few, just to learn the ropes a bit.

David Beard · Answer

Since you're just building capital, it would appear that you're probably needing to work your 40 hrs on other projects, and work on this on evenings and weekends.  Not to beat it to death, but I'm sure you know that can be very grueling, and I constantly hear about problems with moonlighting contractors being unreliable.  Of course that's not you, but the point is that the rehab could get drawn out, costing you money and maybe even losing the peak selling time.  So I would delegate everything I possibly could, while still very closely monitoring progress.  For max profit, you're going to have to be the boss, not the worker on these projects, why not be the boss from the initial project on.  You already know how to do the work, and you probably need to continue to trade your time for money in the nearterm working for others until your flipping business takes off.  I'd just be concerned you'll burn out doing this moonlighting thing.

Even as the boss, your contractor skill set definitely gives you a great leg up:  saving GC fees, knowing exactly what to tell your subs and helpers to do, bringing the project in at the lowest possible cost for the targeted quality level, know and recognize excellent tradespeople and quality work, know how to inspect properties and quickly come up with rehab estimates, etc.

Jeff S. · Answer

Chris, I like your ideas about doing the whole job yourself to begin with. Just realize that might not be the most profitable way to go if time is working against you, but it would be worth the extra expense if you can afford to take the time.

When you do all the work keep careful records of your time and material cost. When you go to hire in the future you will know what is going on and have realistic expectations from your subs.

Like Bryan says, contractors (engineers and perfectionists can have same preferences) can have a tendency to overimprove. If this happens and the market isn't super hot than the overimprovements may be a freebie to the new buyer with that much less in your pocket. Plus it won't appraise because area may hold down the appraisal.

The most important thing you need to do now is learn what is going on in your market. What are rehabbers doing? Are they doing well or are they not able to find profitable deals now because of competition. It has become very competitive and the tendency for a newby would be to overpay. There is nothing worse than breaking even on something that requires so much time and energy.

With all the warnings you should be ready to go, good luck.

Karen Margrave · Answer

When we relocated to southern California from northern California where we KNEW the market, our plan was to start out doing rehabs, and getting to know the So Cal area. However; everyone under the sun was buying foreclosures, and here in Orange County, fixers are extremely hard to find. The few there are get offers over ARV, it's crazy! If we could find rehabs we wouldn't hesitate to do them.
 
We were able to find a lot where a home had burned down; and purchased to build a spec house on it. It turned out we were able to find a buyer before even closing on the land.

I don't think it makes any difference if you're a contractor or investor, the deal just has to make sense.

I do have to agree with Brian, about the tendency to go overboard. As contractors we see every little detail, and could end up spending money that isn't necessary to sell the property.

Mark Updegraff · Answer

Why not hold for CF?

Gidon Freidfertig · Answer

I am more of a contractor myself of new construction homes but here is my input. First as we know in real estate time is money especially with the flips "in and out". As a contractor there is a tendency to do a lot of the rehab work yourself and getting bogged down in project. On your first deals do them with cash to give you extra time for the project and to build your network.

Any contractors doing their own flips?

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