How involved are you with your flips?

Question

For the rehabbers in the forum, how many flips do you typically have going on at the same time and how involved are you with them i.e. do you spend several hours a day overseeing the work or do you just check on stuff once every couple of days. I understand this will depend on the volume you are doing as well but just interested in knowing how people work their rehabs?

J Scott · Answer

Someone you trust should be at the project 100% of the work day.

That said, that someone can be:

1. You
2. An employee of yours
3. A trusted contractor

If it's #3, you should still have either #1 or #2 checking in at least once or twice a day, as no contractor is going to be as trustworthy as you or your representative.

Personally, these days, we have between 1-5 flips going on at once, and have long-term contractors who we trust.  For the most part, the contractors work independently and I have a project manager that stops by all the houses at least once per day.  I rarely go to the houses during rehab these days, but that's only because there is always someone there I trust -- if there weren't, I'd be there myself all day.

Back when we were first starting out, before we trusted our contractors, either me or my project manager would be be at the houses pretty much all day.

James Vermillion · Answer

My business partner and I try to stay as involved as possible. One of us usually checks the progress every day to make sure the work is on schedule, there were no major problems and to create a presence. At this point in our real estate investing careers I think it is very important to have a presence so the contractors understand how dedicated you are to the process.

Not to mention I find checking on the rehabs to be fun, as I enjoy watching the renovation take place.

Brandy Griffin · Answer

For us, it usually comes down to a math problem that keeps us focused on profit.  It's basically this:

* How much of our rehab budget is allocated as cushion?
* For the contractor(s) working (or running) that rehab project, if they work independently, how much of that cushion will they eat up by making "costly" decisions?

Subtract one from the other, and if you're still in the positive, you're probably alright to let them work on it more independently...

A costly decision tends to be any decision that is not in line with your vision... and your vision is likely (hopefully?) one that is focused on the amount of profit that is made when all is said and done at the end of the deal.

The obvious costly decisions that a contractor might make are spending too much on materials, or making a decision in how to actually do the project that increases the labor costs or decreases the value of the rehab work that he/she is doing. There are many other examples of a costly decision, I'm sure everyone can chime in with at least 3 or 4 :)

For our crew of contractors, we have worked with many of them long enough to know how much they will cost us in profit if we let them run the show completely on their own (whether through actual dollars or by delaying a project's completion date).  For new ones, we have a basic figure that we assume they will cost us in the beginning if left alone as they get to know our style.

And like most others here on BP, I have a rough idea about how much my time is worth per hour, largely based on opportunity cost. If it takes me 10 hours to work an auction deal that nets around $35k (like this one we chronicled in one of our youtube videos http://www.youtube.com/watch?v=iD8t-9HqD4I&feature=plcp, then my time is usually better spent looking for new deals.

That's just one of many ways to look at it though...

Bill Gulley · Answer

And, how that contractor is contracted and paid will make a difference. Total bid not to exceed, specific materials list,(better to buy materials) payments withheld, and a drop-dead completion date even with that "trusted contractor".

Justin Williams · Answer

I have very little involvement and very rarely even see the properties myself.

I have about 3 GM's that understand they can have all of the business they can handle if they do a good job, finish on time etc.

I also use my agents to check up on occasion, do final walk throughs, and my assistant will walk the properties every couple weeks just to make sure all is going according to plan etc.

We currently don't do very many high end or structural rehabs, but do a pretty high volume (about 50+ at at time)

We are starting to do some higher end more involved ones as well and will be bringing someone on to help with management.  They will still manage a similar system but be more involved on those ones than our lower end ones.

Brian Burke · Answer

When I started I was at the job site a lot, that is how you learn, and believe me there will be plenty of hard lessons!  Now I have at least 15 rehabs going at any given time, and a staff of three full time rehab managers that constantly supervise trusted in house staff plus outside contractors.  This allows me to spend my time running the business.  That means 25% finding deals (that doesn't sound like much but an acquisition team of about 8 people spend 100% of their time looking for deals), 25% managing employees and processes (like signing stuff), 20% making sure that the money and expenses are properly accounted for, and 30% raising capital so we can continue to expand.

Matt Lavinder · Answer

When I was starting out and had a full time job, I had to trust the contractor.  It started off well, but that trust was taken advantage of over time.  The last house he did, we found a hidden trash can full of empty beer cans the crew had enjoyed while I wasn't there.  Now, I have 1-2 major rehabs going on at a time with a more trustworthy contractor (you usually get what you pay for).  Still, my project manager is there almost every day to check in.  When we aren't there, we have the contractor send us a summary of everything that was done with hours worked.

J Scott · Answer

50% of my work time is looking for deals, 30% is strategy/planning, 10% is bookkeeping and 10% is dealing with day-to-day issues that come up.

Mark Yuschak · Answer

Precisely!

Steve K · Answer

For those of you who aren't on site very often - are you spending the majority of your time finding new deals?

How involved are you with your flips?

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