As someone who came from a Corporate background before beginning to invest “intentionally,” I have a tendency to analyze the pros and cons of every deal. Of course, too much of that can lead to “paralysis through analysis”, but it’s just as important to review both the successes of each deal as well as where there may be room for improvement. As an investor, I do this for my own deals and as a Real Estate Agent, I strive to provide feedback to my clients (a great majority of which are investors like myself), if for no other reason than to give them a 2nd set of eyes.
Recently, I was on the “Agent” end of an Investor Flip that was, to say the least – “painful.” It took much more time to sell than it should have; costed much more money than was actually needed; and created a lot more stress than was necessary. Of course, this could all have been eliminated by adhering to basic organizational concepts and through simple communication. So, to possibly eliminate some of the “pain” that my clients, their team, their buyers, myself and the buyer’s agent went through, I’d like to highlight a few of the problem(s) that we faced, as well as the simple solution(s) that could have helped avoid all this.
Problem #1: Too many Chiefs
My client was an investor who found a credit partner in another state to fund his deal. Since the credit partner was the one with the money, HE was the actual owner of record on the transaction, and since it was HIS money at risk, HE wanted to be personally involved. Unfortunately, the credit partner knew NOTHING about Real Estate (other than it was supposed to make him rich), but he felt as though HE should be making the decisions. On the other hand, my client felt as though since he was a seasoned investor, HE should be the one calling the shots. After a while, the friction became so great between the two that my client went “Radio Silent” and the credit partner who knew nothing about RE, was making the decisions – a classic case of “The Tail Wagging the Dog.”
Solution:
- When choosing a Credit Partner, try to choose someone who understands basic Real Estate concepts. (Life is much simpler when all the musicians are reading from the same sheet of music.)
- If you’re working with someone who is SOLELY a credit partner, decide early what part (if any) he will play in the decision making process for your project. There can be lots of collaboration (I encourage that), but in the end, there can only be one boss.
Problem #2: Who’s on First?
My client was a small investor, who, like many others, is trying to grow. As such, in addition to what he does as Owner and Business Development Manager, he brought on a number of positions which included: Chief Operating Officer (Ops), Acquisitions Manager, Sales Manager and Project Manager. As you would expect, each of these positions has a specific job description responsible for specific duties. However, on this particular deal it was “every man for himself.” In many instances, where decisions had to be made, either no one was available or no one willing to make them. At other times, decisions were being made out of necessity by those who had neither the authority or the background to do so. The result: Confusion, Time delays and unnecessary costs.
Solution:
- State the (not so) obvious goals, such as: The Scope of Work to be completed; Work schedules and completion dates; budgetary/cost requirements and limitations.
- Ensue the role of each person, from the COO to the PM is defined. Specifically: "Who" is responsible for "what" as it relates to the SOW, and the authority and/or limitations each individual has in decision making for their part of the project. Just as importantly, be sure to identify clear lines of reporting, both up and down the organization.
- Lastly, give decision making to the lowest COMPETENT authority. No need for the COO to be making decisions on carpet color when you have a perfectly competent PM on the job who understands and is responsible for the SOW. Likewise, the PM shouldn't be making decisions about Closing Credits for the Buyers either.
Problem #3: I didn’t know THAT!
Assuming the project is property designed and everyone knows what they are responsible for, the project should go off without a hitch, right? WRONG! You can do everything right, but if you don’t communicate on a regular basis, there’s no way to tell if your goals are being met; if schedules are being kept and if costs are being maintained. Likewise, throughout a project there are many (MANY) unforeseen circumstances we deal with on a regular basis. Sadly, this was the case with my last project, and the lack of communication cost my clients – dearly!
Solution: Communicate, Communicate, COMMUNICATE!
- Hold an initial meeting of key members of the team to identify project scope, goals, budget and individual/reporting responsibilities.
- Throughout the project, make sure that crossline team members (Operations – PM) are speaking on a regular basis (at a minimum – weekly). Highlight successes and discuss issues. Ensure that solutions are provided and clear direction is received BEFORE moving on.
- On a daily basis, ensure that information is passed up and down the organization with direct reports (e.g., Contractors – PM; PM – Ops, etc.)
- Give urgent problems the immediate attention they deserve! Urgent problems require IMMEDIATE action. Be sure those who NEED to know are IN the know.
- Lastly, BE AVAILABLE! In our business there’s no such thing as “regular” schedule. Contractors get delayed, pipes burst, and sump pumps stop functioning. Unfortunately, this doesn’t always happen Monday through Friday, from 9 am to 5 pm. More often than not, it happens just about the time we’re about to cut “Little Joey’s” Birthday Cake on Sunday afternoon. Regardless of WHEN it happens, it needs to be addressed.
In my lifetime I’ve led hundreds of men as a Naval Officer and managed multi-million dollar contracts as a Corporate Executive, but nothing compares to the feeling I get when I take a project from scratch, make it my own, and see it through to fruition.
Let’s face it, nothing we do compares to Rocket Science, but there are a lot of moving parts in our business. As such, our success is dependent on our ability to execute a successful organizational plan and to simply communicate with one another. No Rocket Science there!
