All Forum Posts by: Matthew Banks

Hi, I've got a couple buildable lots and would like to build single family homes on them in the $500-700k price range. I've done 10 gut rehabs but I don't have new construction experience. I want to GC these projects, perhaps starting with just one build, but would like to have someone with experience to offer advice/consulting to help with the process and ensure I avoid or minimize potential mistakes. If you have experience, particularly in rust belt or upstate NY, I'd be interested to chat.

**If commenting, please be constructive, negative opinions not welcome.*

We've got 5 units, 4 properties currently, but it is already a lot to manage ourselves. These are BRRRR purchases, and its a lot of work to do the renovations. Any advice on where to focus to scale up? I handle the acquisition, financing, renovation management and marketing & leasing work. My partner handles maintenance and repairs and a lot of the actual renovation, as well as assists in other areas.

For those investors with experience, what things most helped you scale?

I've done some investing in upstate NY, mainly BRRRRs. I'd like to do some flips in order to generate more capital. Market prices in general are more depressed than the rest of the country, but I think there are opportunities. Any advice on what seems to work in this kind of region? Should I target a certain market segment like the higher-end of the market? And besides obvious improvements like cosmetics, kitchens and baths, are there other things that make a flip more desirable and successful, like adding insulation, upgrading windows, etc.?

thanks!

We're in a rust belt city (upstate NY) where home prices are 250-400k, and have done 4 BRRRs, mostly by ourselves. It's time to bring on help for our future projects. Any advice on how to compensate contractors/tradespeople to ensure that you get good people who do good work? Any specific wage, compensation suggestions? We're not hiring people full-time long-term (just for days, weeks, months) so would it be reasonable to require them to have worker's comp and general liability policies?

I'd be cautious about lenders opining about the future of rates and saying they won't come down soon. It is in a lender's interest to make loans now. That said, there are many very prominent people (Jamie Dimon of Citigroup, Ray Dalio of Bridgewater) calling for a recession next year, which usually brings rates lower. No guarantees of course. If you choose to refinance sooner than later, make sure there isn't a prepayment penalty in case you want to refinance down the road at a better rate. You might want to ask lenders if they offer a refinancing option and what the cost & requirements would be, because it may be inexpensive to do so.

BRRRR - buy, renovate, RENT, refinance, repeat. You generally want to refi after you lease it, because that will put you in a stronger financial position with the lender. It may not matter, in your specific case, but it can only help you look stronger financially, and may get you better financing as well.

I'm not trying to buy the lowest quality material, but to ensure I get the best price on material I buy.

-stone, masonry, framing, drywall, nails, sheathing, cladding, roofing

-wall & floor tile

-windows

-doors
-fixtures

-finishes (counters, cabinets, trim, paint, etc.)

So far, it feels like we're paying retail for everything, apart from the 5% discount at Lowes etc. Do I need to hit a certain volume to be able to negotiate better prices?

"I can't justify paying someone labor, because it will cost more to pay them than what our holding costs are. So that math equation didn't work out. At what point did you decide to scale up?"

-Our last project was a BRRRR, where my brother and I did a substantial amount of the labor on a very intensive rehab/restoration. I hired two outside contractors to help us. You probably want to test the waters by bringing on a contractor to do 1 or 2 specific tasks. We get quotes for painting and, given the amount of time that it would require, it made sense to hire someone else to paint the entire interior and exterior. It would not have been worth our time. We also hired a contractor to install tile flooring and a new concrete entrance. For me it came down to evaluating the time to do the job vs the bids from a couple of contractors.

I think you should start small in order to get some experience working with contractors, getting bids, and weighing whether to do a job in-house or sub out.

Your specific project is unique, so only you can compare those options and determine the best way to go. 

In general, people grossly over-hype 'flipping' and make it seem so easy to do. It is easy to show a before and after photo, and ignore all the analysis, estimating, bidding and management that is required. It is hard work to identify a property that will be profitable as a flip. And if you are lucky to have an operation in place, and a consistent ability to source leads, then you will be far more competitive than a beginner or part-timer who has little to no experience in either, and difficulty finding contractors willing to take small jobs with someone they don't know.

If I had tax losses that would offset gains from a sale, I would strongly consider selling. If I know that I'll find good deals, and that more good deals are likely coming, I'd want a lot of dry powder. The only reason to hold a property would be unusually high cash flow and/or appreciation vs buying something else. Another way of looking at it is the trade-off between long-term cash flows and short-term gains from a flip. How does the present value of cash flows compare with the short-term gain from a flip?

I'm in a similar place at the moment, debating whether to focus more on Flips vs BRRRRs. Having low cost capital for acquisition is a HUGE competitive advantage in a high interest rate environment. In that position, I'd be able to make some deals pencil that competitors using HML won't be able to touch. Any competitive advantage is one I'd want to leverage!

Start now by talking to people and networking. Get a sense for the market and different opportunities around you. Get a feel for what interests you. See if there might be ways you can help others, because you enjoy doing things others don't want to do or have time for. Make it an enjoyable process and don't put pressure on yourself. I'd really do this first, before reading books or learning a skillset.