All Forum Posts by: Stacy G.

Many interesting comments above. Thanks everyone for posting.  I will try to come back and address a few of the ones I think are very relevant.  @Manolo D. had some really good points about margins. @Christopher B. and Manolo addressed some of the issues investors face balancing quality work with personal involvement and starting a full fledged construction company. @Rob Adams your questions/comments were good as well including a key point about using the ARV * what percent when analyzing a deal. I gave a talk on that subject for investors in Houston last year. Thanks for the discussion as it has been valuable insight from all. The day you stop learning is the day you start making bad decisions!

Thanks @Stephanie Ross!

@Account Closed, thank you for your comments. You are welcome. This is a huge point about where you get your advice on investing. Doesn't really matter the topic. Markets are different from city to city and state to state. New investors are wise to consider this when seeking counsel.  It does take a team as you wisely point out above.  The key is to know your market and build a team which will make you successful. Sounds like you have put together a great team to be successful in Florida. Thanks again and best of luck in your business!

@Elbert D., thank you for commenting. You hit on another really good topic, which is estimating rehabs versus relying on others who may or may not have your best interest in mind. Due to the time sensitive nature of buying distressed properties waiting around for a contractor to help you estimate repairs on a deal is the difference between locking on up and losing out to the next person. A good deal isn't going to last long on the market. We actually teach a class on how to quickly estimate a rehab in 30 minutes while walking a property. If you get to the property prepared with your comps, exit strategies, etc then plugging in repairs to fine tune your offer on the spot is not too difficult. The challenge is this skill is more art than science and the only way to get good at it is to get in the field and do it with someone who can critique or learning by trial and error.

thank you for your comments @Ritch Bonisa!

@Manolo D. Thank you for your comments.  You might recall towards the beginning of my post I qualified it as being based on doing business in Texas.  I also mentioned the same when replying to @Christopher B. when I addressed his questions. 

"NOTE: this is post should not be considered legal advice and is written from the perspective of conducting business in Texas. Rules & regulations in your state may be different and you should seek appropriate counsel on how to address state or local requirements for acting as your own general contractor."

The fact is doing business state to state as well as city to city can be different. Unfortunately many novice investors are not always aware of the fact which can lead them to incorporate bad processes into their investing strategies.  

An example is the way construction is managed in Texas versus California.  Having been CFO for a Top 10 production homebuilder in Houston with divisions outside of the city it was something we knew very well.  In addition, our owner and my direct boss had been Division President of a national homebuilder before starting his own company.  What works perfectly in one area, might not work at all in another. Something you have to take into account when deciding what model is best for your area.  

GC licensing is not a requirement nor it is done in Texas.  Therefore reading something on BP or taking advice from someone outside Texas on that subject would be invalid if not erroneous in same regards. What is considered a GC in Texas is not the same as California as we do not hire labor or specialists directly as employees as you do there, but they are hired as subcontractors with their own insurance, payroll, etc.

Again, thanks for your comments and I hope the above helps.

Thanks @Mike Garrett! I understand where you are coming from as well.  Explaining is the hardest part.  I still struggle with it myself. Chasing that 90 sec elevator speech version that everyone understands! The cool thing though is once an investor gets it, they are sold on the model. What's unfortunate is many of those come to us after being burnt by a bad GC. Thanks again for your comments and good luck in Bothell!

@Engelo Rumora

You are welcome and thank you as well!

Same here.  You hit the nail right on the head. It has been a process and taken some time to build the right team. 

Best of luck!

Cheers!!

@Christopher B. Thanks for comments and your post! You have some really good questions and I will try to respond as best as possible. First, a good thing to always remember when reading things on BP or getting advice in general is real estate is like politics, everything is local.  I.E. my note about the post being based on doing deals in Texas.  What works in Houston or Texas may not be exactly applicable in Dallas or Knoxville. State and local laws can vary drastically.  

The same contrasts came be found when comparing laws and regs governing real estate licenses, transactions, etc. I have heard many gurus and seminars pitching programs which might work perfectly in their own backyard, but are illegal or not practical in other parts of the country. Make sure you are getting advice from those who know your market.

Case in point is your question about being licensed as a GC. The state of Texas requires specialty trades to be licensed, but not general contractors. But, certain cities within Texas have had their own requirements for GC's above any minimum standards set by the state. So, my answer to the first question would be no, an investor does not have to be licensed as a GC in Texas to do their own rehabs.

Our company provides PM services as well being a general contractor. We are not licensed, but would be if laws changed. We do carry separate insurance policies for each. When we PM a project we advise the client to get coverage which protects them accordingly. In answer to your question about permits, we pull permits in the name of the investor listing us as a contact on the permit as well.  Mechanical permits are pulled under the master project number. Permitting gives contractors control of the project and I have seen bad contractors use that control to the disadvantage of the investor,

Regarding your last few comments about crews, a good PM should have crews relieving the investor of that problem. If your PM doesn't have crews available to them within a reasonable lead time I would question why not.  It sounds though like your are considering starting your own construction business which is somewhat outside the scope of the post. If you have enough volume on your own or through other avenues then it probably makes sense.  My post was focused more on the part-time or lower volume investor who is active, but not active enough to justify a full fledged construction business while understanding the advantages of using a PM.

What you might consider is expanding your business by partnering with someone who is already in construction or providing project management services. It may reduce your risk while allowing you to build your business even quicker. This brings up another point about the stories you hear about getting rich in real estate. None of them did it alone. 

I hope the above helps and good luck in your business!

@Account Closed, thanks for your comments. I assume your first question is geared towards bringing someone on full-time.  My experience is depending on the scope of each project one PM can handle anywhere from 5-10 projects simultaneously. It sounds like you are talking more about the challenges of a GC versus a individual investor? What we do in our business is provide individual investors PM services so they don't have to deal with those issues. Basically, we act as PM's for contract and there are some others in our market who offer similar services.  We do have buyers who are larger institutional investors with their own PM's on staff. You are correct it is a challenge keeping crews happy as well as may have to take some work at times you would pass on at other times.  Part of the cycle of running a business.  Fortunately we currently have enough construction in Houston to select more good work than bad, although labor prices have been increasing with the increased demand. The challenge there is getting those increases into the market and investors factoring them into their costs when negotiating purchase price on distressed properties.  Hope I was able to address your questions!