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A real house flipper with over 300 projects completed brainstorms specific ideas and strategies in the Real Estate Investing world. Usually centering around the Rehab portion or how to use the rehab to get a better deal on the purchase of a house.
I've said this in other content out there but there was a time in my life where I would come to my office every day and say something along the lines of hope it's not another 10K day which basically meant I hope whatever mistakes got made today don't cost me more than $10,000 which happened very consistently you just kind of hire somebody and if you're lucky you've picked the right vendors here if you're unlucky you're barely in the game still there are a lot of different facets when it comes to flipping real estate or investing in real estate the problem is that rehabs and the construction portion of flipping houses sucks you up like a vacuum it is a total thief of your bandwidth and basically I know because we've hired a lot of different people to help us on the construction side and for every one of them it sucks up their bandwidth and so I'm trying to go through what I believe are the different phases the different stages of progression in managing rehabs the issue is so many things are happening on job sites all day every day and contractors are going into the black hole there's problems that you find inside of the houses there's scope creep there's misted scopes there are hundreds of deals that you need to assess by building scopes of work and figuring out what the construction is going to cost all of these things make it to where you can never get Breathing Room breathing room that is absolutely necessary for you to be able to go do what you need to do as an investor which is really go find more deals get deals to the market grow the property management side of your business level up your vendors all of these these things are the things that you should be focused on and we'll get into more of what you really should be focused on once we get to the end of this podcast and the point is that the point is that there's got to be a way to manage the projects and the construction portion of your real estate organization otherwise there won't be an organization so here's what happened for me when I was a oneman show I had this guy that would help me out from time to time and and I was at the time thinking that what I needed to do was figure out how to become more efficient so I could take on more and I remember at that time I had a list of all the contractors that I worked with and I would on that list have what time they would answer my phone call first because I would call every contractor every day and you know I was a oneman show so I only had maybe 10 projects going on at the time and every day I would wake up someone answer the phone at 5:00 in the morning some 600 some 7 some not till 10: but I would call everyone every day and I would keep notes about what I talked with them before what jobs I had them on or projects that I had them on and I would go through it I would keep following up so I hired this guy that would help me from time to time and the goal that I had for him is to basically follow me around and figure out where there were efficiencies to be had where I could could pick up even more you know so I would do my calls in the morning and then I would take the next hour or two making sure that all the jobs were planned out and then I would go out to job sites and check on all of these guys to make sure things were happening and and then at the end of the day I would go through all of my phone calls text messages emails slacks uh at the time I was using monday.com I would go through all of it to make sure that I had it all cleaned up and and have my calls planned out for the next morning and that was basically a day in the life so after a week of this guy following me around he had made a list and made me a report and basically what he came to was that I was totally efficient and I was making a ridiculous amount of phone calls and a ridiculous amount of rounds and I was really at the time proud of that fact that I could get so much done as a one Man Band however I realized that this was not actually a good thing at all this meant that the rehab and construction portion of my real estate operation had totally sucked up all of my bandwidth and so that's great if you want to be a contractor but that's not what I wanted what I wanted to do was to grow my real estate portfolio and to do that I needed to gain bandwidth back but I didn't really realized this until my first daughter was born and of course I didn't want to be out working cuz I'd get out to my office at 5:00 in the morning and I would work till you know 9 or 10 sometimes and even sometimes I remember working later than that and uh get in trouble but I couldn't have that once you know I had grown a family and so I was trying to find ways to free myself up for that and of course it what it ended up doing was freeing me up to really grow my real estate portfolio and that's what we're talking about so we're going to go through the different stages or progressions of this management system and first I want to talk about what that management system will do for you so three main things one is it frees up your bandwidth it gives you back brain space and time so you can focus on the things that matter to you whether that be focus more on your family and your personal life or focus on growing your real estate portfolio or both two is it mitigates mistakes it mitigates the things that really start costing you money and I've said this in other content out there but there was a time in my life where I would come to my office every day and say something along the lines of hope it's not another 10K day which basically meant I hope whatever mistakes got made today don't cost me more than $110,000 which happened very consistently and you know at the time I thought that was the cost of being in business now I realized I was just an idiot and I wasn't managing well and three it keeps everything in front of you and so I kind of imagine this like a uh snowplow you know the snowplow goes down the road and it's keeping all the snow in front of it and the excess is running off the sides and I believe that that is the strategy I use to manage these projects is that I want to make sure all the balls are in front of me at all times I don't need to be moving super fast I just need to make sure that I'm not dropping the ball on anything and so that does more than just mitigates mistakes it frees up your freeze up maybe is not the right word it mitigates your stress to just know that you're not missing out on anything you know there's always like that thing in the back of your head like oh did I forget the blah blah blah or the blah blah blah and I can't like recall what it is and so knowing that everything is in front of me at all times is a feeling of relief it's a feeling of I can sleep at night so stage one is reactivity this is the stage that I call disorientation this is basically when you're new and you're conf confused about what goes where what job comes after which job what contractor should you hire what type of contractor should you hire and so really you're just out there hiring anybody you still think of each contractor as the same you know they're just contractors of construction not the specific types of contractors that we look for like the specific job contractor the all-arounder and the handyman which you'll find all over all of our content you just kind of hire somebody and if you're lucky you've picked the right vendors here if you're unlucky you're barely in the game still but you're in total survival mode here you are hiring these people and hoping for the best even if you are talking to them every day about what they're doing you don't really know what you want yet yet you're in total survival mode and now you may well let me rewind you don't actually know where the money is at at this point you think that you're making money because on paper it works out but you don't realize the cost that you're not putting on that piece of paper and the you know a lot of people get confused here because the numbers are so big it really does seem like you're making money but a lot of times all you've done is created a somewhat of a savings account for you so at the end of the project when you sell the house you might have made money put money in your pocket but it was all uh basically a savings account for yourself you know you lost that money during the project now after this phase of disorientation if you're still surviving you realize that this is not the way and so you level up a little bit and this is for me this is where we started doing what we called the PM planning list and this now I call being in the
weeds and so every day I would go through every single project we had going on and you know this was the story of when the guy was following me around we would go or I would go through every single project every single day I would talk to every contractor every single day and I would make sure that things were moving in the right direction and because I knew construction well enough at the time I was able to know where things needed to go when I was in these conversations so I could keep pushing the ball basically in the right direction so in this phase in the weeds the PM planning you would be keeping track of all the tasks that needed to happen you would uh be talking to the contractors you would basically know where the Project's at and if you had the time you would also be going to the job site most days to figure out where things are and note that this does go against my current philosophies on things but at the time that's what I would do I would try to get to the job sites as much as I could so that way I knew where everything's at it wasn't necessarily to micromanage and it certainly shouldn't be a reason to micromanage it was just to know where everything sat every day that way I could push it forward in the right way now obviously that has a lot of downsides is it takes up all of your time and then it also is called the weeds for a reason because you are stuck in the weeds and you're not zooming out at all and so that moves us to the next stage which is the weekly expectations this is what we call the trees you've zoomed out of the weeds and now you're in the trees so what you do at this point is you start to make weekly plans for each one of your projects so you take project a at 123 Main Street and you decide that by the end of this week we should be able to have flooring done so then the following week I will be focused on doing installs of the new Cabinetry and so I need to make sure that I have my cabinet guy lined up for the following week because I'll be done with flooring and uh that'll be good to go now also at the end of that week you go and hold accountability to the expectations that you set either for yourself or the contractor you know hey contractor a I had you slaughtered to be done by the end of this week and and you know I had the cabinet guy lined up to come in right after you were done and so you didn't get done and now that throws off my whole schedule or you did get done and great job thank you can't wait to hire you for the next one uh that is when you've moved out of the weeds and now you're in the trees and now you're looking at your weekly plan you've heard the expression can't see the forest through the trees and so now in this next phase we have zoomed out even even further and we can see the forest and what we do here this is where the phases come into play so the phases are for lack of better words they're checkpoints for yourself for your contractors for any vendor that you have for your personal team the checkpoints are a collection of jobs that help to make sure that you don't do things out of order and that you have constant stopping points to check your work so when you move off of just the weekly expectation and you move into these phases which you know these phases could take a week they could take multiple weeks they could take less than a week so as you move through this progression you're not you're not giving up the stage prior to move to the next stage you're adding it on except for of course the first stage of reactivity and disorientation that one can go away it doesn't necessarily go away all the time but the goal is that one goes away these others you keep piling them on top of each other this is how you progress in your business so the forest here you will start managing in phases you will have your six phases for every project and you will set things up prior to the phase and then you will hold your accountability at the end of the phase and also hold accountability to yourself so you'll have pre and post-phase checklists you will have the list of things that you need to check to make sure are right before you move on to the next stage every every phase has a planning stage a work in progress stage and a billing and review stage which is uh you know planning is your time to set up the project you make sure that you are going through each item on that list so pre-phase let's just go through it have your dumpster delivered create your pre-phase media packet with your contractor if applicable but this is where you're going to get pictures and videos you're going to update your scope of work you're going to determine the sub chunks of the jobs in that phase how are you going to group those and give them to a subcontractor I guess it would be called a contractor for you prepare the sub packets to give to those contractors they'll get the media packet with your expectations and details so that way they know what they're bidding on that way you have something to hold accountability to at the end collect all the bids from the contractors decide on the bids that you are going to approve or negotiate back and forth with this the does not imply that you're going to go out and get a bunch of bids for every sub chunk that you have you if you listen to anything else I talk about I focus on uh one maybe two contractors for a specific job or group of jobs I.E sub chunk and I focus on building the relationship there not getting a whole bunch of contractors to bid the same thing that's a great way to waste people's time and not build relationship Capital you'll adjust your scope of work as needed you will then schedule contractors post phase you do a walkth through make sure your expectations have been met if the contracted work was done right you pay very quickly uh very big there that you want to always make sure that you're building what we call Job confidence with these contractors which means that they have confidence that you're going to pay them quickly they're not going to be hanging out waiting and that you have the next job lined up for them they don't have a gap in their their work and you know this is a little bit of a tangent here but an important tangent I believe that job confidence is a key to success in this game that these guys are in a position where they let me rewind that you know you hear this all the time that the contractor starts off good on a project and then kind of Fizzles out at the end and this is the reason for that in my belief that a contractor always needs to be thinking about building their business getting to the next job and so just think about it when they start a job with you they weren't just sitting on their couch I mean they were working at somebody else's project and they had to come bid yours they probably left the project they were on to come bid yours they won the bid all right but you're not going to wait for them to finish that last project right you didn't say oh yeah come on in a couple months you said like you can start next week can't you and you know how you felt about that you wanted them to start right away or you would have went looking for somebody else and but what if that somebody else didn't tell you that they were on another project they just lied to you and said they would start you know that wouldn't be good either all right so they won the bid with you now they had to balance between the project that they were on and your new project but your new project has a lot of Runway and so they there's a lot of money there and so a contractor has to be thinking about the money so they're going to go to where the money's at right now not saying that that they're going to abandon their responsibility some do that is called the contractor's black hole and this is a reason why it happens but they will try to get that done but they got to think about the money otherwise they don't have a business at all and so they're going where the grass is green which is your project because you just started with them all right but now they start to get to phase four out of six and they're starting to think all right where's the next project coming from and so they're out there now focusing their bandwidth on finding the next project then they get the next project they're not going to tell that guy hey we'll start in a couple months they're going to start right away because that's what that guy wants okay and now they're splitting their time between your project and that next project but the money is on the next project and this is the cycle how do you break that cycle you give them what I call Job confidence where they know that the next project that's coming is not one that they need to go market for it's yours so you can literally have them wait till the day they finish that project that they're on Project a before they start Project B which is your project great back to the list you create your post phase media packet if applicable this is basically where we take our after photos of each phase and after videos for our records and truly most of that is in the pref phase checklist for the next checklist you know a pre and post phase is obviously the same thing here is where you would add any audibles or change orders to your scope of work and confirm that you have cash escro for the next phase if you're working with a lender make sure you get your inspections done so you can get that money now that you're working in phases this is where you really start focusing on ordering your material in chunks the goal is to have all the material needed for that phase ordered and delivered to the job site prior to that phase beginning everything should be there to keep the surgeons at the table as we say which means keep the contractors working instead of running to Ace Hardware or Lowe's or Home Depot multiple times per day to get material now there are going to be some in Project or in job material purchases but for the most part you want to get as much of it as you can prior to that will save a lot of time now you might be thinking that well I'm subcontracting it or I'm Contracting it out so it doesn't really matter it's not my time yeah but it is you see ultimately if a contractor is not making money on your project they're either going to be raising their prices or finding a new customer and so if you can help the them to be efficient then you can help them maximize the profit and therefore not increase the price on you and also be happy working with you therefore they want to work on the next one all right now you are looking at the forest but now we're going to hop on a little drone and get an aerial view this is the full project setup not just the phases not just a week not your dailies this is looking at the whole project and making a plan this is where we introduce The Ledger as we call it or sometimes we refer to it as invoicing notes because that's what we call it in our construction business but as an investor I call it the Ledger this is where we keep track of all the money on a project this is where we set this is not where we set our budgets but this is where we put our budgets and make sure that we're staying on them this is where if we go over a budget for a phase we find a way to make it up in future phases or find more money for that project this is where we project out costs this is where we put our bids this is how we make sure we land the plane financially this is where we really start focusing on leveling up our smart scopes of work see the key to being a successful house flipper or real estate investor is knowing what you need to do on a project on a house house that you buy versus what you want to do and the line is very tough to find and a lot of people are going to hear that and than slum Lord or cutting corners and you know uh it's not it's just uh the if you're going to do everything go get into new builds the art to flipping houses is knowing where to draw the line and you know it's things like I know that if I replace that trim all right that trim looks bad but if I replace that trim now it's going to make the paint look really bad and now I'll have to do the paint and if I do the paint it's going to make those cabinets look really bad now I'm going to have to do the cabinets so it's knowing where to stop on those things knowing what is going to optimize the cost of the project versus the price that you get for the house and those things come from a lot of experience and a lot of gaining knowledge you have I'm sure heard me say it before you have to take the time to gain the knowledge and then you put the knowledge to work and that is where you gain skills and skills plus knowledge give you the experience and then you can uh really become a very successful investor also in the project setup this is where you would introduce the office block a special checklist that is for kicking off a whole project and also your 81o checklist which is an Ever growing checklist that you use at the end of a project to make sure that everything in the house is ready to go and the house is livable of course you're never going to know all of the things because one of two things happen you sell a house and you get an an inspection done by the buyer side this is where the inspection resolution comes in and you know those guys get paid to find stuff wrong with the house even new builds have an inspection list and so don't try to go make it perfect because of this inspection list you want to make sure that big scary things don't come up on that list but things are coming up so if you go fix all the things that you think are going to come up well you just made the easy ones go away now the inspector is going to work harder to find things to add to the list but they will find things to add to the list and those will now become the burning bright things for the real estate agent or the buyer and then you'll end up having to do those which you wouldn't have had to do those if there were other burning bright things and they're not going to ruin the deal so don't worry about that so you either do them before or after the inspection resolution but if you do them before you're can to have other things on the inspection resolution or you are going to go rent the house and there is just no amount of inspecting that you can do before somebody lives in it because that is the ultimate test they're just going to find things that you didn't even think to find or can't be tested until Everyday Use happens and that's okay don't feel bad about that all right now we're going to zoom out a little bit further yet this is the organizational Outlook this is like uh the last stage was the aerial view this is like Google Earth this is looking at our real estate business not just the construction this is what we are freeing up our bandwidth for and so there are really four things to think about here four things to really spin your time on and that is building those skills in uh creating smart scopes of work it is building your skills as a project manager those are the two things that we really talked about today because as you build the skills in those two areas it becomes easier and it takes less time for you to get the same outcome and that is only going to come from experience but gain your knowledge first next that's not on those lists the uh list of things that we've talked about today is is leveling up your vendors you need to constantly be working on getting better vendors to deal with that uh give you better quality and that quality means different things for the different types of vendors for instance a contractor's quality doesn't mean craftsmanship to me it means consistency to what we set as expectations but always thinking about find find better wholesalers finding better contractors finding better lenders finding better whoever you're working with and maybe you've already found the best maybe you just need to find more maybe you need to find more contractors so you can grow your business or more wholesalers that you focus time in more real estate agents that are finding deals now a lot of these like accountants attorneys and project managers you're going to find one of those and you better be happy with that person and you're really going to invest in the relationship there you may have different accountants and attorneys for different Specialties but for the most part you're focusing in on that one whereas like wholesalers and contractors the more of those that you build a relationship with the more you're going to be able to scale your business and then finally finding deals this is where you should be focusing most of your bandwidth is finding better deals and you know you can do that through wholesalers and through real estate agents but if you really want to level up your game you need to find deals on your own as well in addition to those other methods and you know I ended up here with a construction company and it was a specialty in construction because when I started out in real estate over a decade ago I thought that to really control my real estate Investments I needed to be able to control the construction that's where I would save all the money that's what I thought then now after that experience I know that that's not true at all construction is like your defense it's you set your strategy and then you stick to it through your defense which is construction and you need a strong defense because there's like a million things that are trying to throw your budget off and mess up your project and we talk a lot about all that but where your money is made the offense is all about the deal all about the deal you can make a lot of mistakes on defense you can make a lot of mistakes on what you think a house will sell for if you're getting a great deal on the front and so you really need to learn how to control that but you can't do it if all your bandwidth is taken by these rehabs and that is what we're talking about now those four things finding deals leveling up your vendors be a better project manager and build better scopes of work those happen to be the four things that make up our all weather approach which we have a whole podcast and multiple YouTube videos on just that subject so you should check those out and thanks for your time talk to you soon