Many newer investors get hung up on the “fix” part of “fix and flip.” But if you want to succeed as a house flipper, you need an effective, streamlined way to manage the rehab process on every house you flip.
If you go into a rehab without a clear plan, be prepared to watch costs and timelines spiral out of control.
How can you prevent this? How can you make sure to keep each of your projects on track, right from the start?
I asked 16 successful house flippers how they manage and streamline their rehabs. Each of them shared their #1 tip for completing rehabs quickly and smoothly… check out their responses below!
When it comes to managing rehabs, you must stay on top of contractors and their progress. I was too trusting of a contractor this past year and didn’t ask for photos or videos when I should have. The job was a 90-minute drive from my home, so I didn’t go visit the site for six weeks. The contractor had gotten about six days of work done in that six weeks, when we finally visited the site, and we fired him on the spot. I have had the most success when I do an accountability call with a contractor on a daily basis. I ask what they accomplished that day and if they have encountered any new or unexpected problems. I think they get annoyed by this, but I find they make the most progress and get closest to their timelines for completion when I give them a daily call.
I have a friend who personally visits the jobsite of her renovations every day, but I can’t do that due to the number of rehabs I have going at once and how far away they are from me and each other. I must resort to daily calls and weekly visits.
Holly McKhann is a full-time real estate investor and works with her husband Scott, having done over 200 fix and flips together in Southern California over the past seven years. Holly began her career as a CPA, working for Ernst & Young. She also earned an MBA in finance. Scott is a registered civil engineer with a decade of experience at public home builders. Their blend of expertise and experience has attracted multiple investors, allowing them to expand their business. You can check out everything they’re up to at HouseFlipMasters.com!
Holly and Scott love working from home and enjoying their freedom as entrepreneurs. They have been married 24 years and have 4 children ages 13, 15, 18 and 21. They live in Dana Point, CA and flip homes all throughout Southern California. Holly is a member of the House Flipping Formula coaching program.
My number one tip for managing rehabs is having the right contractor overseeing and doing the job.
Typically, if you have that covered, everything falls into place.
Number two, even though you didn’t ask, I know it’s coming, is to have EVERYTHING in writing. You must have a scope of work that spells out every little detail in very clear language. You also need to be specific about exactly what materials to use (you don’t want to end up with $5 brass light fixtures in a million dollar home).
Clearly specify the deadline for the job and the penalty (typically a cost per day deducted for every day over) if that deadline is exceeded. This usually is just in place to make sure the contractor doesn’t go and work on another job for a week or two or even a month, leaving your job a ghost town.
Pay draws based on completion. NEVER EVER pay a contractor 50% upfront and 50% upon completion. Pay draws when certain things are done. This way you can specify the proper order in which rehabs should take place.
Who’s seen a contractor do minimal demo and then spray all the walls and tell you he’s 50% done???? It happens and people pay them and they are never seen again (the investor and the contractor). Write it down, make sure they understand it and get it all signed.
Danny Johnson has flipped hundreds of houses over the last 12 years in San Antonio, TX. He blogs about flipping houses at FlippingJunkie.com and has a best-selling book on Amazon entitled Flipping Houses Exposed: 34 Weeks in the Life of a Successful House Flipper. He also provides real estate investor websites at LeadPropeller.com. And he’s Justin’s bestest friend in the whole world. (Ha ha, Danny wrote this bio himself… thanks Danny! Love ya, man! – Justin)
Check the rehab twice a week. Walk the property with the contractor and check what you expect. Don’t assume; make sure the contractor and you are on the same page with the rehab. Plan on unexpected costs and issues arising during your rehab; there are always unknowns that pop up during the rehab. If unknowns pop up; have your contractor bid them as they come up. Try to have as many of the unknowns be part of your initial bid for labor.
Shawn Wolfswinkel has 15 years of experience in Real Estate. He purchased his first investment property at the age of 19. Since then he has bought and sold over 700 properties. He has continued his training every year, attending numerous seminars and educational functions to strengthen his expertise in Real Estate. He has been educated on wholesaling property, pre-foreclosures, rehabilitation and contracting, leasing and management, owner financing, Commercial real estate, financing, contracts, and state laws. He currently owns 28 personal rental properties, buys and sells 100 homes a year through his Turnkey Company, TexasTurnkeyProperties.com, and manages 700 properties through his Management companies, Real Property Management Preferred located in Houston, TX and Real Property Management Albuquerque located in Albuquerque, NM.
You have to be on it every single week, have an agreed-upon timeline, and contract. Make sure you hold steadfast to it and let them know that you’re watching.
Randy Lawrence is an indomitable entrepreneur with over 24 years of experience and four successful real estate investment companies. He is also a pastor and founder of multiple life changing ministries and in the last 15 years has impacted over 40,000 people. He has been featured in the St. Petersburg Times, Tampa Tribune, and seen on CBN, NBC and CTN as the “Transformation Expert” focused on transforming lives. Randy is also the host of the Real Estate Preacher Podcast.
Hire a good GC and manage the GC. It is worth it to me to pay a little more to have a good GC managing my rehabs. Another tip is to make sure you have a material list sheet. You may be communicating to your contractor what you think is the clearest description of a tile or granite you want in your rehab, and he will end up installing something completely different. So just write it down on a material list sheet!
Kristi Cirtwill is an active real estate investor who has purchased over 125 properties in the southern California area to flip and hold since 2008. She lives in Cerritos and hosts food nights and plays music in her spare time. To connect with Kristi and check out some of the incredible rehabs she’s done, head over to Cirtwill Investments Inc! Kristi is a member of the House Flipping Formula coaching program.
Find someone you trust to manage the managers (I don’t currently manage my own rehabs).
Andy McFarland is a self-made real estate entrepreneur who started with nothing and currently makes seven figures a year in his real estate business.
After getting fired from his last W-2 job in 2004, Andy went into real estate full time and has never looked back. Andy currently focuses on wholesaling properties in three different states; Utah, New Mexico, and Indiana. In 2015 alone, Andy did over 150 wholesale deals. You can follow Andy on his real estate journey by going to his website: www.iloverealestatestories.com or on his YouTube channel by searching for I Love Real Estate Stories. Andy is a coach along with Justin Williams in the House Flipping Formula and 7 Figure Flipping programs.
My number one tip is to hire a project manager. I can’t even describe how much of an impact that’s made in our business. I remember when I sued to go out to the projects myself, and deal with all the calls to the contractors myself… it’s a job. It’s a lot of work.
Now that we have a project manager, it just takes the load off the rehabs completely. It streamlines the process. It’s automated; I don’t have to see the houses anymore. The project manager does everything; all I look at is the scope of work. I just give her a yes or a no. We go over it to make sure everything adds up, and that’s it. I’m totally hands-off. That would be my number one tip.
Gabriel lives in Miramar, FL, and invests in Miami Dade, Broward, and West Palm Beach counties. He’s been investing since 2012, and is currently focused on rehabs and wholesales. He finished off 2015 with about 50 completed transactions and is aiming to double that in 2016. Check out Gabriel’s website, FloridaCashHomeBuyers.com, or connect with him directly on Facebook!
Utilize pictures and video. Pretty much everyone has a smart phone these days.
Dave Payerchin is co-founding partner of Columbus Turnkey Houses and a Licensed Realtor with Shoreway Realty group in Ohio. His specialties are networking, raising capital, system automation, and developing/maintaining relationships. Dave has formal training in several facets of real estate investing and has been successfully closing real estate transactions in several states (including Ohio) since 2005. Prior to joining Columbus Turn Key Houses Dave worked as a real estate trainer and professional speaker. His hobbies include rooting for the Cleveland Browns & Cavs, rooting for The Ohio State Buckeyes, spending time with his parents and his 7 nieces and nephews.
Be a demanding customer (but do it with a smile).
- Stop in often.
- Create punch lists for the foreman.
- Insist on “hold points” at key junctures, i.e. you must approve the rebar before they can order the pour. Approve the stucco scratch coat before they can applying the color coat, and so on.
- Develop contract specifications that define safe, quality workmanship.
William has been investing in RE since 2003 and has performed 11 rehabs, 5 wholesales, and 2 buy and hold deals. He lives and invests on the Central Coast of California, in San Luis Obispo County and the surrounding areas, where home prices range between $400k to 600k or more. Properties vary widely from upscale coastal areas, horse county, wine country and rural. His primary focus is rehabs. Check out his site, http://www.williambuyshouses.com/. William is a member of the House Flipping Formula coaching program.
Doug and Andrea Van Soest
Have a system of accountability for the contractor. Offer them incentives for completing the project on time.
Doug is a former appraiser and his wife Andrea is an interior designer and licensed realtor. They began flipping houses in the Inland Empire area of Southern California in late 2008. They quickly transitioned to flipping houses full-time and have been fix-n-flipping, wholesaling, and buying rentals all over Southern California ever since. They are currently doing about 5-6 deals per month and just started a podcast called Spouses Flipping Houses.
Delegation. I hired a Sales Director over a month ago who is responsible for converting incoming prospects as well as listing the home when ready. This has kept me away from focusing on talking to sellers directly and more on generating lead volume and getting the business to grow.
Alex Bejenaru is a lifelong Southern California resident living in Yorba Linda, CA, with his wife and 2 kids. He started his flipping business in February 2014 as Premier Pacific Properties, LLC (webuysocalhomes.com), and in 2015, he quit his full time gig as a residential loan officer to be a flipper full time. In 2014 he bought 2 flips and is finishing up 2015 with an additional 9 flips completed and 2 properties wholesaled.
Make sure you or someone you trust is checking up on the rehab crew and progress frequently, at least for the first few jobs if you are using a new contractor. Have the scope of work and schedule in writing, and address any deviations or slips immediately. Communication is key, and if a contractor is not working out it is better to cut your losses and move on than wait around or try to micro-manage everything for weeks or months as the holding costs add up.
Andrew Herrig lives in Dallas, TX along with his wife and daughter. He has been investing in the DFW market since 2013 when he bought his first rental property. Andrew is primarily focused on his wholesaling business, but also flips and has a growing portfolio of rental properties. He has done 11 deals in the past two years, and is looking forward to scaling his business in 2016 and beyond! Check out his website at http://www.andrewbuyshousesdfw.com. Andrew is a member of the House Flipping Formula coaching program.
Don’t do it all yourself; hire a project manager.
RJ is an experienced real estate investor who has closed over 150 real estate transactions and co-founder of Columbus Turnkey Houses. He is an expert in the Columbus market. He has had formal training in deal structuring, creative financing, and other residential real estate areas. He received his BA in Marketing Management from Youngstown State University in 2005. RJ attended Youngstown State University on a full ride tennis scholarship where he played #1 Singles and Doubles all 4 years. His hobbies include tennis, photography, Cross-fit workouts, and guitar.
I don’t do rehabs other than on my own buy and hold properties. And the key here is to have a good manager who you can trust. I don’t want to spend my days chasing contractors, so I’d rather find a GREAT manager or pay a little more for trades to get things done well. But my outlook is to hold these properties for a long time so I am different.
Jack Bosch is one of the Country’s foremost experts in Tax Delinquent Property Investing and more recently an educator in Real Estate Investing. Since 2002, Jack has been buying and selling mainly unimproved land and has completed more than 3,203 land deals. Learn more at JackBosch.com.
Stick to a strict timeline. Push people to stay on target with the timeline.
Tom has been investing in real estate for 13 years. A former Catholic priest, he is married with 2 teenage sons and flips houses in the Chicagoland area. Tom is a member of the House Flipping Formula coaching program.
NEVER assume everything is going to go as planned, Murphey’s law. Always leave room for hang ups, no matter how well you plan, anything that can happen will happen. Double and triple check. Get everything in writing. What you imagine isn’t always what they hear. Take photos and send photos of what you want or what needs to be done. Visit the project frequently and always follow up any conversation with an email. Many times we change things on the go, so make sure in writing (email) that everyone understand who needs what, when, where, and most importantly if there is a change.
Delon Hall is a fix-and-flipper in Atlanta, who in 2016 will attempt to take on Chicago and Orlando as well. A wholesaler since 2008, Delon is also a buy and hold investor with 3 properties in NW Indiana, 2 in Chicago, and a package deal in the works in SW Atlanta. He is also a licensed agent with a team of 2 staff and 3 agents. Delon is a member of the House Flipping Formula coaching program.