Planning Your Project
With each passing day, your loan costs you a little more.
Don’t get discouraged…get organized!
The best way to assure that you’re maximizing your profits on any given project is to make sure you’re maximizing your time. Well, okay. The BEST way is to buy the property at the right price–we make money when we BUY, after all, and we realize that money when we sell. But I digress…
Time is money, but unlike money, you can’t get your time back.
TIME IS UN-REFUNDABLE. USE IT WITH INTENTION.
Even the experienced investor may need his or her loan for the full term (6-12+ months). Even though an investor can get a project done in the recommended 45 days of renovation, there are many factors that could extend the project. Sometimes a home doesn’t sell right away once complete, sometimes you can’t predict that there will be mold that will need to be addressed or you could be stalled out on the process of permitting.
But besides the schedule crushers that you can’t control, there are steps you can take to assure that you’re making the most of your TIME investment.
GET THE RIGHT FUNDING
You need a deal before you can get funding. But, if you want to make the most of your time on a project, find a few funding options before you stack and offer and write that contract.
First, you must understand more about what makes private lenders different from conventional bank loans, (For a comprehensive breakdown, <CLICK HERE>).
Then, shop around for what you need. When you have the right funding and understand the process (if you don’t, talk to your friendly loan officer today by calling (800) 473-6051. We’ll answer all your questions!), you can still expedite the process to assure fast funding and a more stably funded project by following a few guidelines.
Get the right funding, and get it when you need it! We’re happy to help.
You can’t get everything done alone.
For each project, get bids from at least three contractors. Look for any discrepancies between the proposals and address them. Look for someone both competent and honest. When flipping multiple times, you can work with the same contractors, earning both discounts and loyalty.
But why delegate when you can do the work yourself?
If you’re a handy person, you may be tempted to lay the flooring on a project to save some money, paint the walls, or weed the backyard. Easy fixes, right? Why pay someone else to do them?
This is an object that comes up on the regular. I’m not going to tell you not to help out on your projects–we all need to roll up our sleeves sometimes and get in there to get it done right–but you need to look at the cost. If you can hire someone to come pull weeds and throw down a basic landscape for $14/hour, and you believe you’re worth more than $14/hour, then by doing the work, you’re giving yourself a massive pay cut.
It behooves you to hire out the elements of a project so you can spend your time focusing on managing the current project well and getting another deal under contract. If you can’t find another house to flip because you were too busy painting the basement, then you’re out more money than you saved.
You can hire people to do small jobs, you can’t hire people to run your business for you.
Follow up- the most important part of delegating is following up. Following up isn’t just for acquisitions and contracts, you must follow up with your contractors and stay on top of their work and schedule, especially as it pertains to the schedules of others. If your electrician is running behind schedule, your drywall guy isn’t going to be able to get until the wiring is redone. And if your drywall guy is only available during a short window, you may have to hire someone else. If it takes you three days to find someone else, and they’re not available for another week, you could have to reschedule your painting and finishing.
You can prevent most of the headaches that arise by following up, confirming, and communicating with your contractors.
Key #1 – Communicate with Your Contractor.
You need to know what is happening, when it’s happening, what the costs and projections are, what the deadlines are, how closely the schedule is being adhered to, etc. If you don’t know, they don’t know, so start the conversation.
Key #2 – Be Seen by Your Contractor.
Be a constant face on the job site. Show the contractor that you are hands on, that you will be there when you say you will and pop in unannounced to keep them on the job.
Key #3 – Don’t Bulldoze.
If you don’t want to get bulldozed by a contractor, return the favor and maintain a professional relationship. You can assert your stance as a professional AND be flexible to their advice regarding the project. That doesn’t mean you take every suggestion they make, but you should’ve accounted for appropriate changes in the budget and schedule when applicable.
Key #4 – Be Honest.
This is especially necessary to set up at the beginning! For instance, if you’re going to use a draw schedule, make sure your contractor understands up front how it’s going to work, when they will receive draws, how much, and what you are expecting. Then, don’t deviate from your word once the work begins. Don’t promise to give more than you can, and don’t give less unjustifiably. Remember, this relationship goes both ways.
Key #5 – Make Sure They Complete the Job!
There is little you can do to persuade a crooked contractor to finish a job—and you probably don’t want them to! If you’ve had a contractor abandon a job, your best move is to hire someone reliable to finish the job.
But, that’s not what I’m talking about. I’ve seen people make the mistake of paying the contractors when they’re “done” without doing a final punch list.
This is your job.
Do a final walkthrough with a roll of blue tape and a notepad. Mark up things like chipped paint, unhung towel bars, poorly done calking, or missing trim. Even the best contractors miss things, so get in there, create a punch list, and get the items knocked out as quickly as possible. Don’t pay the contractor’s final payment until this is all done!
Key #6 – Incentivize.
Time is money. You know this. I know this. Contractors know this. If you want a job done on or ahead of schedule, offer them an incentive.
It is possible to build lasting, cooperative, mutually beneficial relationships with contractors that last for the duration of your investing career. Don’t get discouraged if you find a dud. Network with other investors and with multiple contractors. Connect with a mentor or coach when things get sticky. And, most importantly, keep going!
NETWORK AND BE PREPARED
Things come up.
Maybe the chimney needs repair and your regular mason broke his foot and can’t work. If he’s the only mason you know, it’s naturally going to take you longer to find, vet out, meet with, get estimates on, and decide upon a replacement.
Keep your rolodex (or you cell phone directory) full of reasonable and reliable contractors of all varieties.
Well, the more projects you do, the more people’s numbers you’ll have handy. You’ll also be able to live and learn, kicking the duds who aren’t doing their jobs to the curb. All of this takes time, thought.
The fastest way to fill your back pocket with good contractors is to network with other people who are doing what you’re doing. This is why I have the RULE OF 56. Just be aware that if you get the name of a good contractor,
Have a strong exit strategy. I can’t emphasize enough how much a good exit strategy WILL change your investing career.
If there’s any one thing that stalls a process more than anything else in the world, it’s a project that isn’t working out the way you planned and now you can’t get out.
If you don’t have an exit strategy, a project that takes a turn for the worst could become a money pit and fast. If you’d like to learn more about how to create an exit strategy for each stage of your project, join me on Monday, March 5th for my CEO Fireside where I’ll discuss this and much more. <CLICK HERE> to register!
By anticipating the needs of a potential project, you can assure that your project is scheduled properly, that your funding ducks are in a row, and that you have a plan for anything that could happen.
And when you effectively and efficiently manage projects, you can do multiple ones, do them quicker, and snowball your investing career.
If you’d like to dive deeper into becoming the best project manager you can be and how that will impact your investing career, talk to one of our Business Development Professionals about taking the Project Management Specialty Class. If you’re going to invest in fix and flip properties, it doesn’t make any sense not to learn how to best manage your projects. Call us at (800) 473-6051
To Your Planning;
Lee A. Arnold
The Lee Arnold System of Real Estate Investing