I noticed that many investors shy away from extensive house rehab projects. They feel like they don’t know where to start or how to organize the work. It can be really intimidating to take on a large renovation project on a flip house. FEAR NOT!
In this article you will learn all the secrets that a large-scale rehab professional has to share on how he runs his business and how he manages his renovations on his flip houses.
In order to manage a large rehab effectively on a flip house, a real estate investor should follow these groundbreaking steps:
- Get Organized
- Up To Date Rehab Budget
- Superb Scheduling
- Getting Started
- Utilize Your Connections
- Subcontractor Management
- Beating Around the Bush
- Parting Ways
- Running your Numbers
- Know Your Teams Skillset
- Invest In Yourself
- Painting Efficiently
- Order of Project Operations
Steve Hayes is an expert on massive renovation projects and the owner of house flipping company Iconic Construction and Iconic Electric LLC. Today he is walking us through his process and pro steps on how he approaches his business. His latest flip was a house that was seriously damaged from a fire. No project intimidates him or his team.
Where do a lot of investors get off track with their business?
Getting Organized: Every real estate investor needs a system to stay organized during a house flip project. That system needs to be reproducible every house. Steve keeps both a paper copy of all documents and an electronic version. This will protect you in case the original version gets damaged or lost. Also, use technology to aid your business practices. If it saves time and helps you stay organized it’s a well justified expense.
Up To Date Financials: Steve works closely with his project manager to ensure that the project’s current spend and financials are always up to date. They prefer to track everything in excel. This may or may not be the right tool for you however, it’s important to find a way to have up to date financials and know if you are exceeding your renovation budget. It is also important to know if your business is operating in a way that’s profitable and generating appropriate revenue.
Superb Scheduling: At the beginning of a flip house project write out a project schedule and timeline and make sure to keep that timeline. There will always be some surprises but it’s up to you as the general contractor to keep the schedule intact. Steve always has 2 different subcontractors working at the same time at every project. This ensures timelines get met and that carrying costs are minimal.
It’s common for subcontractors to get into disagreements with each other when there are multiple people on the job site. Steve explains that it’s expected to have some interpersonal conflict at the job site. The best thing to do is to listen and be there for the subcontractor. However, don’t change your schedule or plan for them. At the end of the day if you don’t have multiple projects at the jobsite running at once then your business won’t succeed.
Managing people and subcontractors is often the biggest pain point of the real estate investing industry. How can real estate investors overcome this?
Getting Started: Before you get a house under contract, make sure you have an idea of who your subcontractors will be and what your budget is for the house. Communication on a big project is key. It’ll be crucial to have good communication to hit timelines and for scheduling. Steve finds that it is often worth paying a subcontractor a little more if they have good communication skills. If the subcontractor won’t pick up the phone, it could be costly to your business. Remember time is money.
Utilize Your Connections: If you need to find a new subcontractor, ask for referrals from people you trust. Utilize their name as a warm introduction to the new subcontractor using a familiar name they’ve had a good experience with. It will give you instant repour. It’s important to continue to build repour after the introduction. Subcontractors want to work with people they like and respect.
Subcontractor Management: Make sure your subcontractors are aware of your scope of work and ask them when they can start the work. If they can’t fit you in for 2 months they won’t be a good fit. Do not let the subcontractors set your deadlines. Steve utilizes a great technique of setting all the inspections with the municipality and they he tells the subcontractor the final deadline (the inspection date).
Beating Around the Bush: Steve recommends to run in the other direction if a subcontractor won’t give you a price. Be very concerned! Never commit to time and materials with a subcontractor or go into a job without a price. This is a great way to get taken advantage of.
How do you give a subcontractor feedback if they are not meeting expectations?
It’s important to communicate honestly with your team and subcontractors. Never give feedback in a group setting. Steve recommends pulling the individual aside and talking to them in private. Make sure to encourage the team member but let them know that you expect more from them and how they can meet those expectations better in the future.
Parting Ways: It is never fun to have to part ways with a contractor. Steve has unfortunately had to let 2 different plumbers go this year. If a contractor is no longer a good fit try to finish out the project with them and then focus your efforts on finding someone great for the next job. Never feel like you have to use a company again if they aren’t meeting your needs. If communication or quality of work is poor on one job it is likely to continue down the same path on future jobs. Better to cut ties and move on.
How can a newer investor learn how to run their numbers and estimate the renovation?
Steve feels real estate investing experience comes from a lot of practice. In order to gain experience a newer real estate investor needs to walk as many houses as possible. It is especially helpful to walk the homes with a contractor and ask a lot of questions to build your rehab knowledge base. Practice running numbers! This will help a newer real estate investor grow their confidence over time.
Know your team’s skillset
Typically, real estate investors start by using a general contractor or subbing everything out for their house flips. A great strategy to have better controls over your real estate projects is to build a real estate team in house. Steve has had a lot of success through building his own contracting team. Generally, having your own team helps you with cost control, jobsite control and timeline improvements. Building an inhouse team means you will have workers at the jobsite that are solely dedicated to your project and share your vision.
Subcontractors often have several jobs going at once and your business will never be their sole priority. Once you build a team you will learn their strengths and weaknesses. It is important to encourage your workers to stay focused on what they are good at and not get distracted by items that aren’t in their skillset. As a business owner you should hire out the things that your team is not comfortable doing.
The most important investment of all: Invest in yourself and change your mindset
Steve recognized early on that if he was going to build a successful flipping business that he needed to grow himself first. He needed to focus on himself and get centered. This has greatly attributed to his professional and business growth. He highly recommends that all investors focus inwardly to best achieve their goals.
How to paint a 3000+ sq ft house in only 2 days!
Steve’s team of 3 can paint an entire large house in 2 days. Usually, they are painting homes that are 3,000 sq ft and larger. This is an incredible timeline to hit and he has a secret technique that he developed to help his team be more effective. His team is trained on a paint sprayer and this is a great tool to help cut down on time. Every ceiling gets sprayed using the spray gun. No matter what they do 2 coats of paint. Then, his team cuts in and rolls the walls with 2 coats of paint.
One of the biggest time-consuming aspects of painting a house is the base trim. His team removes all the old trim and they buy pro packs of trim bundles. The great thing about trim bundles is that you can order it already with white primer on it. This cuts out a layer of paint you’d have to do on any old trim. Next, his team pre-paints the trim before cutting and installing it with a semigloss white paint. The trim is rolled with a small roller. The next step is to cut and install the trim. Finally, his team comes in and touches up all the nail spots, caulk on corners with the semigloss paint and finally painting is complete!
Steve’s Order of Operations:
- Roof (Pro Tip: if you don’t fix the roof on the house first then it can cause a lot of damage to your finish work)
- Carpentry, Structure, Framing and Walls
- Electrician and HVAC specialists
- Plumbing and Insulation
- Drywall and screw inspection
- Taper (Pro Tip: Taper’s are very picky about not working at the same time as other team members or subcontractors, move your team to another job for a couple days and let the Taper focus)
- Landscaping and Exterior
Thank you to Steve Hayes from FasterFunds Lending borrowers and team for sharing all your wisdom and advice. Our team is committed to bringing our clients the latest and greatest tips and tricks in the real estate field.
Please check out our Facebook page @FasterFundsLending. Our team is made up of real estate investors who care and want to see your business thrive in 2020.
Steve Hayes, owner of Iconic Construction LLC and Iconic Electric LLC
- St Louis Real Estate Investor with 3 years of experience
- Managed 7 Flips while acting as general contractor
- Owns a portfolio of 15 single family rentals
- Invests in commercial buildings in the St Louis area
- Experienced wholesaler
- Works for FasterFunds Lending, a hard money lender in St Louis, MO