House Flipping Project: Project Manager Vs. General Contractor Vs. DIY
Who can make your house flipping project a success? Is it a project manager, a general contractor or should you do it yourself? Only one way to find out.
My day ended really terribly the other day. I took on a project I thought I could handle alone and I ended up hitting myself square in the jaw with a floor board. I didn’t break anything but I realized that there are three ways that I could rehab a house. I could either:
- Hire someone to do all the dirty work
- Do all the rehab work myself
- Do some of the rehab work and let the others do their part.
House Flipping Project- Should You Do It Yourself?
Honestly, I’d much rather do some of the rehab work but not all of it. Unless I absolutely feel the need to rip some floorboards, I’d rather have someone else do it.
If I need to do some flooring work, I definitely will since I used to be a flooring guy for several years but my experience this week tells me I would be better off hiring someone to do the rehab work while I oversee.
If you are new to house flipping, the best way to learn the ins and out of the industry is to get your hands dirty once in a while so doing some of the rehab work when learning the basics isn’t a bad idea.
Getting others to do the work for you afterwards is a great way to avoid the emergency room and also to focus on looking for the next deal.
Should You Hire A General Contractor?
The answer is yes and no. Yes because hiring a general contractor is a sure way of getting all the rehab work done when you are flipping a house. No because if the numbers don’t work your house flipping project could be a huge flop.
It’s extremely hard to hire a general contractor to do the rehab work and still maintain the 70% rule. Contractors hire the same sub-contractors and they really don’t bid out jobs.
In addition, a general contractor will add 10-20% over what he pays his subcontractors. They too, need to make a profit so there’s nothing wrong with that.
The good news is that everything in house flipping is negotiable so if you are set on hiring a contractor, you might as well negotiate for a lower price.
What About The Project Manager?
If hiring a general contractor is not cost effective for you, then a project manager might just be what you need.
You can approach a licensed carpenter who works with subcontractors and negotiate a fee with him based on his involvement.
In my experience, many carpenters and their subcontractors don’t mind this kind of an arrangement. They get paid not only for rehabbing but for managing their team well.
As I mentioned before, everything in a house flipping project is negotiable you just have to be extra creative. Here are a few ways that you can make financial arrangements.
- Flat fee and performance bonus. You can pay your project manager an agreed upon flat fee and then pay him bonuses for meeting budgets and deadlines. The bonuses serve as motivation and it gets them going.
- Percentage. You could pay a smaller percentage of what you would normally pay a general contractor. If your project manager does a good job, then you would have saved yourself a great deal of money.
- Partnership. You can work out an equity stake in the property or a partnership. This isn’t a very good strategy if it’s your first house flipping project but it’s something to keep in mind.
- Flat fee. There’s really nothing creative about this. You agree on a flat fee, you oversee the job and you pay.
Where To Find Project Managers
Always look for young, hungry, ambitious and smart project managers. They are the ones who will put in the extra effort to move things along.
Technical colleges are a good place to start looking for project managers. Newly graduated students are usually hungry to get their first project so they could be an ideal match for you.
Yes, they are not experienced but what they lack in experience they make up for with background knowledge from school. If your budget allows and if you have enough projects to keep them busy, you could hire them on a full time basis.
What I Did When I First Started Out
During my first few flips, I did the rehab work myself. I loved construction at the time and I couldn’t resist converting a run-down shack into a beautiful house. So I got my state contractor’s license and I was ready to flip my first house all on my own.
Despite the challenges, I learned a lot of things. I learned firsthand how things are done and this helped me in my career. I knew how to set the rules when hiring and how the house flipping process worked.
Should you do the rehab work when you first start out? Not necessarily but it is an experience you can learn from.
Whether you decide to hire a project manager, a general contractor or do the rehab work yourself depends on your circumstances. Whichever option you choose, if managed well, can help you make money.
I’d love to hear what you think is the best way to rehab your house flipping projects. Leave a comment below.