I have 11 flips I am working on right now, and that is after selling two last week. I have had ten flips or more going at once multiple times over the last couple of years, but I am in a much better place with my business today. The biggest change I have been able to make is reducing the time I hold my flips, so I can buy more and sell more, which means I make more money. In the past I had many flips going, but one of the biggest reasons I had so many flips was it took me a long time to get them fixed and sold. Over the last three years I have had at least one property in my inventory over a year, which is way too long to hold a flip. All my current flips have been bought within the last 6 months, except for one that was rented for most of last year and I did not start working on until August of 2016 (two months ago). The biggest change to my flipping business has been reducing the time it takes to get my houses sold, and I have many new ideas to improve that process even more.
Why has it taken me so long to flip houses in the past?
I worked with my father for many years as an agent and flipping houses, but in 2013 I bought the entire business from him. Before I bought the business I think the most flips we had ever done was 7 at a time. We had a couple of good contractors who worked on the houses and we used sub contractors for plumbing, roofs, and flooring. While we had 7 properties at one time, we usually had 5 or fewer. It was not too hard to get properties fixed up and sold when you had 5 flips at a time. We would have a couple on the market, a couple being worked on and maybe one waiting to be worked on. One reason I bought the business was I wanted to ramp up the flipping and have more control of what we bought. I bought more flips in 2014 and 2015 than we had ever bought before, but I was not getting them fixed any faster and that created a log jam. We would have a couple of flips being worked on, a couple of flips on the market, but four or five waiting to be repaired.
The average time it took to buy, repair, and sell a flip went from 6 months to 10 months. I tried many things to speed up the repair process, but nothing seemed to work very well. Here were a few of my challenges:
- We had to stop using one of the contractors we used to fix most of our houses. He stopped going to the job sites, hired some questionable workers, and costs went up and it took him much longer to get houses finished. We gave him multiple tries to do better, but it never improved.
- We hired more contractors to get jobs done faster, but they did not work out well. I tried out many contractors, who all made big promises, but failed to deliver. Some performed okay for a period of time, but they increased prices or they started taking forever to finish jobs.
- I hired a project manager as a full-time employee to manage contractors, subs, and properties. He was a contractor by trade, and I had worked with him in the past on a few projects. He started out slow and everything pretty much fell apart on his watch. Nothing was getting done, costs were up, and he was not communicating with me. I could have done a better job of staying on top of his work, but he continuously told me things were going great. In the end he said he wasn’t hiring new people to work for us, because he didn’t think I had enough work to give them! I had five houses waiting to be fixed at that point.
- I am addicted to buying houses. Even though I knew I had to fix my contracting processes I love to buy houses and I kept buying great deals.
Below is a video of a flip we are adding on to.
What did we do to finally speed up the house flipping process?
In the beginning of 2016, I got rid of my project manager and started to manage the flips myself with the help of my team. Nikki, who has been on my team for years and worked mostly on my REO listing agent business. HUD and REO properties have disappeared in Colorado, so she was able to take on more tasks in the flipping business. She became my project manager and has done an awesome job. We hired multiple new contractors (some have worked out and some have not), and we also hired more sub contractors. The new contractors have been able to work through the projects much faster because we are using subs to help them out. Whenever I try to hire a general contractor to complete an entire job, they take forever and go over budget. The more sub contractors I can hire, the faster the work goes, and the less things a general contractor can mess up.
Another thing we did was take a very active role in the management of the repair process. We buy all the materials for the flips, make sure the materials are bought well in advance of when they are needed, and visit the properties at least every week to make sure the contractors are doing what they are supposed to be doing.
What will I do in the future to make the process go ever faster?
While things are going much better now than they have in the past, there is still room for improvement. My contractors are continually taking longer than they say and they are going over budget. One of my contractors has slowed down tremendously in his work and it just so happened to occur at the same time he bought a house for himself. When his crew was supposed to be working on my houses, they were working on his house. He claimed they only worked on his house after business hours and my houses had priority, but every time I drove by his house during the work week he had guys working on his house and not mine.
Last week I hired a full-time employee to work on only my houses. He is a handyman who can do demo, light carpentry, install lights, paint, etc. I hired him full-time so I know he is only working for me during the week and I have direct control of the costs. I plan to hire more employees like this and use as many sub contractors as possible to get jobs done fast. I will use contractors for part of the work, but not the entire jobs. I believe this model can reduce the time it takes to repair houses even more, which will allow me to buy more houses and make more money. My goal for 2017 is to flip 3 houses every month.
The flipping business is going great. I have 11 flips in inventory, I have four under contract that I am buying, I have two flips under contract to sell, and one listed. The biggest roadblock has always been getting the houses fixed, not finding deals or even financing them. If I can improve the repair process, it will make things run much smoother.
For more information on how I flip houses, find deals, and finance them check out my book: Fix and Flip Your Way to Financial Freedom.