You’re a fix-and-flip professional. By definition, you are pretty darn capable. You know how to look at a piece of property, evaluate its worth, judge what to fix, and then actually do it. There are a lot of people, even capable people, who can’t do what you do, from tiling to duct work. However, no man is an island, as a fellow once said. There are some jobs that are too big to do alone, or even with a partner. If you are buying a multifamily building with the intention of renting it out, it will take a long time to renovate. That’s time where the building is not earning money, and you are just sitting on it. The “rent” part of “fix-and-rent” is sorely lacking.
So what to do? One thing that you can do with your hard money loan from Socotra is to hire contractors to help you with the work. A lot of professionals are reluctant to do so, thinking that they are going to lose profit by hiring, or that they just don’t trust other people to do the work well. Neither of these issues have to come to fruition, however. Fix-and-flip professionals can hire people to get the work done, while letting everyone earn.
The Money Issue: Cost vs. Time Spent
Let’s imagine that you are going to be renting out a 6-unit place with an average price of $1,000 a month, per unit (clearly, this apartment isn’t in the Bay Area). That’s six grand a month you are losing out on by not having the building ready. If it takes you a year, on your own, to get all the units ready to sell, you are out $72,000, not to mention the cost of material and your time.
Spending money on a team to help you might not add up to a 1:1 cost-saving analysis. After all, that money is spent up front. But that’s where a hard-money loan comes in. Based on your equity, you can get a loan to hire a team. The huge benefit here is that you start earning faster. The sooner you start renting out, the sooner you start earning, and the sooner you can take advantage of the tax benefits that come with owning a rental property (as opposed to owning a property on which you will theoretically rent one day). There is no benefit to taking a long time to get your rental business off the ground.
How A Fix-And-Rent Pro Hires A Team
So, now that you are on board with the financial side, you might be wondering both how you can hire a team you can trust, and how you can lead them. There are a few things to keep in mind.
- Even if you don’t feel like a leader, you can still lead. Working on a home often means working in solitude. It tends to draw in people who are comfortable on their own. But that doesn’t mean you can’t lead. Introverts often make the best leaders, because they allow for others working with them (or under them) to feel comfortable sharing ideas.
- Open the lines of communication. Sharing ideas is the best way to get a job done. When you are working with people you aren’t familiar with, or who don’t know you, they might feel unsure about saying they have a better way to do things. Contractors sometimes just put their heads down and do the work. But maybe the guy you hired knows more about HVAC than you. Ask him questions. Let him feel free to talk. It can make the work environment a lot more efficient.
- Look at reviews. Yelp, Emily’s List, and a bunch of other sites have reviews for contractors. Take advantage of those to do a quick look at who you are hiring. Remember that these reviews aren’t infallible, and that one unfair review can taint the whole rating. However, it is another data point, and worth considering.
- Ask around. You know people in the business, and sometimes it seems like everyone has worked for everyone else at some point or another. Call for references. These tend to be less biased—for good and ill—than the general public’s opinion. You’ll get the real scoop from professionals.
- Provide incentives. Remember, you want them to do the best possible job, and take pride in the work, even though they don’t technically have any ownership of the property. Incentives include bonuses, training, or even just bringing a case in after work on Friday. You want your contractors to feel like this isn’t just a gig, but a place to shine.
Sometimes, you have to spend money to make money. While you might feel like you are saving on expenses by not hiring a team to help with your buy-and-hold property, every day that goes by without renting is money you are missing out on. A hard money loan from Socotra Capital, California’s premier equity-based hard money lender, can help you finance a team that will get the work done and the tenants in quickly and efficiently. Pretty soon, knowing how to build the right team will be another tool in your belt.