Having the wrong people on your rehab team can lead to expensive mistakes for real estate investors. Those can lead to lost opportunities and profits. From badly structured offers to poorly completed rehab projects, one wrong team member can make a potentially successful rehab a nightmare. So, how do you prevent that? You build the right team.
Your Team: The Key to Avoiding Flipping Losses
It’s all about developing a few key guidelines, says Kyle Alfriend of The Alfriend Group in Dublin, OH, who has bought and sold 126 homes and represented buyers and investors in over 1,500 home-buying transactions in the past 26 years. “Success in rehabbing requires a true dream team.”
To start, realize that it will take some investment to build a quality team. “Choosing contractors based solely on low-cost will backfire,” he says. “But don’t choose the highest priced, either.” Look for the “sweet spot” instead, advises Alfriend – the most affordable contractor with all the skill sets required to complete the job without supervision and problem-solve through the inevitable issues. “When in doubt, always go with the skill sets over cheaper price.”
Next, he says, ”Your team must be trustworthy and understand your priorities.” But, that’s only the beginning. Alfriend offers these eight additional guidelines for putting together a winning flip dream team:
1 – Deal with Individuals, Not Companies
“Most of my team are independent contractors with low overhead,” says Alfriend. Where team members own a company, he deals directly with the owner. “This allows me to develop long-term, trusting relationship that they want to maintain, too.”
2 – Get Extensive References and Meet Contractors in Person
Alfriend calls all references himself and then meets the contractor for coffee to get to know him or her. “This may sound excessive,” he explains, “but I am looking for partners I can trust.”
3 – Discuss Your Business Philosophy with Them
Since your goal is to build a long-term business relationship, it’s important to assess if your values match, says Alfriend. “I’m looking for someone who will eventually be able to predict how I will handle every situation.”
4 – Make Integrity Non-Negotiable
Without exception, for Alfriend, a single case of dishonesty means immediately severing the relationship.
5 – Build a Team Atmosphere and Celebrate Successes
Alfriend has “appreciation parties” for everyone involved with his successes. That includes all professionals who play a role in every fix and flip transaction. “On the occasional, exceptional deal that’s a home run,” he explains, “I pay ‘appreciation bonuses.’” These annual or bi-annual perks send an important message about partnership, he says. “It’s that this success is ‘our’ success.”
6 – Pay All Their Material Costs Up Front
“If you can’t, pay a premium on the back end for making them wait,” he says. “But, check their prices constantly to keep everyone honest.”
7 – Promote Their Businesses
Do this every chance you get through co-branding, advertising and referrals.
8 – Pay Experts To Do What You Can’t
“If I don’t feel qualified to supervise a job, I pay someone I trust to do it,” Alfriend explains. “The money spent is a fraction of the potential cost of a bad decision.”
Bonus: Create a Repeatable Rehab System
To be successful as a rehabber, you must have a model that you can repeat often, and having a dream team makes it possible for you to create a repeatable rehabbing system, says Alfriend. “A well-compensated, happy dream team is the key to rehabbing success.”