By CK Cole, Lighthouse Realty Group of Fulton Grace Realty
Ever play Bumper Cars? Scoot around at top speed, weaving in and out with sparks flying from the ceiling hook. Hit the other car just right at top speed, watch them spin out of control, struggle to get back in the general flow. Big fun! Good memories! True with bumper cars, not so much fun with a rehab project.
With a rehab project there are many, many lanes – each essential to a successful job.
What does a successful job look like?
- Find the project
Assess the –
- Acquisition Price
- Projected Construction Costs
- After Repair Value (ARV)
2. Design to be competitive with surrounding market
3. Confirm contractor’s pricing and schedules
4. Confirm financing based on contractor info with extra for those bad surprises
5. Develop marketing materials and begin sales process
6. Finish home on time within budget
7. Sell at or above projected ARV in the projected time
There are key roles here, first essential role is the sales and marketing team. I may be a bit biased here because this is my team’s role, but hear me out. The sales and marketing team are the boots on the ground for area marketing trends, they not only study the market, they actually listen and interview real potential consumers on the market’s specific needs and preferences and articulate those results.
Home sales and marketing teams are not like the auto show sales and marketing where the prettiest shiny object draws attention to the car. You need a smart, effective marketing program or the target market can’t even find the home. “Field of Dreams” was just a movie, if you build it, they may not come..
The Lighthouse Team of Fulton Grace consists of 6 seasoned agents at the ready to locate and provide market analysis of target properties. Assist with property acquisition; contribute their expertise to the architectural design, and market competitive finishes; provide signage and high quality brochures as well as extensive internet and social media marketing. We then provide the marketing events and follow-up to sell the home, if that’s the goal.
If the goal is to hold the home, the Lighthouse Team can still provide input to optimize the design of the home for future sales.
The Lighthouse Team members have solid histories in Real Estate, Marketing, Design, Construction and Finance so it’s likely they will have a recommendation for whatever is needed in the process.
Next step, the financing and contractors. Financing can be personal funds, investors, bank loans, hard money – decide which best meets the goal. This is then balanced with the contractor pricing and scheduling. The entanglement of these 3 players – marketing, construction and finance – becomes more intense here and the intensity grows as the project progresses.
If the financing is not available on time, the construction can stop – costing time. If the construction is not done on schedule – that costs time. If the project is not done on time, that changes the marketing plan and can negatively affect the ARV.
Loss of time always costs money. Maybe it doesn’t seem like such a big deal that the electrician is going to the beach next week and can’t begin their work till the following week, think again. Is it a big deal to have less profit? That is the guaranteed end result. Of course, someone can borrow from Peter to pay Paul, but in the final calculation, there’s less money.
Also consider how the construction is paid for, balance fair pricing for the job with the timing to keep the contractors engaged. Never pay in advance and hourly doesn’t work either. Define what’s to be completed for payout as you go.
If you want to try your hand at Fix and Flip or even Fix and Hold for your own home, try to work with folks who understand this and are committed to the project costs and schedule. Know that stuff happens, have a Plan B. Next piece of advice, know your role. Everyone on the team needs to understand a bit about what everyone else does to get a good perspective on the end goal, but – Stay in your Lane and Deliver! Much higher stakes in the Indy 500 than bumper cars.