4 Tips for Flipping a Multi-Unit Property
The challenges of any multi-unit fix and flip are vast. A multi-unit fix and flip is exceedingly more challenging than a simple home that one or two people can fix and flip in a matter of weeks.
Companies have to be familiar with their market and the resale potential of their buildings. They have to know how easily they can fix the myriad of challenges that might arise during the repair process.
It’s fair that some may be worried about their investment. Multi-unit fix and flip projects can cost millions of dollars and a failure could have a greater impact than flipping a single house.
Here are some tips to ensure that your investment is not lost and that you make as much money as possible.
1. Perfect your market study
The market study is an essential part of any multi-unit fix and flip. This process involves a company ascertaining what other businesses in the local area charge for rent and what their growth and ownership pattern is like.
Some companies spend thousands of dollars by contracting an outside company to craft the most meticulous, professional market study possible.
A company buying a multi-unit property has to know the rent payments being charged and the success of multiple properties nearby. The have to know the economic makeup of the area being considered and its sensitivity to storms and natural disasters. Most importantly, the company has to know the possibility of their building being sold at a number of different price points.
The market study will help with all of these steps. It will allow a company to offer a well-researched price that is as low as possible for a particular building in a particular market.
The market study will also allow a company to properly price their building when it goes on the market at the end of the multi-unit fix and flip process. Minimizing the original purchase price while maximizing the sale price will ensure success for any building-flipping project.
2. Line up contractors
Time and planning are critical to any multi-unit fix and flip. Reducing costs is essential to making a profit from an eventual sale.
The best way to reduce costs and maximize profits is to make the “fix” phase as fast and painless as possible.
A company who is organizing a multi-unit fix and flip needs to begin by ascertaining all of their needs on a property. They need to look at the sizes of their rooms, the scale of their problems, and the location.
If the town is large and prosperous, they may not need to travel far in order to find a group of companies that will bid for the job. But smaller towns may have to ship in a contractor from dozens of miles away or negotiate carefully with a local contractor.
Once bids are in or contractors have been found, they need to be staggered. There should be no stretch of time where some sort of work is not being performed. But the company needs to plan knowing that painters may not be able to work on top of electricians or plumbers in many instances.
A contractor that is not performing well needs to be either confronted or fired as quickly as possible in order to minimize costs. Of course, it’s important to communicate these expectation before the job begins as well.
As a result, the property can be placed on the market as soon as possible. The seller would therefore keep utility and property tax payments as low as possible.
3. Tackle problems immediately
A company planning a multi-unit fix and flip needs to be either on the job or have a close associate on the job at all times.
The presence of a seller will help the seller tackle the many problems that commonly derail multi-unit fix and flip projects.
There may be an errant contractor or a leak that has not been responded to in a timely manner. Certain employees may not be performing their jobs in a prompt, efficient manner. A new contractor may need to be brought in for a previously-unidentified problem.
Owners or their associates need to be on-site in order to respond to these problems immediately. Letting them linger for weeks or months could easily result in cost overruns into the tens of thousands of dollars.
An owner or associate needs to break the job up into week-long or even day-long increments. Every day or week of work brings the building that much closer to completion and then the sale.
4. Lead a team, not a staff
A set of multi-unit fix and flips cannot be completed alone. There are many individuals who have to work together on an accelerated timeline.
Such a project has to be done with a team of individuals who are committed to the project. Commitment and belief in the project are key. Simply having a staff often means that there are a number of individuals who show up to work every day for a paycheck.
They know that their job cannot be smoothly replaced in many instances and this leads them to slowly complete their projects and take unsanctioned time off during the day.
A team, on the other hand, is directly invested in completing the project as soon as possible.
Owners may accomplish this project by giving their employees a small percentage of the eventual sale. If not, they need to treat their employees fairly, pay adequate wages, and give individuals a reason to work above and beyond what they would do otherwise.
It’s advantageous to find long term trusted team members.
Contact Orchard Funding
The multi-unit fix and flip process is can be complex. You need trusted relationships or connections that you can use in order to reduce this workload.
Orchard Funding can remove the complex and difficult process of finding and securing capital. We have years of experience providing adequate, prompt financing to multi-unit fix and flip projects. You can expect capital at the right time and at a fair rate for the project.
Contact Orchard Financing today to remove yet another obstacle from your multi-unit fix and flip project. Call Orchard Funding at (310) 356-7373 today.