[Editor’s note: This is an excerpt from our new guide, “Less Sweat, More Equity: How to Scale Your Fix-and-Flip Business.” Read the full guide to get started on scaling your business today.]
Consistency is one of the keys to scaling your fix-and-flip business. If you’re constantly looking for new contractors, buying different materials, or changing up your renovation styles, you’re introducing new risks and using valuable time that could be spent on turning over your properties.
Also, if part of your plan to scale includes selling to institutional buyers, consistency will go a long way toward creating trust. These kinds of buyers are very risk averse, so having a fix-and-flip investor who renovates homes in a consistent manner will make them feel much better about working with you long term.
Know Who You’re Selling To
Before starting a renovation, you need to know who you’re selling the home to. This doesn’t mean you need a buyer lined up — although that is helpful and possible with companies like Stoa — but it does mean you need to have your ideal buyer in mind. Who are they and what are they going to use the home for?
For example, if your goal is to sell to an institutional buyer who will rent out the home, you need to renovate the house based on rental standards. Or if you want to sell the home on the open market, look at the comps in the neighborhood and figure out what is standard in the area. The goal here is to know what you need for different types of projects so you can create a scope of work checklist to work from each time.
Use a Scope of Work Checklist
Once you know who you’re selling to and the standards for those kinds of projects, create a renovation guide for each type. The renovation guide should have the basic information on what should be cleaned, repaired, or replaced, as well as the required materials and fixtures that are required. You checklist should include sections on the:
- Home exterior
- Front yard
- Stairs and hallways
- Kitchen
- Living room
- Primary bedroom
- Primary bathroom
- Additional bedrooms
- Additional bathrooms
- Garage
- Backyard
Having this checklist available to your GC and the rest of the renovation team will help you avoid miscommunications and missed items, as well as create consistency of work. This scope of work checklist is a great place to start.
Buy in Bulk
Because you know the kinds of homes you want to create and you now have a scope of work checklist, you can start to buy your materials and fixtures in bulk. This will not only create consistency for each home, but it will also save you a lot of money.
Let’s say you’re purchasing homes that have a similar construction style or are in a similar neighborhood, and you’re going to sell the homes on the open market. If you need to replace their roofs, you can use the same type of roof tiles. Or if you need to replace the floors, you could use the same flooring types. The same goes for doors, windows, and hardware.
Even if you’re going to sell the homes to institutional buyers or mom-and-pop rental investors, you can purchase the rent-ready materials, fixtures, and hardware in bulk. Add this to your scope of work checklist and you’ve greatly expedited the turnaround time of the home as well as created consistent output.
Buying in bulk also makes life easier for your contractors and handymen. They know what they’ll be working with for each project, and as they get used to the same materials, it could help the renovations go more quickly.
Sign Up for Loyalty Programs or Awards Accounts
Once you start buying in bulk, sign up for awards accounts or loyalty programs with stores like The Home Depot or Lowes. These programs will help you save money and could even get you access to less-expensive, contractor-grade materials. Keep in mind that contractor-grade materials are limited to certain finishes, but if you’re not focused on creating custom homes, it may not matter.
