When I started flipping houses seven years ago, I knew nothing about construction. I grew up in a home where my dad would call the handyman to screw in a lightbulb. That’s not an exaggeration.
A lot of kids in America grew up without any chance to work with their hands. And as the world gets more tech-savvy and less handy, quality construction will come at a premium price.
It’s basic economics.
Why Project Management Is in High Demand
It’s a simple measure of supply and demand. In the 1970s and 1980s, the trades were taught in schools and technical colleges. It wasn’t sexy, but those careers were stable.
Now, as those guys are retiring, a new crop of contractors is entering the market. Instead of going to college, a kid could learn the trades in high school and easily make over $75,000 a year running their own construction businesses.
In my mid-size market of Cleveland, Ohio, construction is booming. A massive stock of older homes are being bought by out-of-state investors, and an elderly population is dying, leaving dated and abandoned inventory in good neighborhoods.
Related: Looking to Invest Out-of-State? Here’s How to Pick and Analyze a City
On the construction side of things, every good contractor is booked solid. Some guys are booked for months in advance, especially crews who do custom work for homeowners. But not every contractor is good, either. There are plenty of guys out there with drug and alcohol problems or those who are just plain lazy and looking for handouts.
So, how are investors supposed to hire a contractor, give them a deposit, and hope the work gets done without getting ripped off?
Why Project Management Is So Important
Ultimately, the more you layer the protection of human capital on your projects, the higher your chances for success. Whether you are interested in doing a project out of state, partnering on a flip, or buying a rental property, here are some noble pieces of advice from my mistakes as an investor.
1. Hiring a project manager will help keep projects on time and on budget.
A project manager is hired almost like a middleman between the investor and the construction crew. They’re required to be on the job site daily, turn on utilities, keep track of expenses, and confirm contractors are working diligently. They’re there to support the contractors, too!
Contractors usually call investors for two things: materials and money. As investors, we just want our projects to stay on time and on budget. One of the worst possible things is to have lost labor timeâfrom losing a contractor to driving to Home Depot, standing in line, and driving materials around. It kills timelines on projects. So, hiring a project manager will reduce headaches and increase efficiency.
2. A project manager has your best interests at heart, because they can be given equity in the deal.
I say this to people all the time: Starting out as a project manager is the easiest way to start a career in real estate, especially if you have little money or credit. You really only need your wits, ethics, and time.
Related: How to Invest in Real Estate With No Money (Seriously!)
And if you’re an experienced investor who’s sick of turning on utilities, delivering materials, and checking up on contractors, maybe giving an at-bat to an eager 20-year-old for 25 percent equity is a good decision. There are hundreds of newbies on BiggerPockets that would take that opportunity.
3. Project managers have a ton of construction knowledge.
It’s surprising how quickly you learn to do small things just from watching contractors, delivering materials, and maybe even physically helping out on the job. This year, an investor friend of mine and I learned how to sealcoat a driveway by watching a YouTube video. It saved us probably $2,000 by doing the job ourselves.
So, whether it’s your own house or a larger project, getting your hands dirty with someone who knows what they’re doing pays itself back tenfold in the future.
4. Cutting down on material cost is key.
A contractor usually factors in his time and markup on materials. So, having a project manager run materials to the job site (and having receipts for reimbursement) will help you save on material markup and streamline the process of delivery.
5. Not everyone drives a truck!
Even for those of you BiggerPockets pros out there who drive a truck now, think back to how hard it was to fit an exterior door in your 2002 Honda Civic. (OK, that’s my old car.)
But seriously, if you’ve been there before, you know that having your own truck is huge. If you have a truck, a driver’s license, insurance, and you’re physically fit, that’s really all you need to be a great project manager.
Why Project Management Is the Easiest Way to Get Started in Real Estate
Full-time investors manage multiple projects at a time, and sometimes they’ve gotten so used to their rhythm that they don’t even realize they need help. If you’re new and asking, “How do I get started?” This is the easiest answer.
Another factor that plays into these opportunities is location. There are plenty of out-of-state investors. If you live in Charlotte and you meet an investor who lives in Atlanta but flips houses in Charlotte, make yourself the guy or girl to go to for construction management there!
Learn a bit of construction and put yourself out there in the BiggerPockets community as a project manager. Negotiate a little bit of equity with an experienced investor, or maybe just take a small weekly salary. Whatever the arrangement, the time and money has to make sense for both parties.
So, do your due diligence on people on both sides. If you’re working for an investor, Google him or her and make sure other people have good things to say about them.
And as a busy investor looking to hire on project managers, realize that you might have to wait a few weeks to find the right person. They have to be in it for the right reasons. If it seems like quick money is their key performance indicator, it might not be the right fit. You have to vibe with that person and spend some time with them to get a good feel.
Interested in hiring a project manager or becoming one yourself?
Network with each other in the comments below!