HOW IMPORTANT IS CONSTRUCTION IN YOUR BUSINESS
They charged extra for that and it worked well for a while. But we got some very inconsistent results. Both on the property management and the construction side of things.
I realized that people just starting out don’t pay enough attention to construction. Because we sure didn’t.
Instead, we investors get very excited about raising capital and finding deals and as a result, asset management takes a back seat.
Relying on the property management company to do construction was not a strong move. They were doing an okay job, but then the operations started to suffer.
We saw it happening but decided to keep going because we needed to get things built.
When we pivoted to a new company, operations picked up and we didn’t have any construction issues. Great right?
But that was because the company didn’t have a construction arm.
We still had projects, but we didn’t have any construction, so nothing was getting done.
So, we sat down and tried to figure it out. On one hand, we had both construction and operations, but the operations were less than desirable.
On the other hand, the management was great, but there was no construction.
Long story short, we were forced to go into the construction business.
Simple enough right? But then you’re getting into it and hiring general contractors that you trust. And one day people stop showing up to work or a project is forgotten.
And now you have these problems starting to present themselves. But we still needed to find a way to our business plan:
To find an older apartment complex, fix it up, and make it worth more. How do you do that?
Well, there’s construction involved. The bigger the project is, the more involved it becomes.
It’s such a major component of so many deals, especially ours. Yet we still struggled with figuring out how to get the big construction projects done.
Our old property manager didn’t have a development oversight. So that meant we had to bring in a general contractor and have them manage it. And that would work … for one project.
But when you have two or three going at the same time, sometimes even in different locations or with different GCs, you have yourself a real complex undertaking.
That’s when we realized that we needed some oversight internally at nighthawk. We needed some oversight over the GC.
It wasn’t just enough to have a GC run everything. We needed supervision and that’s when we hired a construction manager.
Let me explain it this way:
The reason that some people choose to go in-house with property management is because it gives you 100% focus on your portfolio right?
Well, same thing with construction. If you hire a GC, they have all these other jobs going on and you have to fight for their attention. Someone has to manage that situation.
So we decided to create our own company which gave us a lot more bandwidth and flexibility on how we do projects.
That’s what’s been the big game changer for us.
Now we have one project manager that runs a bunch of different contractors throughout our sites to make sure the jobs get done on time.
What we learned from that whole experience is even if you’ve done a few deals or even scaled to a large level, construction is still kind of an afterthought.
It’s something that you don’t really focus on that much.
For us especially it was just one other thing we did on the side and didn’t pay much attention to.
But now that we started to get into it, I like to say that we’re in the construction business.
It’s just one of the aspects of multi-family real estate. By now I hope you realize its importance.
However there’s a lot of equally important pieces that are vital if you want to be successful in this space.
You can get access to tons of resources about everything apartment buildings.
It’s called the Freedom Vault. And it’s a great first step to financial freedom with real estate.
Head over to the Freedom Vault and start learning.