Van Sturgeon – How To Be Your Own General Contractor Ep. 226

Synopsis

Van Sturgeon is a real estate investor involved in land acquisition, building subdivisions, and doing renovations. He is a general contractor who’s been doing this for 30 years. In today’s episode, Van gives newbie real estate investors tips for them to become their own general contractor on their flips and save up to 50% on their rehabs.

Key points

Real Estate Background

Van was born and raised in Chicago in the late 60s-70s by immigrant parents. In the late 70s, his parents bought the apartment building they were living in and became landlords.

Unfortunately, there was a sort of malaise going on at that time leading to huge 40-60% vacancy rates and drug and prostitution going on. Lots of landlords ended up suffering and found it difficult to hold on to their properties. A lot resorted to torching down their buildings to claim insurance.

Van’s parents did everything to survive. To avoid needing to hire people, they, as a family, did the building maintenance such as painting, roofing, and replacing windows.

Choosing Real Estate Over Law School

Van’s parents wanted him to go to law school and become a lawyer. But his heart wasn’t into it, so he had to break the news to them that he planned to become a general contractor.

This was in the late 80s-90s. Van had to go knock on doors as he built his business doing renovations. At this time, he kept running into the same flippers and decided to branch out into real estate flipping.

Van bought his first home for $42,000 and spent $17,000-18,000 on renovations. After selling it for around $97,000-98,000, he made $30,000. Earning that amount of money in 4-5 months made him realize how great real estate investing is. So he kept growing his business.

Later, he did buy and hold and kept diversifying his eggs. Now, Vans owns a portfolio of over 1,000 properties in different areas.

Common Mistake Of Beginner Flippers

Most new flippers have this huge fear over the extensive process needed to do rehab. Unfortunately, most of the time there isn’t a clear scope of work created specifically for their own project.

Generally, flippers would get quotes from multiple general contractors (GC). As every single aspect needed to be done isn’t detailed out, the quotes they get can’t be compared objectively.

So Van suggests that instead of hiring a GC, flippers should act as their own GC. By doing that, they can save 30-50% on the total rehab as those are the margins a GC would make.

How To Become Your Own GC

The first thing is to learn the process of how to plan and manage your own rehab. This is a fundamental skill needed to be successful. Just know that it can be done and has been done already.

Any information can be found online. The only issue is most don’t get enough practice time to start with. Van recommends that flippers start by knowing their area thoroughly.

They should look at properties for rent and for sale. Find out what they need to do.

The next step is to figure out the process of what those would cost. There are lots of resources out there such as podcasts, real estate investor groups, and meetup groups. Go out and meet like-minded people. You’re sure to meet someone willing to share their knowledge.

Nothing beats practical experience as lots of hours are needed to go through that process successfully. So do the next best thing.

Being On The Business To Working On His Business

Van used to have this mindset that only he could do the job. So he became too engrossed in his work.

After running into a real estate investor who was the epitome of success, Van asked him to coach him. He had to pay a lot of money, but it was the best money he could have spent.

Why? Because it took him from where he was to where he is today. His coach pointed out his mistakes and taught him what he should be doing instead. He changed Van’s mindset completely.

Since then, he’d spent probably $100,000 on coaching, mentorship, books, and seminars because he believes that an investment in yourself would net you the single highest ROI.

What To Check When Looking At A Property

The first thing is curb appeal. This is the one area that you could spend the least amount of money on that would give you the highest ROI. So be sure to do some landscaping such as new sod, bushes, and flowers. Re-paint the door and garage, and check the roof as well.

Since it takes a long long time to recoup your investment, there’s no need to push for getting the highest rent.

Make sure you still do your due diligence. Van learned to check on weeping tiles especially if there are trees surrounding the property. Get a plumber out there to check the property out too.

Finding The Right Contractors

Once you’ve identified 2-3 contractors you’d want to talk to, go out and visit them. Ask for references. Look at the work they’ve done. Find a principal there and ask them how they found that contractor and their experience with their work.

Always trust your gut. Go back to that scope of work and have a hard conversation with the contractor. Set your expectations and timeline. Make sure everything is put into writing.

Most importantly, only pay for what has been delivered. Don’t pay before they deliver anything.

Tips When Doing Your First Project

Instead of hiring a handyman, it’s better to get an electrician, plumber, and painter. Hiring specialized people means you’re hiring professionals who will get the job done well and quickly.

Every project is unique but also the same. For larger scale rehabs, you’d probably have the kitchen removed, the bathrooms rehabbed, the floor replaced, and do work on the roofing, landscaping, and removal of termites.

If you’re using a kitchen manufacturer, they’ll supply their own installers. If you’re replacing the drywall in a 1,500 square foot home, you’ll need to hire a drywall company.

The one thing that is important is communication. Make sure everybody is on the same page. Also, rather than hiring someone on an hourly basis, pay for a lump sum.

References

More from our guest

• Get more resources and information at Van Sturgeon’s website: http://www.vansturgeon.com/
• You can also sign up there to get his free Renovation Calculator.