buying/starting contracting company to rehab...

Although new to the real estate game, I have enough capital to start a three employee real estate company. Marketing, Aquisitions, Sales, and I (Owner) will team to find, buy, rehab, and sell dilapidated properties in an area with more than enough on hand in good neighborhoods.

There will be a budget for each part when needed (marketing initially), but nobody will get paid much until deals are in place, There will be financial compensation for employees to produce and year end bonuses based on the net income of the organization. I want happy employees who not only love what they do, but also do a great job and feel like part of a team. The employees will largely people right out of college with a desire to be part of something big in the future even if it means temporarilly sacrificing.

I live in an area with a reputation for having bad contractors. I had to deal with a 140,000 dollar job which I took on after it had gone on largely unfinished due to lack of oversight in the project. After dealing with crooked contractors, illegal immigrants, drunken workers, unprofessional labor, lying project managers and over 40 emails and phone calls exchanged I was able to remedy the situation by theatening legal action along with photographic evidence backing my case. I am one of many that has had this problem here and don’t want to deal with these issues again.

Additionally owning a contracting company will ensure that I am able to have workers available for my properties at all times. This would also lead to a decrease in actual costs of rehabbing and increased profit for one of the two companies I would own. I would be able to flip more properties for more money.

My question- Which of these should I do?

I can start a rehab company and just screen the crap out of applicants to make sure I find one capable, experienced guy who can run a company which I know very little about. (I can safeguard by having other firms bid on my project to assure I am getting a better deal since my overhead is less). Fiding this guy will be tough, but ultimately the better option if I can find someone great. ALthough I know a lot of people I don’t know anyone right now.

Otherwise I can partner with someone who knows what they are doing and let my lawyer work out the legalese. Perhaps an escalating ownership clause based on the numer of years the partner remains with the company? I would want to retain final control over all activities of the company (salaries, jobs taken), leaving him to literally manage projects, workers and subs.

Anyone have a business similar to what I am doing? Advice? Stories?

Lean and Mean to start out Ted. Lean and Mean!

I’ve been a contractor for over 20 years, what your talking about setting up here is a money eating machine. Go out and rehab a house that YOU own first. Rehabbing another persons property (or a frat house) is a totally different beast. When it’s YOUR time and money you will not want to pay for a staff of people. Even if your paying them out of the back end it will eat your profits alive.

Your long range plan is good. My only advice would be to let THE BUSINESS build up to pay for it and not your inheritance.

Great advice.

Stick with the KISS method to start. (keep it simple stupid).

As you grow and begin moving alot of properties, then you can implement your business plan little by little.

If you’re just starting out, you are going to burn alot of unnecessary cash by hiring out so many employees.

Kinda like putting the cart before the horse IMO.