Why is Residential Construction is Ripe for On-Demand Disruption?
With a record year for the on-demand industry in 2019, the big prediction for 2020 is that on-demand companies will expand to new industries.
This is happening now in residential construction. A common issue with residential construction is going over budget, not meeting deadlines and plainly losing (wasting) money primarily due to lack of communication.
Most contractors do not use project management software to keep their jobs in-line.
95% of all residential remodel projects end up in frustration. Homeowners go into a project excited about their contractor only to soon be in the dark about what is going on.
Check out: The new on-demand startup “Project Buddy” http://www.projectbuddyservices.com is the 1st of its kind and planning to revolutionize the industry: Creating completely transparent transactions between homeowners and contractors. Simply put, Project Buddy helps organize projects.
“After years of consulting in the construction industry I found that almost every job had a point where the client thought they were being cheated, it was almost always due to a simple lack of communication. Construction remodel projects are very organic and change daily. I started Project Buddy to help both Contractor and client stay up-to-date on a weekly basis.”
Project Buddy, from PGN Design Group, works with a cloud-based construction software that all parties have access to with their smartphone, tablet or computer. Project Buddy finally makes it easy for homeowners to follow the progress of their construction project from anywhere and makes it easy for contractors to keep their clients updated on day-to-day progress of their projects. It works with 5 easy steps.
Upload project information to Project Buddy cloud-based software.
Take daily photos of the project.
Create daily work logs.
Contact all contractors, subs and architects for scheduling purposes.
Create an “end-of-week” report for the project.
So who’s doing the actual work? Numerous “Buddy’s” manage jobs in the areas that they live in. They can work as much or as little as they want. Think of it as the “Uber for Construction Projects“.
The service will operate on weekly contracts so that there is no big commitment from homeowners or Buddy’s. For contractors, there’s no need to hire and train full-time employees only to have the burden of their salaries on the books when it gets slow.
At the end of each week, clients have the ability to either “opt-in” if they like the service or “opt-out” and we’ll see you on the next one!
Project Buddy will have the ability to do one or all of their jobs. The company is poised to disrupt the residential construction industry by helping smaller companies with growth, and larger companies with quality control. The price is $497/week for most projects, cheaper than the cost of a laborer sweeping up the site!
Why Use Them?
Lost Time = Lost Money
Cloud-based Software = Transparency, 24/7 access from any device.
Organize contractor = Get’s the Job Done on time and on-budget!
Weekly contracts = No Big Commitment
One low rate for any size project (single-family or multi-family)
Project Buddy has launched in Los Angeles and the San Francisco Bay area with expansion to other major cities in the U.S. later in the year.
Contractors/Developers – Instead of carrying a payroll employee as a superintendent, we can replace that cost, and we have no problem with working for 1 week..
Real Estate Agents – You know all of the Wholesalers, Flippers and Homeowners doing remodels, refer our service and receive a $497 referral for each.
Architects – You work with homeowners and flippers too, with our service, you can monitor the project remotely and not get left out of the circle. Refer our service and receive a $497 referral for each.
Hard Money Lenders – CLOSE MORE LOANS. We can act as a 3rd party service provider that can be financed and used as a kind of “insurance policy” Lenders can require their borrowers to use Project Buddy, and they’ll always know what’s going on with the project! Two words – Accountability Partner. Protect their loans. Fewer foreclosures will increase bottom-line. No COST to the Lender – You can build it into the loan (its a cost of doing business)
Owner Builders – You want someone to babysit the work-site, and you don’t want the job?
We’ll help week-to-week until you don’t need us anymore! You can see all the progress on your smartphone or preferred device, and read the notes left by the Buddy. Perfect Communication!
Book us for one job, for one week and you will quickly see how easy and smooth your job/s will run.
Last year, One of my real estate agent friends who is also an aspiring Hollywood producer and through his networking introduced me to a top production group on the Universal lot!
After a tour of the lot, we discussed the film business and the financing and investment in films they were producing.
This didn’t lead to any actual investments, but one year later, in February, my agent friend re-introduced me to this group and after a short consultation in his office, we submitted the application package for pre-approval for a hard money rehab loan which I knew we’d get back asap because my partners and I had an established relationship with the private lender who funded the loan.
My client identified a fantastic but dated remodel candidate in Malibu with a breathtaking views of the Pacific Ocean! The property had been on & off the market since 2015 & it was clear that since the previous buyers fell out of escrow the sellers & agents were uneasy about the whole private funding offer and funding.
I knew that I only had one shot to get it right!
He negotiated a $2M purchase price, our contracting team submitted a $450K rehab budget, with a 4-5 month timeline.
We ordered the ARV appraisal, after a week, it came back at $3.6M!
The case and the borrowers were nearly a perfect candidates, except for one thing: They had no experience rehabbing high-end luxury properties, so the lender required us to join the borrower on the loan and sign as co-guarantor’s of the investment! This was unprecedented!
We entered into a project management & joint venture agreement with my borrowers which afforded them maximum leverage on their $500k down-payment. We were able to secure 2-4 months of interest payments so that wasn’t a concern.
The plan is to refinance after the remodel is complete, payoff the hard money bridge loan @ 9.9% and 4 points, 90% of purchase & 100% of rehab, into a 30 yr, fixed rate mortgage with cash out if needed for further future investments.
We closed this loan in about 30-40 days, but this was because the property was occupied by a seller who needed extra time to vacate before we closed escrow.
We will begin rehab this week & documenting our progress as we’ll be using exclusive, new “smart home upgrades” which I’m not at liberty to disclose yet due to its status.
Our motivation to JV was based on the profit potential and deal viability as well as the borrower’s financial position and excellent credit score & profile. Also even though they were not experienced, they handled the first time investor duties with poise and we were impressed with their willingness to learn the process. Overall they were very pleasant and easy to work with!
If you have a project you’d like to joint venture on, contact me below!
This year one of my goals is to become an even larger resource for the Fix and Flip & Investor Community. After 16 years of service in this industry, we connect investors to lenders and private funding programs nationwide.
After reviewing these new loan offers and working with dozens of lenders, I compiled this list of lenders to refer to interested parties.
In September 2017, I received a referral from a Real Estate Agent colleague in San Diego, his friend in Cleveland Ohio needed funding for a property that was purchased for cash back in July 2017 for $80,000. They purchased the property to be used for a special needs daycare center (special use)
While using personal funds to finance a total interior remodel, they demo/gutted the inside of the property, with this being their first project, they were not prepared for the unexpected expenses that occured.
Their rehab was north of $60,000.
They purchased the property for cash, so the equity should available, right?
In simple terms, yes – but because of these factors the marketability of a potential loan became more difficult:
Location of the asset
Asset type (special use) not just a regular tenant rental, it’s residential property being used as a business.
Value of Asset (As-Is value was only $75K) most fix/flip hard money loan minimums are $150k
Owner/Borrower has 650 Fico, no previous experience flipping homes or land-lording.
This was a long-term hold, but lenders who offer long-term financing at reasonable rates will only loan to stable assets, so she needed a two-step solution.
Gutting the property destroyed the chances of simply cash-out refinancing because the lender immediately required an appraisal inspection!
Getting a lender to approve the refinance knowing the borrower has no previous history of completing rehabs.
Getting a lender to approve the loan knowing the borrower has no reserves! They underestimated their rehab, and needed the funds to complete the renovation. How will they repay the loan?
Developing an exit strategy for the fix/flip loan included adding a co-signor, who also needed to be added to the business LLC.
We applied in the name of the LLC with a very well-known lender, the rate was higher than we preferred, but the points were reasonable and they provided the requested cash-out to complete the rehab and reserve 12 months’ worth of interest payments so she didn’t have to worry about that. Everything was going smoothly, we had title complete, ARV appraisal came in at $160K!
The following days we had a term sheet with $15,000 cash to close as a condition? This included points, closing costs and reserves requirement! The proposed loan amount was $80,000, so I convinced her that we needed to raise the funds from somewhere!
Her father stepped up earlier in the process to qualify for the exit loan as a co-borrower, he has a 700+ fico score. To qualify for the 7.5% rate with 30 yr. fixed or 7/1 ARM with 30-day refi seasoning, you need to have a solid 660+ Fico. I offered to help them raise unsecured funding to fund their deposit to their business account to show reserves, they weren’t happy about paying the fees or the unexpected panic to perform, but reluctantly applied for and received $90k+ in personal unsecured funding from 6 different vendors.
We were ready to close the loan, when the lender suddenly backed out, saying that the DSCR was just short of qualifying?! They didn’t have their act together, it was a gross error from the underwriting team, and my account rep couldn’t get the exception approved.
It was heartbreaking. Three weeks were invested. Now it’s mid-October, in Ohio they are facing the bitter Midwest snowy winter, and she can’t afford to slow down on the rehab..
She was blessed to have the credit cards we raised to take care of expenses, however, because the cards came in her dad’s name, it wasn’t easy to convince him to let the cards go! Her parents feared that she would rack up unsecured debt that she couldn’t pay down. Ultimately destroying her father’s credit.
My team and funding partner located her a fix and flip loan, they agreed to take the rehab bid we put together, ARV appraisal, title work and loan package, it was already packaged and should’ve been a slam-dunk!
She used the credit card she received to pay a small application fee, and they announced a closing date. Unfortunately, it took about 3 weeks longer to get it done, meanwhile, honestly I’m getting nervous – my client called me with her husband on the line and they were concerned as well.
I reassured her that I knew these guys would close & that her case was very solid!
She explained the situation with the credit cards and her inability to use them.
I coached her on how to explain the importance of intent. The whole reason we are applying for multiple forms of funding is to complete the rehab at any cost!
This is your future business location. And until you complete the rehab, you are losing time & money.
Use the unsecured funds to pay your contractors and buy material, when this refi goes through, pay the lines of credit off! But have faith.
She complained that she felt bad bringing her parents into it and that she wanted to stop altogether! She was very discouraged.
I reminded her why she started! You are trying to provide a better lifestyle for your family and it requires sacrifice and your dad stepped up to help his little girl!
Don’t fail him by quitting in the middle of your plan! Continue to execute.
And she did.
Over the next couple weeks waiting in anticipation she racked up some hefty invoices from her contractor and was prepared to pay them via her unsecured credit when BOOM suddenly “Clear to Close” came across our emails, with loan docs and estimated HUD for review and signing to be completed a few days later.
The process taught her a lot about financing, she learned how to qualify for fix/flip and buy/hold loans, as well as unsecured funding.
She had her father add her as an authorized user on all of the trade lines, so now she’ll get her own cards for easy access, she’ll build her credit score through positive history (piggy-backing) and paying all of the lines down again!
She received $90k unsecured financing in 3 weeks, then $75,000 3-4 weeks later @ 12% for 12 months, she received a lump sum at the table, and she has submitted a couple draws already for reimbursement. You complete the work – submit an invoice after you (take before /after pictures), then the 3rd party company reviews, approves and wires the money to your business account in 24-48 hrs.
She now has 6 trade lines that added $90k to her ratios, and if she keeps utilization down under 30%-40% it’ll raise her score to 700+ also with another mortgage trade line, she would be soon staring at an 800+ fico score!
Because we added her dad to the LLC, I’m focused next on helping them create a strong business profile with multiple business lines of credit of $200k-$500k over the next 12 months. These lines will allow them 100% access to borrowing down on the lines without affecting their business credit rating! She can open another daycare center by early 2019, or flip some properties in the area (if they choose).
Finally, since she’s been working on the property the whole time, she estimates being complete with the Refi by mid-January, immediately applying for the refinance into the 30-yr. fixed. The lender has already reviewed her property details, personal credit and financials and pre-approved them, additionally since the 1st payment isn’t due until January for the current loan, she has a great chance to only make 1-2 payments at 12%.
In the end, my team and I were successful at providing a couple rounds of funding for a well-deserved client. We have a long-term solution in place that she can self-sustain and scale up if preferred.
At Fix and Flippers, we approach each potential deal on a case-by-case basis. It’s helpful to remember that we are very active in the market and possess resources that may not be advertised or previously mentioned.
We help clients with credit repair, credit enhancements, traditional and non-traditional funding, both secured and unsecured. We pair up investors to structure successful joint venture partnerships.
We prefer an ongoing working relationship with our clients to offer advice, consulting and resources.
We welcome Brokers and Facilitators to partner with us. You will be protected.
We are a high-end construction rehab team consisting of an experienced General Contractor of 20+ years, Real Estate Agent with 10 years experience & Marketing Executive with 15 years experience.
We are in the business of locating, privately funding (through trust deed lenders) luxury rehab projects throughout the Los Angeles area. We are well experienced with all phases of rehab and construction including basic kitchen/bathroom remodels, swimming pools, windows, smooth finish stucco, landscaping and complete demo/scrape/ground-up construction.
We are always in the market for off-market fix/flip candidates that we can either add square footage, repurpose, re-zone, sub-divide or improve for a profit. We’ll look at anything that has upside.
If you are looking for a dependable, fair contractor that’s licensed, bonded & insured to manage your project, or manage your contractors & sub-contractors, contact us! We can also provide the initial SOW (Scope of Work) to your lender and be your experienced contractor to help you qualify for ARV loans!
Right now reinforcing & replacing the fittings in your home can be important if you have an older home, since we live in an earthquake State! We can help with this!
We can provide one-on-one mentoring for 1st-time flippers, women are welcome to contact us!
If you’re interested in becoming a gap partner or trust deed investor, let me know, we constantly have opportunities to fund. We can keep your funds moving.
Here are some projects completed and shows our work..
9222 Bartley Ave Santa Fe Springs, CA 90670
Purchased on 3/21 for $350K,
Sold 9/16 for $500k after investing $50K rehab.
653 Tularosa Dr. Silver Lake, CA 90026
Purchased 3/15/15 for $625K, Invested $250K rehab
Sold for $1,350,000 on Apr 12, 2017
4083 Sea View Ave Los Angeles, CA 90065
Purchased 8/24/16 for $1,150,000 With a rehab budget of $300,000. Currently in construction with 60 days remaining.