If you’re working or dabbling in real estate, it is vital to understand real estate construction management. Even an occasional house flipper will need the knowledge and skills to execute a project in an organized, efficient, and repeatable way.
Often a project manager working for a large construction company will have a master’s degree in project management. While that is not necessary for the typical single-family landlord, it is important to have at least a general idea of the five phases of construction management.
This knowledge will keep your projects on track and within budget. We want to allow you as an investor to slowly build relationships with contractors in real estate construction in your area.
Skills Every Real Estate Project Manager Needs
Every professional project manager needs to develop soft skills to be effective in the real estate industry. Whether overseeing an apartment complex or a 1031 exchange, building relationships is the foundation of long-term success in construction project management.
Whether making a career or a hobby out of real estate, focus on building relationships with property brokers, commercial realtors, general contractors, subcontractors, and tradespeople in your local market. For example, commercial realtors in MA will have a built-in network of construction professionals. This step will give you a leg up on your competition in completing projects quickly and efficiently.
In even the smallest project, mistakes will happen, and it is your job as the project manager to correct them and keep costs down. Being able to communicate and negotiate with tact in these situations will turn out to be incredibly valuable in the long term. Understand that no project runs perfectly, and build a room in your budget and timeline to account for minor hiccups.
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Phase I: Initiation Phase
The initial phase is when a project manager researches to determine when a project should begin. For the part-time house flipper, this could be a quick calculator of rehab costs and after-repair value (ARV). For a large real estate construction company, it could be an in-depth study of costs and market analysis of a major residential apartment complex. Most of the preparation for real estate construction management happens in this phase.
Phase II: Planning
The planning phase is when the project manager creates blueprints, writes plans, and documents changes to execute for the remainder of the project. For a typical flipper or investor, this is when they will hire a general contractor or start getting bids from subcontractors.
The best way to find qualified contractors is through a referral system, but even then, a project owner must make sure to do their due diligence when hiring. Many contractors will have a certain niche or specialty. For example, an investor may have one general contractor they use for quick and inexpensive fix and flip properties and another for larger or more complex projects.
When getting bids, it’s important not to always go with the cheapest. In the planning phase, a project manager should decide early on whether they will go with the low bid or the bid with the best value. Investors must know the market they are working in and have a specific idea of the ARV or the rent revenue the finished project will bring.
Phase III: Execution
The execution phase is where the actual work of completing the project happens. A project manager must make and stick to a schedule where work coordinates with various subcontractors and property managers. Each subcontractor should have a scope of work assignment and a schedule on when their work is due. All parties should try as best they can to stick to the schedule. Phase III may be the most time-consuming part of your real estate construction management.
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Phase IV: Performance and Monitoring
The performance and monitoring phase generally will run concurrently with much of the execution phase.
This step can be quite simple in a small real estate construction management project. For example, you will want the electrician to complete all of their work before the painters come in to paint the drywall. But in a larger project, it can get complicated quite quickly. Subcontractors must be brought in and managed to complete the work as easily and efficiently as possible.
It is almost a certainty that mistakes will happen. A project manager must remain flexible and realize that a major part of the job is to manage and mitigate mistakes.
Phase V: Closure
The closure phase is after the work completes, and the team holds a post-mortem meeting to discuss what went well and what needs improvement for the next project. Once your initial structure is there, will you need to install lighting, plumbing, or furnishing? Ask your project manager what comes next. For example, you might need to hire a property manager if you renovate a condominium.
Remember that there are few clear delineations between the five phases. Use the five phases as a general guideline to keep your work and tasks organized. There are many moving parts in any project, even a small one. Staying organized and keeping all involved working should be one of the most important responsibilities of the project manager. This review will keep everyone happy and able to run their businesses as profitably as possible.
- Focus on always learning and developing your skills as a project manager. You are never done learning or improving!
- Do not underestimate the importance of building relationships; this will make every project run smoothly in planning and execution.
- The initial and planning phases will require a knowledge base on the estimated costs of finishing a project. Knowing your current market will help make this phase easy and efficient.
- The work completes during the execution and performance, and monitoring phases. The most crucial part of these phases is coordinating the workflow among all subcontractors.
- Always conduct a post-mortem to discuss what went well and what needs to be improved. Try to get better at every project.
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About NAI Glickman Kovago & Jacobs
As the leading commercial realtors in MA, NAI Glickman Kovago & Jacobs focuses on commercial property management in Worcester County. We have an award-winning restaurant, retail, office, industrial, multifamily, and medical real estate management record.
We can also assist with land acquisition and development as a commercial brokerage. Our deep local knowledge comes from decades of business partnerships with commercial contractors and key community vendors. Whether buying, selling, or leasing, we can find the right commercial investment property to fit your needs.
Contact us today if you need help finding commercial property for sale, brokerage, commercial construction management, or local property management services in Worcester, MA. You can also follow us on Facebook, Instagram, and LinkedIn for more updates about our commercial retail space listings.