There’s a moment at the end of home reno reality shows when the homeowner sees the finished project for the first time. Usually, someone cries, at least a little. And sometimes, it’s because that remodel is an epic fail.
As a real estate investor, you don’t want to ugly cry on the job site. Really, there’s no reason for that to happen. You’re the one investing in the property, and you shouldn’t wait until the end of the job to be surprised about how it turned out.
But you also shouldn’t be doing the work yourself. So let’s talk about roles in your remodel, plus 7 key tips that will keep you from jacking up your fix-up. But first, a quick tip on the properties you should be fixing up.
Mold Is Gold
You should be buying mold houses like crazy. Mold is not a scary thing. Even black mold… not scary.
Because it’s very easy to get rid of. You don’t have to hire a gigantic crew in hazmat suits. It’s not up to you how your crew removes mold; it’s up to them.
It’s also cost effective to remove mold. The key is to get the house mold tested after all the mold’s been removed…
When buyers go back to the original pictures, if they see mold everywhere that tends to be a red flag. When they ask, I’ve got a whole paragraph on how we got rid of it. I have pictures. I give them the results of the mold tests. And all my mold tests come back and say the air outside the house is moldier than it is on the inside!
That puts the buyer at ease. The key is to get a legit mold test, not one of those $5 tests from Home Depot. Bring in an actual mold test company. Test the air and the surfaces in the entire house.
Mold isn’t a scary thing for contractors either. They’re just concerned about finding the cause of the mold. It could be from:
- sump pump issues
- foundation problems
- damaged or clogged gutters
- broken pipes
- leaky roof
The point is to find the cause, fix it and then do the mold test to make sure all the mold was removed. And make sure to test before hanging drywall.
Okay, let’s move on to building contractor relationships that are guaranteed to help you avoid jacking up your fix-up.
Your Project, Your Brand
Our houses are our products. They are our reputation. They are our brand…
If you put out a crappy product, people will talk about you, particularly if you do more deals in the same area. If I put my sign up in the yard and my contractor puts his sign up in the yard, you better believe that we’re going to do high-quality work.
But you and your contractor need to work together well. Your contractor’s job is to execute your vision. You make the decisions, not the contractor. You come up with the design, not the contractor.
My contractor knows that I may find tile at Home Depot, Lowe’s and Floor and Decor, and he’s got to work with them all. That’s just how it works.
My contractor executes my plans, he doesn’t make the plans.
And that’s the mark of a great contractor. Your contractor needs to be someone you trust. I know one investor whose brother was his main contractor.
My contractor has been working with me for about 5 years. We hang out; we’re really good friends. I’m not saying you have to be really good friends with your contractor, but that’s the kind of relationship and trust you want with your contractor.
If you have issues with a contractor, they need to be corrected immediately. You should have no problem firing a contractor.
You can be your own general contractor, but I don’t recommend that. You are not in the contractor business. You’re in the real estate entrepreneur business.
Home Inspectors on the Other Hand…
A home inspector’s job is to find everything. No matter what it is, there are going to point it out. If you pay $500 for a home inspector and the guy comes back with nothing, how excited are you?
And also important to note that a home inspector who comes back with 27 pages isn’t necessarily good. I just had an inspector point out a bazillion electrical things. I talked to my electrician and he said, this guy’s out of his mind.
Now who do I believe?
Your home inspections can tell you something about your contractor, though. I recently had a home inspection with a list of 6 things. Only 6, and none of them were related to my contractor’s work. That’s awesome. My lowest is 2, and those were miniscule issues.
The point is—your contractor is ultra-important. He is your #1 team player.
I’ve learned all this from experience. And I’ve also learned that in addition to working with the right contractor, there are 7 ways you can avoid jacking up your fix-up.
#1: Pre-Planning Is Key
If you don’t pre-plan, it’s going to screw up your project.
You need a detailed scope of work and timeline.
And your timeline must be realistic.
You also have to know what permits you need. If the inspector comes and tells you that you need a permit for something and you don’t have it, you’re going to wind up 2 weeks behind schedule. You don’t want red tape or to have your job put on hold while you get your permits.
#2: Don’t Under-Budget
Make sure you understand the repairs and budget enough money to handle all of them. If you don’t know your budget and the details of the job, you’re going to have problems.
Don’t give your contractor the entire budgeted amount up front. Break the job into phases. That way you know you’re on track; the work for each phase should be completed with the money you budgeted for that phase. And you’ll keep track of what work is being done and how much everything should cost.
Boom, your project is done at or under budget.
#3: Master the Change Orders
Find out in advance how the contractor is going to charge you for change orders.
Let’s say you want to move a wall halfway through the job, or you don’t like where the shower is. How does that work? Maybe the contractor is going to charge you 10% of the fee plus the materials. Make sure you agree ahead of time how this will work.
The best contractors will always be on the lookout to save you money.
They’re out there; my contractor is like that. I never have to worry about whether he’s overcharged me for something, or whether he’s cutting corners.
#4: Know Your Crew Charges
How many guys will be working on the crew every day?
If the contractor has a crew of 10, does that mean all 10 will all be there every day? Or is he only bringing 4 to 6 guys daily?
Make sure you agree on the labor expense and timeline, and doublecheck that those numbers make sense with the number of guys on the crew.
#5: No Profits on Materials
Your contractor should NOT be making a profit on materials. But some contractors do charge, saying they’re taking time to go pick up the materials.
Ask about that to make sure you understand the contractor’s fees.
#6: Do a Walkthrough
Your walkthrough should be an ongoing process.
When the job is 70%-80% done, take your punch list and some sticky dots or blue tape… look around the property and put those sticky dots any place you see an issue. Add that issue to your punch list. If you’re high tech, you can take pictures of any problem issues and tag the pictures.
Send the pictures (or give the punch list) to your contractor. I spot a minimum of 50 things on every project to fix…
These guys have been looking at the same house for 3 months. They get very blurry-eyed and miss things. I come in like a buyer and spot things that don’t look right.
Then a few days later, I’ll come back to look again. Usually, I find another 10 things; they knock those things out, and we’re good to go.
#7: Get a Lien Waiver
Lien waivers are so important. Let’s say I paid my contractor $150,000. My contractor has to show that I paid them $150,000 for me to close. My title company requires that I have lien waivers. You should require yourself to have lien waivers.
You do not want a contractor to come back and say, “Hey, I did that job. You didn’t pay me. You still owe me $10,000.”
If you don’t have a lien waiver, you’re going to lose that he-said-she-said battle in court. Get a lien waiver from your subcontractors too, not just your general contractor…
Everybody needs to say, “Yep, I was paid.” That way you’ll never have any problems.
One for the Books
Take this advice on your next fix-up. And just in time for the big reveal, you’ve got a project that looks great and comes in at or under budget.
Plus, you’ve hopefully got a contractor who’s on the same page and ready to start your next big project.
For more free information about renovations, check out this other post sharing 6 Shortcuts to Save Time and Money During Renovations.