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Tag Archives: Scope of Work

Planning for the Nash Renovation

Lee and Jennifer are ready to work!

Now that we’re officially working on the Nash house, it’s time to start making a plan. It always helps to have another set of eyes to look at a potential renovation, and a real estate specialist familiar with the local market is a really good choice, because they know what sells in the area and what renovations that might work in one place won’t be so great where you are.

So, our first thought was to get in touch with Jennifer Young, who is doing such a great job with our Washington house, and who has managed to find the perfect new owners for Travis 1. I enjoyed working with her on Washington, and it was so great to have an on-site project manager to check on things and manage issues as they come up.

She was delighted to come meet with us and bounce ideas around with us for the Nash house, and has agreed to do the project management again, in addition to getting a sales commission when we eventually sell.

But first

Before we can resell a house, we have to renovate it. We had lots of ideas for what we can do, but those ideas have to allow us to make a profit. Here’s some of what we are thinking, with photos of a lot of the “before” areas:

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Old Lady Taylor and Her Furry Friends: An Update

Initial Therapy Sessions

The front of the house after landscaping cleanup.

In my last installment, Old Lady Taylor received a life-altering exterior facelift, transforming an ugly duckling into a swan. Since then, the old lady has been undergoing therapy to beautify her interior state. The first phase of this type of therapy is demo—tearing down the old and sad to make way for the new and improved.

Because we needed to change our exit strategy to respond to market pressures, I scaled back our original scope of work from a fairly significant demo and rehab to something much less involved. The revised demo scope of work included pulling down the vinyl wallpapered plywood sheets that covered perfectly good sheetrock walls in the downstairs bedroom and pulling up purple, blue, and red carpet and linoleum in various places throughout the house, revealing a could-one-day-be-beautiful hardwood floor in the master bedroom with literally thousands of nail and screw holes. These holes were matched by the literally thousands of nail and screw holes in the walls and doors left by previous occupants. In phase 2 of therapy, prep, the holes in the walls and doors have been carefully patched and primed and are ready for paint.

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Looking for Good Ones

Man on a ladder by windows

Working! Grillo cuts a template to speed installing the siding around the newly replaced arch windows in Bryan.

Where Did They Go?

We’ve been having some trouble getting some of our smaller tasks done, because our usual sources of contract workers are no longer as reliable as they once were. One day this week, Carol spent a whole day trying to get the right person to fix an air conditioning issue on a project. The wrong person said they’d done it and wanted payment, but the unit actually wasn’t fixed. The person we’d asked to go to the location had never showed up. Another guy wasn’t answering the phone. And the one we like best had recently been yelled at by another contractor and was hesitant to go out. SIGH. (Details have been slightly changed here.)

One reason that we, along with others in this line of work, are finding qualified subcontractors hard to find is that a lot of people have headed over to east and south Texas to get good work repairing hurricane damage. We certainly don’t begrudge folks in great need from getting their houses repaired, but in the short run, we may expect to find people with certain skills (like drywall!) harder to find.

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TV Redevelopment Myths

There is only one show currently on television that shows the redevelopment world in anything remotely resembling a realistic light: First Time Flippers. And I can’t watch that show because it just seems cruel to let folks make the mistakes they do. Worse it is just wrong to inflict those mistakes on their future buyers.

The rest of the shows present a remarkably rosy picture of the process. So, I decided to compile a list of the most egregious misconceptions these shows propagate.

  • All you have to do is buy a house off the MLS.

You see this on Flip or Flop all the time. They rush to buy a house that “just came on the market” or that a “Realtor® friend just told me about.” We even buy the occasional house from a Realtor’s MLS listing.

While it is true that more than 80% of the houses sold in the US are sold via the MLS, that’s only part of the story. When you’re looking for a house to redevelop, you’re not looking for just any house. You need one that you can buy cheap enough that you can afford to hold it through the development, spend the money you need to fix it up, and still make money when you sell it.

The MLS is primarily for retail buyers. As a redeveloper, you can’t pay retail and survive. That’s why I know several people who spend more than $10,000 each month on marketing. You don’t have to spend that much unless you want to operate on a volume, but you will have to spend something.

That said, you almost always want to list your finished home for sale or rent on the MLS for exactly the same reasons you won’t buy listed homes very often. The MLS is for retail buyers, which is exactly who you want to buy your finished project. The only time you wouldn’t want to list the finished project is when you have a purchase offer before you finish.

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How to Manage Your Repairs

Kitchen with bad cabinets and backsplash. Lots of garbage.

How much would it cost to fix this kitchen? It depends on the level to which you want to renovate it. You should make the decision, not your contractor.

Estimating the cost of repairs is one of the most difficult parts of this business. You just have to learn this part of the business yourself if you want to redevelop houses.

There are systems available to help with estimating repairs, but your contractor is probably the most unreliable one. Here are a few reasons why you shouldn’t rely on your contractor for your repair estimate.

  • It’s not your contractor’s money; it’s yours.
    My experience with contractors tells me they are very good at fixing things, but they are not necessarily good at running a business. They rely on cash flow—specifically your cash flow—and seldom plan more than one job ahead of today. (As Suna mentioned the other day, we’ve even had one contractor go homeless in the middle of a project and squat in our renovation.) And they have a responsibility to their families and employees that trumps their responsibility to you. That said, as a rule, contractors want to do a good job and see themselves as hardworking, honest people.
  • They really want the work and know you want to save money where possible.
    This situation leads to two conflicts of interest.
    • They may underbid the project to get the work.
      I recently had a contractor submit a very low bid for a job. When I went over the statement of work with him, he had left more than half of the items out of the bid. It may have been a simple oversight, but he may have intended to charge a fee per “change order” to get the rest of the work done, too.
    • They may assume you want to use the cheapest materials and methods available.
      Contractors, even the ones who claim to specialize in “high-end renovations,” will cut corners on methods and materials when they can. You have to know what you need and what you’re paying for. Then you have to make sure you still make money at the end of the project. Saving a nickel on cheaper materials can cost you a dollar in resale value. Just remember that the opposite is not necessarily true. It’s very easy to over improve if you don’t know the market.

Solution

Spreadsheet showing work to be done.

The more detailed your statement of work, the better of you are. The model numbers of the doors are not specified here because they had already been purchased but not used on another project.

It takes time to learn to do a valid repair estimate. But what will save your bacon is to have a detailed scope of work (SoW) for the project. It should list every task you want to have done as a separate line item:

  • Paint the exterior walls and soffits Muslin (SW6031)
  • Paint the exterior facia and window trim Craft Paper (SW6125)
  • Replace the front door with a JELD-WEN 34 in. x 80 in. Craftsman 6-Lite Painted Premium Steel Prehung Front Door with Brickmould (Home Depot Model #THDJW182500036, Internet #204317376)

Notice that I provided paint codes and model numbers. There can be no room for confusion when you are this detailed, and you should provide this level of detail for everything you want done. If you do, you’re in charge of your project, not your contractor.

As you go through the project, you know when each line item is done and ready for payment. You also know if your contractor substituted materials or changed pricing without your approval.

But there are times when the bid is an estimate, and you have to recognize those times and be somewhat flexible. For example, we’re having custom cabinets built for one of our projects. My contractor gave me an “updated” SoW to reflect the pricing he got from the cabinet maker. That pricing came in at almost double the GC’s bid, and he had “helpfully” changed the bid price to reflect the sub’s bid. We had a long discussion about helping. We decided to use custom cabinetry only in the kitchen and master bath and to use prefab cabinetry of a similar design from Lowe’s in the other rooms. We are still over budget (I kept the original numbers so we could track the actual overage), but we are much closer to the original bid than we would have been putting custom cabinets throughout the project. More importantly, I know how much and why we are over budget, because I didn’t use the “helpful” updated numbers.

Isn’t it funny? He didn’t think it would be helpful to change the original bid in places where he actually came in under budget.

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