Day 54 - We accepted an offer today! After a lot of interest and a couple of offers, we came to terms with a very strong offer. As the house was on the market for less than a month, coupled with it being our second official flip, we could not be happier. The price was very close to asking, and the buyer asked for a one year home warranty and June 2nd closing. While the closing will take longer than we hoped, the overall sale price made it worth waiting the additional month.
Day 66 - We received the results from the inspection report today. Fortunately, the seller’s only asked for a few items that were identified in the report. And most importantly, those items were already being addressed, as there were a few odds and ends that were unable to be completed prior to the inspection. Specifically, we ordered replacement windows. The company sent a few incorrect sizes and thus, we needed to reorder the correct sizes. The only item that requires getting someone out to do the work was the septic. They would like the septic pumped. Despite having already received a note from a previous inspector that the septic did not need to be emptied yet, we decided to just agree to the request. We received a quote for under $300 to have it completed. They also asked for a 1-year home warranty. We were able to secure the warranty for under $500, which will be included with our closing fees. As I always build in a contingency for homeowner requests (for requests like this, or if they ask for seller financing) we were able to just agree to all of the requests, while still having “bonus” money for us!
Day 100 - Mortgage commitment came in, we are now set for closing on June 2nd! While we keep asking the buyers if they want to move up settlement, they do not want to leave their lease early, as they will be responsible for both their rental payments and the mortgage for their new property.
Day 113 - I have called all of the utility companies and alerted them of the stop in service for the day after the sale. This will allow the new homeowners a day to transfer utilities over, if they have not done so in advance. The furniture from the staging has also been picked up. We are so close!
Day 129 - Closing Day!
Everything went as planned! The walk-through went well, and settlement went well. In fact, the buyer’s agent commented on how amazing the house finished. Side note: The buyer’s agent is from the same brokerage as the agent from which we bought the house. Thus, the buyer’s agent had previously seen the property when the agency sold it to us, and therefore, knew what it looked like originally. The buyer’s agent also noted that he has been in a lot of flips, and he has yet to see the quality of work we did. (Great job PM!!!!) Ok, so if you have been reading my postings since the beginning, you have patiently waited for the numbers. Without further ado...
Numbers (Key F-Forecasted; A-Actual):
Purchase Price - $312,500F ; $312,500A
Purchase Costs - $6,250F ; $5,599A
Holding Costs - $13,000F (assume 6 month hold) ; $4,951.21A
Selling Costs - $45,000F ; $32,604.94A
Sale Price - $460,000 (bottom line)F ; $470,000A
Profit - $40,000F ; $66,306.35A
Timeline AnalysisRenovation - 31 daysF ; 34 daysA
Open House Target - March 6F ; March 6A
Days on Market - 60 (goal) to 120 (max) daysF ; 21 daysA
Closing - 180 days from Acquisition F ; 123 days A
I think I say this saying once a month, “Proper planning prevents poor performance”. PM & I knew we were going to do this daily journal. We knew people would be reading it. We also saw the opportunity in this house to turn it around quickly, while hopefully making a decent profit. That said, we spent hours before we purchased the house working out all of the details. To date, we spent the most hours on this house prior to acquisition than any other house. BUT, I think that is why it was a success. As PM knew I needed to know the day-to-day details for the blog, we spoke multiple times a day, to insure the blog contained everything we were going through. Due to these conversations alone, we brainstormed solutions together that typically PM just handles on his own whenever an issue arose. It was an amazing learning and growing experience for our company, and in the end PM and I took home over $66,000 for our time and effort. So I want to take a moment to thank everyone who has not only read the blog, but also provided feedback. You kept us driven to write our day-to-day experiences!
Task related, we learned you can repair stucco without a full remediation, you can refinish engineered hardwood, your neighbors most likely know where to find replacement materials, and you can do anything you set your mind to do.
We are taking our lessons learned and applying it to our next project. We are also starting to look for funding, as we are hoping to pursue our next goal of handling more than one project at a time. We have the infrastructure in place, so we hope we can find a quick resolution to this hurdle.
Thank you again to everyone who has read our blogs!!
Day 28: We officially have ONE week left! Cue the sleepless nights! Today did not start well at all. As you are already aware, we have been having problems with one of our subs. Despite being a no show on several occasions, yesterday he was supposed to stay late and finish all of the tiling. Guess what?!?! He didn’t. I am sure you are all thinking “No Surprise”. So what did we do? Initially, PM had enough, and fired him. The problem with firing someone is you will always pay more to get a replacement. Whether it is due to added time, cost, or both, you are not in a good situation. PM and I spoke about this, and realized it would be best to try to get him to finish what he was doing. Here is our thinking: 1) We won’t be able to get a replacement and get everything completed in time for the open house on Sunday, and 2) It is only about two more days worth of work we need finished. BUT, that doesn’t mean we don’t have a backup plan if needed. Here’s our plan; initially we believed the electric estimate to be too high. However, we could reallocate the money that we were going to pay the other sub, and shift it to the electrician. This would free up PM to complete the unfinished work, and have the electrician (whom we have used before and know is reliable) to complete the electrical finishes PM was doing. Considering we already bought all of the tiling materials, and we were only paying for labour for that particular sub, we just wouldn’t pay him the rest since he would not complete any more work. We will only exercise this backup plan if he does not come in this afternoon, and finish what he is contracted to do. While everything will still fit in according to schedule, just barely, we did allow for a bit of a buffer in case we need it. In other words, we have the flooring guys coming Wednesday afternoon to apply the last coat of poly. We told everyone they are coming Wednesday morning, and therefore, they need to be finished by Tuesday evening. If worst case scenario they are not finished Tuesday evening, theoretically they can come in on Wednesday morning. Hopefully, it will not come to that. If that wasn’t enough stress, I think PM might want to kill me. He sent me a picture of the backsplash with the granite, and I hated it. If I just didn’t like it, it would be one thing, but I honestly hated it. So I began frantically searching for alternatives, and he ran out to Lowes to pick-up replacements. He actually didn’t seem too mad at me, but after all of this work we put into the kitchen, I didn’t want the backsplash to cause a delay in sale. Back to the house...Fortunately, the one sub arrived in the afternoon to finish the tiling. The painters painted all of the spindles and handrails. The cleaners arrived to clean the exterior windows and the interior entrance high window (as the ladder was still there).
Day 29: Today the painters finished! We could not say enough good things about our painting crew! They showed up everyday, arrived before PM, and always stayed after PM (including the night he stayed until 8:30pm). Their work was exceptional, and despite being one manager short, they finished on-time and delivered high quality work! The kitchen backsplash installation started. We were right to change out the backsplash. The new backsplash is amazing, and creates the high-end finish we wanted. The microwave and dishwasher were also installed. A few hall lights were installed. And the sure sign you are near the finish line is when the clean-up commences, which it did today. Hooray!!!
Day 30: My Mom was a huge help today with the staging! My Mom met the furniture company and let them know where all the furniture was to be placed. She also noted that they forgot one of the tables, and arranged for them to deliver the replacement prior to our open house. My Mom also ran to a few stores to get some finishing touches. She did such an amazing job, and confirmed her spot for all of our future staging needs (whether she likes it, or not!). The tiling finally finished in the master bath. The Electrician came and installed the entrance light and switch plates. The cleaners started on the second floor windows, and the kitchen backsplash was installed. PM noted that a few pieces of tile were installed upside down, and told the tile guy to fix them right away, before the cement dried. Of course he did not listen, and then had to chisel a few pieces off. Luckily, we had enough extra pieces for when he cracked the chiseled pieces! BUT, the most interesting story was our sub (the one who has been giving us some difficulties) asked if he could sleep over to catch up on the work. PM thought about this for a while, and ultimately decided it would be ok. He bought him dinner. Maybe we will be able to catch up on lost time!
Day 31: PM arrived this morning with coffee and breakfast for the sub who slept over. And, guess what?!?! The sub didn’t get much done. The unreliableness is becoming reliable! Our agent came to take pictures of the house. As the tiling was not done, and the subs were tracking dirt through our freshly cleaned house, PM had to get down on his hands and knees to wipe the floors so the dirt would not show up in the pictures. One of the subs who works for our problem child asked when the next payment was coming. PM politely reminded him that based on their performance they would not be getting anymore checks until the entire job was finished, and that he was in a contract with his boss, so if he needed to be paid he should speak to his boss. Lastly, our realtor was able to post the listing:http://www.estately.com/listings/info/105-quail-la...
Day 32: PM is just a wee-bit stressed. He called me to go over what was left to do on the house. We both knew there would be a few minor things left to finish after the open house; however, when discussing those items we realized our lists did not match. So we spent a few minutes discussing which items should be prioritized. During our discussion we took into consideration what items would have an impact on someone making an offer. Once we finalized the list, we realized we would need some extra hands to get all of the work completed. We spoke about a few different options, but settled on asking my awesome brother and his friend (one of my really good friends too) to help. Both of them are very knowledgeable about renovation. My brother grew up working for PM (our Dad), and within our business plan we hope to have him full-time with HouseItLook too! And my brother’s friend has multiple investment properties, and does both buy and holds and flips. With respect to the house, the carpet was installed in the basement. The sub who installed the carpet, is the one we have been having issues with. After the carpet was installed and all of the tile was sealed, they were officially finished. The sub then came and had a long conversation with PM. To summarize, he asked PM to give him another chance and apologized profusely for the delays. PM told him he had given him multiple opportunities. (Side note: I have read in multiple forums on BP how your initial relationship with a Sub is typically how it will go, if not worse. Our initial relationship with him in our last flip included delays. I was very hesitant to hire him, but PM and I spoke and his price was good and at the time we did not have an alternative. PM asked the Sub if he wanted some advice, and the Sub said “Yes, of course”. PM said, “I have been in this business a long time. Are you busy?”, and the Sub said, “Yes”. And then PM asked, “Are you having a hard time making money?” and the Sub replied “Yes, you have no idea”. So PM said, “Then something is wrong. I think you should take a break, and reflect on your business. This industry is either crazy busy, or you are begging for work. If you are crazy busy, and not making money you will never make money. Something is wrong, and you need to figure out how to fix it before you lose all of your customers. You just lost us, and you do not want to lose anymore, so you need to do something about it.” I think the Sub was grateful for the advice. Now whether he does anything with it, remains to be seen. But, in the end you never know when, or who you will need to call on for help. It is always good to never burn a bridge, no matter how much you are probably dying inside to do so!
Day 33: PM, my Mom, my Brother and his friend came over today. According to PM, he would not have gotten even half of what they were able to accomplish. We are truly lucky to have such a great supportive family and team! PM was able to complete the list of items needed for the open house. My Mom finished the final staging touches while running out to get lunch and water (which the boys would have preferred beers!). We owe them big time! I searched Zillow today and did not find our listing. I was very nervous, as in our area Zillow is the end-all, be-all of finding houses. So I went on Zillow and listed the house by owner, with the disclaimer that it is being listed with a realtor, but it has yet to pull from Trend. I did this for two reasons. First, I wanted people to know the house is now for sale, and second as we have an open house tomorrow and Zillow allows for you to list your open house.
Day 34: Open House Day!!! PM and my Mom went over before Open House to get everything ready. The Open House was amazing! We had three potential buyers, and seven neighbors stopped by too! It was a great opportunity to not only meet the neighbors, but they also gave us some good insight on the neighborhood. I hope to post very soon with confirmation of the sale, and our final numbers. Until then, thank you for sharing this experience with us!
Check out our website to see before and after pictures: http://www.houseitlook.com/project-002.html.
Disclaimer: This post is not my best work, but I am so exhausted with everything that is going on with the house, the writing definitely took a hit this week.
Day 21: The painters moved outside today, and power washed the exterior. In the process, PM identified a few minor leaks around a couple of the windows. He spent the rest of the day fixing all of the leaks, and caulking around them. This will secure the seals, and prevent further leakage from occurring. The new bathtub spout conversion kit arrived for the master bath. We also had a HVAC company, the one the previous owners used, come and service the system, and everything is in good working order. Most importantly, the cabinets arrived!!! PM will need to hang them tomorrow, in order for the granite template to happen on schedule. We had a no show Sub today. PM got on the phone with him and worked everything out. He also received confirmation that all of his tasks will still be completed on time.
Day 22: More painting, tiling, grout, and cement board installation today. The kitchen cabinets were installed today, as well. I got several pictures at 8pm from PM, so he is really earning his keep!! PM wanted to insure installation was completed as the granite template is scheduled for tomorrow.
Day 23: Another plug for the BP community...on my last posting, one of the amazing connections I met through BP sent me a private message about staging. He gave me an amazing recommendation that we ended up using. Special shout out to Percy!!!! During the cabinet installation, PM noted one cabinet was broken, and one was missing. He called the company, and they are able to get the cabinets ready by tomorrow. We had a roofer come out to give us an estimate on the minor roof repairs. He is not able to do the job until after the open house, but we are going to move forward with him as the price is right, and it will not impact the open house. AND, lets say it together, “the painting and tiling continued”.
Day 24: The cabinet company called to confirm the cabinets are ready. Fortunately/unfortunately there was a very bad storm last night (with tornado and flash flood warnings), and it is making it very difficult to get to the house. Several of the contractors have called to say they have tried four different routes to get to the house without any success. Side note: in my previous job in pharmaceuticals, I had to do these Risk Analysis Plans rating the likelihood, and impact of certain events to assist with project management. The scale was a 1-5. Typically environmental factors have a likelihood of 1. While I did not complete a Risk Analysis Plan for this house, just try to imagine my state of mind when I heard that even major highways were shut down prohibiting access to our house. Lets just say, I had a good laugh. PM, was in a better state of mind, and realized the opportunity to go to Home Depot and pick-up the kitchen faucet, master bath vanity faucets, master bath lights, light for hall bath, lights for hallway downstairs, a few extra tiling material, and pick up the cabinets. PM was later able to get to the house and check on everything. Luckily, we only had a bit of trash that had escaped the dumpster, but no damage to the house.
Day 25: Today, PM did a bit of patching in the master bath so the painting in the master bath can be finished. The master bath electric got updated to account for the two vanity lights over our new double mirors. A lot of trim work was completed in the kitchen around the cabinets. And going back to the staging, my Mom (PM's wife) and her friend went to the furniture rental company, and selected furniture for staging. Then they went to a few different stores to pick out a few more decorative items. It was a lot cheaper than the normal staging costs!! The same Sub that was a no show in the beginning of the week, was once again a no show. Lets just say PM is not happy!
Day 26: We received a recommendation for a few different cleaning people. One guy I spoke to appeared to be perfect for the job. He could do the cleaning in a few hours, and also worked on construction cleaning jobs previously. All I need to say, is if this flipping thing does not work out, I am going to clean houses post construction. His estimate was $1200, and that did not even include cleaning the windows! Needless to say, we found someone else. The painters began sanding all of the hand railings. PM installed the trim in the kitchen, and he installed the vanity in the hall bathroom. He also hung three replacement doors. And, once again that one sub was a no show. PM called him, and received confirmation that he would be be there all day Sunday. He also promised he would be finished on time.
Day 27: One week to showtime! The bathroom tiling continued (finally) today. The Sub promised to stay as late as possible to get all of the tiling completed. The painters moved on to staining the handrail. PM was concerned about how long the handrail staining would take, but was assured by their boss it would be completed on time. This is because there is a new oil-based polyurethane that dries in four hours. Thus, you can apply two coats in one day, as compared to the old process of needing two days to apply two coats of stain. Besides meeting with all of the subs and doing one more check that they will finish according to schedule, PM fixed a few windows as well.
Day 14: The week started with another deal. Homeclick.com and Wayfair.com have programs for real estate businesses (as long as you can provide documentation, for example your EIN number that you get when you register your LLC) to score major deals. Wayfair has significantly lower pricing for a business account than for the normal consumer. Homeclick not only has lower pricing, but it also provides a $50 discount and $100 coupon for taking a few additional steps when you register for your business account. So, how much did we save? We purchased a glass surround and base for the master bath shower, and with the two discounts and the business pricing we saved almost $250!! With respect to the house, the floor guys finished today. They only have to put on one more coat of polyurethane when everything else is finished with the house. As the floors were being finished, and PM was not able to be in the house, he made a few trips to HomeDepot to finish getting the tile for the baths. In the afternoon, he was supposed to meet with a roofer, who not only was a no show, but never called. This roofer is someone who was “highly recommended” from one of the forums for which I am a member. He has said on multiple occasions he was going to come out to the house. Just another lesson, that not all “highly recommended” people are good. Bad news is we now have to find another roofer.
Day 15: Checked in with PM today on his thoughts for achieving the deadline of February 29 (with first showing March 6) and we should be good! We also have been going back and forth about a stager. Our budget is pretty tight on this house, and the rooms are pretty well defined and it is easy to imagine furniture layout. What do you think? (Reminder: our selling price point is mid-high 400's). The price range we have received for staging is $3,500-4,500, and then approximately $600-$700 per month holding. Back to the house happenings. We selected the paint color; walls are Accessible Beige and the trim is Marshmallow (both by Sherwin Williams). PM finished removing all of the old cabinets. I listed the cabinets for sale on Craigslist with a disclaimer that they need to be gone by Friday (as we are running out of storage space). Another way to get some money back:) We also have a double wall oven and a stove top we are selling. PM went around the house and checked and nailed down all of the quarter round (which will be painted with the trim). He then met with the Electrician. You might be saying to yourself, wait what is this about an electrician??? Initially, we did not think we would need an electrician, but with some added changes (for example the full renovation of the kitchen) the laundry list of electrical updates needed grew. Finally, the appliances came today. Interesting story about the appliances. PM had to drive his truck down the driveway, and load the appliances on the back of his truck as the delivery truck could not get up the driveway. He then had to unload them again into the house. Thank goodness PM was there at the time of delivery!
Day 16: The Electrician came today to give a bid, and it was ridiculously high! This is the same Electrician who did our last flip, so we were shocked with the price. We prioritized the items we needed him to fix, and PM is going to cover the simple changing of fixtures. The painters continued and are doing a very good job. One challenging point for PM is the language barrier. While I speak Spanish, PM does not. With me not being able to be at the job, and no English speaking painter (as the boss of the painters is at another job), communication is proving to be difficult. I have yet to mention that every few days I do a budget check-in to see where we are. We are currently almost $6,000 over our renovation budget. A few things to note about this: 1) We originally had a reno budget that was $10,000 over what would make the numbers work, and were sure we could make concessions to bring the budget down, 2) We did not know they would take the refrigerator, the stove was not in good condition, we would need to replace all of the kitchen cabinets, and a few other minor fixes, and 3) we still have some areas where we can hopefully find savings. Lastly, I scheduled the open house for March 6th!
Day 17: Lets start today with the challenges we faced. First, one of the shelves in the garage broke. It was holding the tile, grout, and thin-set. Fortunately for us, the tile did not break. While speaking with PM about the backsplash, specifically the quantity needed, he realized he ordered the wrong size cabinet for one of the cabinets. However, the bright side is the correct cabinet will be ready tomorrow morning, but he needs to go to New Jersey to get it. Why is this good news? The granite template cannot occur without all of the cabinets installed, and as the new cabinet will be ready tomorrow the granite template can still occur according to schedule. This really has been an ongoing challenge, but we continue to struggle to find a roofer. We only have a few minor fixes that need to be completed, but we can not seem to find someone. I made about five calls to roofers yesterday, and I hoping at least one can work with us. I mentioned earlier that we looked for kitchen backsplash. I sent PM seven options I found. I also ordered three mini pendant lights for over the kitchen island. PM scheduled a HVAC tune-up for next week. The tile guys began tiling the main bath and laying out the master. And the painter continued to paint. Considering we have some nice weather coming up, PM called the painters' boss and confirmed they will be working outside on those days to get everything outside completed on time. Keep in mind this is Pennsylvania in February!
Day 18: “Call me asap”. Three words I never like to see when reading a text from PM. A million different ideas of what “Call me asap” could mean, from family related (remember PM is my Father) to house related. When I finally hear it is house related, I am relieved. I am sure this infuriates PM a little bit, as he is still concerned, but I am just happy it has nothing to do with my family. I mentioned yesterday that he was going today to the cabinet warehouse to pick up the one cabinet he ordered in the wrong size. When he got there, they gave him a box that said “White Shaker”. PM brings it to their attention that we did not order white shaker, and they happily exchange it. PM then followed-up with the original sales person to confirm that all of the other cabinets were the correct style. Guess what? They were not correct. A few hours later the company called to confirm the delivery for Monday afternoon (three day delay). As a result, this will hold up the granite by a few days, but we should still be ok for scheduling.
Day 19: More tiling and more painting today. PM did some work to prep for some of the subs. Still on the hunt for a roofer. And our Realtor went around the entire neighborhood and handed out our referral flyer. Our referral flyer includes a bonus for anyone who refers someone who ends up purchasing the home, and it also includes information about the Open House. Our Realtor also posted the “Coming Soon” sign. We hope this will build awareness of the upcoming listing.
Day 20: Today the weather was really nice, so the painters moved outside and began to power wash the exterior. PM laid the tile design out in the Master Bathroom. It looks very nice and should be memorable. We are in the final push! Keep your fingers crossed that in two weeks we will be receiving an offer!
Day 7: I hope this entry is not the tone of this week. Late last night we received an email from our floor sub. Despite the fact that they signed our Independent Contractor Agreement (ICA) earlier in the week, cashed their first milestone check, and worked all week, they said they were offended by the ICA, and were very concerned that they were not going to be paid due to the ICA's language. Note: the ICA template we used is the one provided by Bigger Pockets; thus, there is nothing crazy about it...in fact, we even removed the delay in work/penalty section! We wrote an email back trying to resolve the situation via email, however, the situation was not resolved. Therefore, Monday saw no floor action. PM finally reached the company, and was able to talk them off the ledge. The owner is coming to the property tomorrow to go over his concerns. Just one small note: we pay a four milestone payment schedule (30-30-30-10). His payment plan had three 33% payments. He was going to complete 90% of the work this week, and just apply one last coat of polyurethane two weeks later. Thus, if we went with his payment plan, he would not get 33% of the total until he applied that last coat. With our contract, he would have 90% prior to that last coat. Once PM politely pointed that out, I think he was more willing to work towards a resolution!
Day 8: I fear this week is not getting better. Our floor guy who was supposed to meet with us, was unable to due to a family emergency. Thus, the floor guys are now scheduled for tomorrow. PM and I decided to focus on a few other import topics that are pending, most importantly the kitchen. We are now debating whether, or not to just replace all of the cabinets. Here's our reasoning: 1) the replacement matching cabinets are proving difficult to locate, 2) the cost associated with replacing and then staining are inching near the price of replacements, and 3) some of the cabinets are not in the greatest shape. The two risks with replacements are the same as all reno decisions: cost and timeline. PM is researching these two risks across a few companies, and we hope to make the decision promptly. We both agreed the lesson learned is to assess the situation, and make a decision sooner.
Day 9: PM is getting us back on track! PM met with our floor guy today, and went over the contract. When the floor guy first arrived he said to PM, “We are not using this contract. I have spoken to several other contractors, and they told me I should not have signed this.” PM then said, “I totally understand. You and I are cut from the same cloth. We have been in this business for years, and we go off a handshake. I was put off by this contract too, at first, but after reading through it, it really just covers the basics. Lets go through it line-by-line, and see where there are issues.” They then proceeded to go through the contract and only one issue was noted. Together they decided to waive the one clause for this contract only; however, in the future PM noted this will be standard in the contract. The one issue was if they do not hold up to their end of the deal they are liable for up to $2,000. Why did we waive the issue: 1) they already were doing a good job prior to this point, and thus we assumed our risk to be low, and 2) the time and cost of finding a replacement, and potential project delay would be far greater than making this concession. This situation further demonstrated the necessity to provide this general agreement to the sub when they came to do their estimate. The crew started on the floors again, and agreed to continue late into the night, to have the overall project done by Sunday evening (possibly Monday morning). Note: the original finish date was Sunday evening, so the paint guys can start Monday morning. Next topic: Kitchen. I am sure you are as over me talking about the kitchen as I am writing about it! PM and I made a decision that we are definitely replacing the cabinets. Now it comes down to pricing. PM went to one place yesterday and was able to get a quote (a bit high, but a starting point). While he was there he asked if there were any good appliance places, and got a GREAT recommendation. He originally was scheduled to go to another cabinet place, but since he was close to the appliance store he headed there. Our total budget for a refrigerator, 5-burner gas stove and microwave was $2,500. (I know I have yet to talk numbers, but our selling price is set in the mid-high 4's....I will give all numbers in my last posting, once we sell the house). We both felt $2,500 was going to be tight to find the level appliances we were looking for this type of house, but we welcomed the challenge. Well, PM just killed it! Total cost: $1615 (including delivery)! How did we get that? As I am sure most of you know, appliances are best to purchase January through beginning of February, there were rebates on this package, Delaware (store location) is tax free, and we got a 2% discount for paying with a check!!! Score! Now we can use the extra money we saved towards the cabinets! Of course the money saved will not cover the overage in cabinets, but every penny counts!
Day 10: PM continues to score the deals!!! He negotiated the cabinets down to $5600 (fully assembled, including delivery)! We just need to figure out the granite, and then the kitchen is set! PM is going to one more place tomorrow to look at a few options, and then we will make our decision. The floor guys continued today, and were able to put on a darker stain.
Day 11: I feel like you are going to stop believing me, but I should just refer to PM now as “The Negotiator”. The Negotiator went to the one granite place today, and looked at a bunch of options. There were two options that stood out to me and The Negotiator. One was a really nice Level 1 and the other a Level 5. Both were on sale, but the Level 5 was obviously more expensive. Never fear, though, as the Negotiator is here. The Negotiator negotiated a $2500 all-inclusive deal with an upgraded double-sink for 60 square feet of the Level 5. If you have yet to shop for granite, let me put this in perspective. The most common deal in our area across all granite stores is the following: Level 1 granite, 50 square feet, standard sink (select from 3 options), at $1999, and each additional square foot is at the regular price, which is typically $35-$45 per square foot. And, for each Level you go up, the price per square foot increases between $5-$10 per square foot. Pretty unreal!
Day 12: PM went to the granite store first thing this morning to give a deposit for the granite and then headed to the house. The floor guys were there putting the stain on the floor and it looks fantastic. He confirmed today that the floors will not be finished until Monday, so the paint guys and the tile guys will be held off by one day for the floor guys to finish. Administratively, I finalized updates to a referral document that we create for all of our houses. Specifically, it is a flyer that we distribute to all of the neighbors alerting them of the upcoming listing. It also offers a $500 referral for anyone who refers someone to the house that provides an accepted offer. Note: for this house, we have holding cost of over $2000/month. Any possible way we can get a quick sale is welcomed! We also had our Real Estate Agent post the Coming Soon sign today. Since Home Depot changed their rewards, I started looking into alternative credit cards. I discovered that Bank of America Business credit card gives 1% off all purchases (also 2% off restaurants and 3% off gas). Comparatively, this is a greater savings than both Lowes and Home Depot cards. Upon discovery, I emailed my Bank of America contact to get more information.
Day 13: The final post this week is a bit off topic, but is relevant to anyone who is interested in flipping, and is trying to do everything by themselves. The last flip we did, PM did a lot of the work while simultaneously managing the project. Despite how hard he tried, it was (in both of our opinions) too much for just one person to handle. Keep in mind, this is someone with over 40 years of experience, and multiple contacts right out of the starting gate. For this project, we took a completely different approach. We tried to sub out almost everything. Why am I bringing this up? I can already tell you in less than two weeks, both PM and I have already had several conversations that we are not going back to the previous way. It is more efficient for us to streamline the process with PM at the helm. This process allows for a true Project Manager to emerge, phone calls to be made, scheduling to be kept, budgets to be tracked, and liability to be kept at a minimum.
Day 0: Whhhhhoooo closing went well! We received confirmation the previous homeowner took the two large items that were present during the walk-through. So we officially have a blank slate to start this project. And without further ado, here is a picture of the house:
Doesn't look like your average flip does it? We were having problems with finding the “perfect” flip, and for several months we kept missing out on the house by being outbid, late to discover the house, or just not even aware the house was available. We decided to take a new approach. We looked for houses that were sitting on the market for a while, appeared to need minimal work, and investigated further why they were not selling. This particular house had an offer when it first hit the market, but then when the septic failed, the house was listed back on the market with a significant price reduction. As it was not being marketed to investors, and instead to primary residents, we believed it to be a perfect house for us. Why? Because most people who purchase a home at this price point need a mortgage, and most lenders will not lend on a failed septic. But that is not even the best part of this story! When we learned of this, we submitted an offer far below asking. Despite going back and forth with the homeowner, we could not reach an agreement. The house then sat for another month on the market. We asked our Real Estate Agent to touch base with the homeowner's Real Estate Agent again, and we learned the homeowner might come down in price. So we started negotiations again. During the negotiations, we found out the homeowner had the septic issues fixed, and it now PASSES!!! This was fantastic news to us, and allowed us to come up in our price (as we no longer needed to factor in the septic repair into our renovation) showing the homeowner that we were being flexible too. Here is now the best part; they never updated the listing to reflect the fixed septic issues. Thus, no one knew they now could get a mortgage on the house! There was only one other person who put in an offer, and with our ability to close quickly we were able to secure the house! A few more updates before I close out this entry... First, PM went to two granite places and looked at the options for the Kitchen Countertops. Second, I customized the Independent Contractor's Agreement (ICA) and Sub Check-list for our first Sub, who is coming tomorrow to start demo. I also created a Payment Tracker document to track all Subs payments in one location, so we don't have to keep referring back to the ICA for amounts and conditions of payment. And I finished setting up all utilities, including insurance. The only two items left is getting another fill-up of propane for the tank, and we are going to hook up internet at the house. PM and I do almost all of our calls via FaceTime (so I can see what is going on), and cell reception is terrible at the house, so the internet hook-up is a must!
Day 1: Demo started early this morning! The only thing left to demo is to pull the carpet up in the basement. However, we had a little hick-up with the dumpster. The dumpster was supposed to arrive at 9:00am, but didn't arrive until 1:30pm. Further when it did arrive, I ordered the wrong size. I ordered a 40 yard, which wouldn't be that bad (considering it is always better to order bigger), but the sides were over 8ft tall! Which would have been very time consuming to actually put the trash in the dumpster! They took it back ,and replaced it with a 30 yard. While this hick-up caused a delay of the trash actually getting in the dumpster, the good news is we saved $100 by getting the smaller size....you have to keep looking for the positive in this business! PM and I had a few calls during the day. During the calls we confirmed the granite for the kitchen, however we still are working out the configuration of the kitchen. It needs to be decided shortly, as several tasks are depending on the configuration. The priority now is getting the flooring for the bathrooms. In order to do that we have to pick out the vanities, as it all needs to tie-in together. Did I mention how much I hate, wait scratch that, loath vanities!?!?!? Someone needs to come to come up with a store that just sells vanities. It would have mix and match bases and mix and match tops, with 20 color options for both, and different style handles. It could be made while you wait, or shipped the same day for free. The store would also sell the complimentary flooring, and have pictures of your combination with the different floor options. This way color matching between vanities, and flooring is not such a risk. And whoever is reading this thinking this is a great business idea, would forever give me 50% off instead of a royalty fee.
Day 2: Floor guys came today. They started sanding all of the engineered hardwood to prep for the refinishing. PM and I spoke again about the kitchen and master bath configuration/finishes. For the kitchen, the configuration is the concern. The current configuration has a 27” wall oven-microwave combination in black. All of the other appliances are stainless and the ARV cliental will expect stainless. Here's the problem. Wall oven-microwave in stainless are expensive (about $2,000 to start). While a standalone is way less, they are not made with a 27” width (they start at 30”). Solution, we had to reconfigure the cabinets to find the room for the standalone to fit. The new problem this creates is finding new cabinets that match the existing cabinets, and are available quickly (in order for the doors to be stained by the painters). Sounds like a headache for PM to worry about! Today we also ordered the main bath vanity, however we are waiting on getting the flooring, as the main bath vanity is featured at a few different stores and the color varies slightly. As we want the floor to compliment the vanity, we want to be 100% certain of the vanity color prior to installing the bathroom floor. We can decide later as the vanity is scheduled to arrive by mid-February. Just one more reason why having the mix-and-match vanity store would be such a great idea! (Read yesterday's post if you don't know what I am talking about).
Day 3: We decided at the beginning of this project, the target audience for this house is my Mom (PM's wife). Which makes sense as this house looks exactly like my parents' house. We decided to leverage this by seeking my Mom's approval for each design element. Which brings us to the master bath. While I hate vanities, I am sure PM hates master baths. In the past 24 hours, I have changed the design three, wait, four times! In fact last call he said, “I don't care what we do, just pick something!” Here is where my uncertainty began: I had an idea for an expresso and cream colored bathroom and showed it to my Mom. And she said, “It is not what I would have picked, but if I walked in and saw it I would like it”. With that small comment, I started coming up with alternatives. I sent a few options to PM, and while PM and my Mom were having breakfast this morning, they ranked the ideas with the original idea at number one. With that confirmation, I ordered the master bath vanity. Sooooo, hold on to your hats, we are going with the brown and cream option! I am still a little nervous about this, but I know it will be more unique than the Calcutta, grey and white bathroom that everyone is doing right now (not ripping on it as we did it on our last house). PM investigated the kitchen a bit further, and discovered there is a gas line already in for the new oven location! When PM told me this, I said, “This is a good thing, right?” and he replied, “If you like saving money!” And that right there folks is why we get along so well! PM also has the cabinet figuration sorted out, and made a call to a cabinet maker to identify where they can be made. PM also called the company who made the shower fixtures in the master bath. I forgot to mention this previously, however, instead of replacing the entire faucets, we are just switching out the exterior parts. Not only will this take less time to complete, but it will save money while giving an updated look to both the shower and the tub. While things seem to be going very well, there was a bit of bad news concerning scheduling. When we originally spoke to the floor guys, they confirmed that we could work in parallel while the floors were being done. Apparently that translated to only two days (while they were sanding). Tomorrow they start staining, and they don't want anyone in the house until mid-week next week! Fortunately, we have the time, but lesson learned we really should have gone day-by-day with them to confirm which days we could and could not be in the house. This is not welcome news, as we just purchased all of the tiling supplies for the tile guys to get started tomorrow on the tiling, which will now be postponed until next week. Fortunately, they completed all of the sheetrock today in the main bath, and some in the master.
Day 4: With the floor guys needing the house to themselves, PM and I had a long call this morning to work out a few more design elements. To start, my Mom actually found a chandelier she liked for the interior which I was able to find for almost $90 cheaper online. (I am starting to think I should write an article on how to save money when flipping, or renting...I am like the crazy coupon lady of house flipping!) The granite company wants the appliances in prior to taking their measurements (which was not the case with the last granite company we worked with; PM is going to call to verify that is truly a necessary step). PM and I also looked at appliances online, and he was going to go look at a few appliances later in the day. After our call, and PM running a few errands for the house, he went to the house and checked on the floor guys. Here is a picture of the floor stain; it is the darkest we can go. While I am a bit skeptical about the color, I think once the whole house is completed and the floor has polyurethane on it, it will look good.
Day 5: I am starting to think my Mom should be on payroll for this house! Today my Mom went to a granite store, and found a granite option for $500 less than what we originally selected. The color is a bit different than the one we initially chose. Before making a final decision, PM is going to put the two granite options next to the color of the cabinets, wall color, and backsplash. PM also spoke again to the cabinet company, and while they do not make the cabinets we need, they believe they know who does. PM has to call back on Monday to get more information. PM and my Mom also went to check on the house today. It appears the floor guys did not show up! PM called the floor contact multiple times, but did not get a call back. On Monday he is going to have a conversation with the floor company, and explain if people are not coming on certain days, he needs to bring other guys in to keep the house moving. While at the house, he tested a sample for the stair railing, and applied a second coat of stain on the floors on a hidden area. The floors look better with a second coat. We are going to ask about the cost/time of applying a second coat of stain and make a determination.
Day 6: Shameless plug...I launched our website www.HouseItLook.com! I have been working on this behind the scenes, but it is officially launched! Other than that, day of rest to be ready to continue the momentum tomorrow morning:)
Day -7: PM and I spoke today confirming Wednesday morning is our new sub day. We confirmed who was notified, and who has yet to be called. We also identified that a few more subs are needed for specific tasks. Therefore, I spent the rest of the day researching people, and reaching out to set-up estimates for Wednesday morning.
Day -6: Super busy day today! Made at least 20 calls, trying to get a few more subs lined up, and was actually pretty successful at doing so. We are still looking for a few people, but I think we are off to a great start. Of course I spoke with PM today, and we went over all of the updates. I updated our Master File on Google Docs to reflect the same (note: I update this document multiple times a day). We also heard from our Real Estate Agent that the title is clear (Yes!!!), and we decided the place and time of settlement. The Title Agency called to provide an update on the Good Standing Certificate and the Corporate Tax Lien. Although we are paying in cash, the Good Standing Certificate is a company requirement for financing and cash purchases. However, the Corporate Tax Lien is not needed as we the entity purchasing this proper is in its first year of business, and has yet to file taxes. The Good Standing Certificate is $75, so at least we saved $90 by just asking the Title Agency to confirm that these documents were absolutely necessary.
Day -5: The big day, Sub Day!!!! I am so excited that I started writing this post before the Subs even arrived. So while we are waiting for their arrival, let me just take a moment to talk about how much I love BP! Several months ago, I connected with an individual, from Pennsylvania, on BP. We hit it off, and he asked me for a good floor guy, and I provided him with two contacts. Since then I have asked him for a few recommendations. Not only has he provided them, but he has been very supportive of my business too. To be honest, I was a bit sceptic about the longevity of BP's community willingness to help others. In my personal experience, outside of real estate, I have seen people burned only one time, and it dramatically affect the way they interact with others. I thought it would not be long for some “bad eggs” to ruin it for everyone. However, I am happy to see that is not the case. Lets get back to talking about the Subs. The Subs arrived, and everyone came, except one who called to let us know something came up. PM took each person around the house and talked through what was needed, and requested quotes to be submitted by the following evening. We also discussed what light fixtures were needed, options for the Kitchen and the master bath. There were a few surprises that we missed in the initial walk-through (note: we saw this house about a month before the offer was submitted). It turns out the flooring is engineered hardwood, and not solid hardwood. Fortunately, the engineered hardwood is thick enough to be stained and refinished. It's worth noting that not all contractors who refinish hardwood, refinish engineered hardwood (which proved to be the case for one of our Subs). All of the other items were minor, but we will need to address them.
Day -4: Estimates are coming in! I am not only keeping track of them for this specific job, but also my Master Sub Tracker. What is that you ask? I keep track off all Subs' estimates for each project. At this point you might be thinking I am just anal retentive, however, the reason why I am doing this is for flexibility and scalability. In the short term we may run into a scheduling issue that requires a new sub. In the long term, if we are flipping more than one house, the need might be overlapping. As Warren Buffet once said, “Someone's sitting in the shade today because someone planted a tree a long time ago”. Remember in last post I mentioned we discovered the flooring is engineered hardwood, and not solid? Well it turns out refinish engineered hardwood flooring is a delicate process (read: expensive). The cost of refinishing engineered hardwood flooring is almost the same as ripping it out, and putting in new engineered hardwood flooring! We also learned that painting cabinets is almost the same as replacing with new cabinets! I imagine the higher end floors and cabinets you have, the more it would make sense to refinish vs replace. However, for builder grade materials, the difference is not that great.
Day -3: We have almost all estimates. Things at this point are looking pretty good. On the last call with PM he said a very good quote, “I am not going to get overly excited about how things are going, as in this business things change daily. There are days that are the highest of highs, and others that are the lowest of lows. I do not want to let this affect me this time, and just approach each day with a balanced outlook.” However, with this being a journal to not only reflect on things we can do better, it is also worth noting what we are doing correctly. To date here are the things that are going well: 1) Sub days, 2) Original Estimate Forecast, 3) Building a good team, and 4) Administrative Organization. First, with the Sub Days, we are able to not only identify who we are selecting, but we are able to both lock down the schedule and the budget. This is allowing us to make decisions on whether or not to move forward with any of the items from our “optional list of improvements”. (Side note: We create an absolute must list for each flip, and then an optional list, which we reassess during the renovation after analyzing both the budget and the cost/benefit). 2) The bids that are coming in are all around the original estimate forecast. I don't think I need to explain the obvious benefits of this. 3) The people we brought in for bids are strong. Unlike our last flip where we only had one option for a majority of the tasks, we have multiple options for almost all tasks. 4) With all of the organization we are doing administratively, we are able to be organized at the project. While we are talking about organization, PM suggested for our future Sub Days, we should create a packet to hand each Sub. Included in the packet would be the following: Information about us, the project and our expectations, and information about the needs for their specific task. This is beneficial as the Sub will have all of the information upfront, for efficiency reasons PM could schedule all Subs to come in at the same time and give them the packet and only answer questions as needed. It will also give the Subs a first impression that we are a serious business that expects the same in return. During the call with PM we discussed some of the bids we received and some pending questions we have. We also confirmed that our final walk-through will double as our second and final Sub Day. Even though it is only the day before settlement, we know that every day counts.
Day -2: Today PM and I had a few calls, one of which was 2.5 hours long! We went over submitted estimates, pending estimates, pending questions, the Subs who are coming tomorrow, the materials that we are providing, kitchen configuration, kitchen cabinet color (specifically differentiating between white and bright white - it was particularly entertaining), and we started the schedule. BP talks a lot about the importance of having a good team, specifically bringing together people with different strengths. PM has been self-employed for over 40 years as a General Contractor. Therefore, it's quite obvious that his expertise is invaluable when it comes to flipping. He knows building code, the proper way to do so many different things, and the order in which to do them. He is very good at finding multiple solutions when a problem arrises. He is very easy to get along with and very well liked both in business and personally. So what do I bring to the table, besides excellent journal writing skills? Previously, I worked as a Global Project Manager, and as a Director of Project Managers in one of the world's top pharmaceutical companies. I also have a Masters in Leadership Development, and I am Six Sigma Lean Certified. I am always researching the latest home design trends and glued to HGTV. Despite how well we work together, we sometimes have disagreements. Typically those disagreements center around budget, or scheduling. PM is responsible for actually scheduling the subs, and keeping the project moving, however, at the onset of the project PM and I set the initial schedule together. Our scheduling conflicts center around building in buffers and allowing for flexibility for weather and project unknowns. If you take a moment and step back this makes perfect sense; PM has the experience to know the high probability that weather and unknowns become a factor during renovation. So we always build in some sort of buffer, but it may not always be as much as PM wants, or as little as I want. The most important aspect of our relationship is we work very well together, and if we disagree, it is very easy to move forward.
Day -1: Final walk-through and last Sub day. Walk-through went well, but there were two large items left in the house. Our Real Estate is agent is asking if they can come and take these two items. We had two Subs scheduled today. One showed, and one was a no-show. We have all estimates in, minus the one Sub who came today, but he is sending tonight. With the pending questions, we are going to decide on all Subs tomorrow morning. Tomorrow is closing day! With next week's posting, I will be posting several pictures. So stay tuned!!
Over the next month and a half (fingers crossed), I will be providing a weekly journal of our latest flip. I will be starting with the day our bid was accepted, until the day we list the property. I am keeping this journal for three reasons: 1) to hold myself accountable for the performance and timeline, 2) to be able to reflect back on the experiences after the house is completed, and 3) to share with you, the BP community. I know every flip is different, but I hope you are able to learn something helpful through these journal entries.
Day -17: Whoohoo! We heard our bid was accepted. Now the craziness begins, as we have approximately two weeks till closing. The very first thing I did was pick up the phone and call my business partner, who also happens to be the Project Manager (PM), and most importantly is the BEST Dad a girl can ask for (note: he's my Dad!). I let him know the good news, and follow with the need to set-up some calls to start outlining our plan for the next two weeks. He is available for our first call tomorrow, so until then.
Day -16: The excitement has worn off, and anxiety moved in its place. Both the Agreement of Sale and Seller's Disclosure are signed-off, so there is no turning back now. I speak with PM and we go over the work we want to do, and highlight the areas for which we need sub-contractors. We wrote in our agreement with the Seller, that we want two days where we can bring in sub-contractors. I thought this would be beneficial for two reasons: 1) we should know a more accurate rehab cost and timeline, as the estimates will come in prior to settlement, and 2) we will not waste time getting bids after settlement. I started putting together a document with the lists of subs from which we would be soliciting bids. I also researched some unknowns (township permit requirements, appliance pricing, and a few subs).
Day -15: Had a call with PM today. We started a list of questions we have for the homeowner, as well as, points to look at in the house when we go there for one of our days. We also made a list of Exterior and Interior work. This is a rough start, and will be finished before we close. We have two semi-major changes: 1) Kitchen, and 2) Master Bath. With the Kitchen we are refinishing the cabinets, moving the counter-top stove (which is currently on the small island), adding granite, replacing the microwave oven combo with a stainless steel, removing the island (as it is too close to the back cabinets and refrigerator) and making a breakfast bar, and potentially changing the backsplash (neither one of us can remember the current backsplash color). With the Master Bath, we are more uncertain of our changes. We are definitely replacing the countertop and fixtures of the vanity (we might change out the vanity all together, or alternatively, we might paint the vanity). We are adding seamless glass to the shower. The unknowns are the bathroom flooring, and tiling around the bathtub and shower. So basically, is it a full gut, or partial? Other more minor changes to the house include: minor exterior stucco work to the front of the house, minor roof repair, paint the entire interior, refinish all of the floors, replace the carpet in the basement, update some of the bathroom fixtures and lighting throughout the house. There are also a few fixes we are not sure if they will be needed: exterior landscape trimming, two concrete slabs near the pool have a few cracks and are sinking, MasterBedroom closets might need some updating, and a few doors might need to be replaced.
Day -14: Had a call with PM this morning. We went over what subs we spoke with and who we are waiting on call backs. We have set-up our first day of contractors to come in for bids, for this Saturday. Although we have used a majority of the subs before, for most jobs we are getting at least 2 bids, to make sure our pricing is still competitive. We also agreed that the Master Bathroom needs the money put into it. So we will find a way to get that handled. We are getting a wide range of quotes for the stucco on the front of the house. This may prove to be a new risk, so we need to look into this a bit further to solidify our plan. Another discussion point that came up during one of the sub calls, concerned the floor refinishing. On the last house we waited to do the floor refinish last. This is quite standard, but what we realized, is during the sanding process, a lot of dust covered the fresh wall paint. Thus, for this house we are most likely going to do the sanding and the first coat of the flooring first, and then after all other interior work is complete, we will come back and do the second coat of the flooring. Administratively, we also needed to pick a new title company. Too long of a story for this posting, but our last deal with our normal title company did not go well, so we now are on the hunt for a new one. Will be decided today.
Day -13: It wouldn't be a flip, without weather becoming a factor! The forecast for Saturday (the day all of our subs are coming for estimates) is calling for a major snow storm. Of course it is! We are going to make a decision on Friday on whether or not we will postpone it till Sunday. Also talked to several Stucco people today and it seems that the stucco issues might be resolved very easily. Possibly even PM can resolve them, but we will know better once we get a few more people's opinions. Not sure if I mentioned the house has a pool. So I got in touch with the company that completed all of the servicing for the owners, and confirmed the history of the pool. There was a comment about the heater being repaired last summer. It was also noted the equipment is the original equipment (2001). We will need to look at that a bit further, as well. Of course I touched base with PM multiple times during the day to provide these updates. He also provided a few updates concerning the subs he spoke with. I once took a seminar (back when I worked in Pharma) that said good project management is 80% communication; I definitely believe we are reaching that quota!
Day -12: Zeroing in on all of the subs that we are bringing in for estimates. It looks like the weather may still pose a problem; however, we are going to wait one more day to make the decision. With respect to the Title Company, they requested a Good Standing Certification and a Corporate Tax Lien Certification. I was a bit confused on the need for the first document, as when I researched it online it seemed to only be for finance purchases, and we are paying in cash. With the second document, I explained we are a newly formed LLC and this will be our first year filing taxes. The Title Company is going to look into both documents with their underwriters and get back to me. Hopefully that one simple phone call, and a quick google search, saved us $165! I will keep you posted:)
Day -11: UGH the weather!!!! We had to postpone our day of bids, as of course the FIRST snowstorm of the season is set to hit Friday night through Saturday. Therefore, we have postponed it to Sunday afternoon. One of our subs went out to the house today (thank you so much current home owner) as they were bidding on exterior concrete and were concerned about accessibility with the snow. Other than a few calls to reschedule all of the subs, not much more to report for today.
Day -10: PM and I failed to connect today. The time difference between us doesn't help (that is for a different posting). So I worked on a lot of administrative documents. If you and your team have yet to learn about Google Docs, I highly recommend you go to the site right now! It is absolutely amazing, as you can share documents with someone instantaneously. With respect to the documents I worked on today, I worked on our Master File on the house. What is our Master File on the house? It is an excel spreadsheet with multiple tabs, so all of the major information is in one place. The first tab has our number analysis. The second tab has the original estimate, when we walked through the house. The third tab has a listing of the Subs needed, multiple options for each job, points we need to look at when we go back for one of our two days, and schedule for when the Subs are coming out to give their bids. The fourth tab is a material list, specifying what is needed, who is responsible (us, or the Sub) and the cost (only tracking if we are providing the material). The fifth tab is one type of Timeline Manager, that looks like Microsoft Project (again if you don't know what Microsoft Project is, spend a few minutes watching youtube videos, and you will significantly increase your project management skills, and thus the project timeline). To be honest, I can't imagine managing a project without it! The sixth tab is another type of Timeline. It is not a project management tool, but more like a calendar by day of what “should” be happening. As an aside, I have witnessed people claiming they are managing a timeline for a project, just because they have a calendar of what “should” be happening that day. That is not project management. The reason why I say this is good Project Managers are able to not only see what is going on at that moment, but how it fits in the big picture (meaning how it impacts other things, good or bad). If you are looking at just a daily/weekly view of a project, you will fail to see the full impact a half-delay on one simple task could have on the entire project. Enough of that rant, and back to discussing the other documents I worked on today. I also customized the following documents: Independent Contractor Agreement, Lien Waiver, and I created a New Sub Checklist document. Ok this post is getting a little lengthy, for what I initially intended, so that is all for now!
Day -9: Good thing we rescheduled the Subs, as the storm hit hard! PM and I don't even know if tomorrow is going to work! We only spoke briefly today to confirm that we might need to reschedule Sunday as well. Decision will be made Sunday morning. We also spoke about the color tone of the house. On our last house, we did the trendy light grey walls, white kitchen cabinets, grey granite, blah, blah, HGTV look, blah, blah. However, for this type of house, both PM and I believe the purchaser(s) will be of a different demographic. We believe a tan/brown clean-look combination will not only compliment the exterior, but will also meet buyers' expectations.
Day -8: We spoke today and LM made the call to reschedule for Wednesday. Now time to hit the phones, and let everyone know.
We recently completed our first flip. It was an incredible experience, and one we cannot wait to do again. Before we do, we wanted to share our five biggest lessons learned.
1. “The 5 P's”: Proper Planning Prevents Poor Performance
Mistake: Our first mistake was thinking the work only started when we actually bought the property and had keys in hand. While we had a pretty good idea of what work was needed when we made the offer, we only had a rough cost and timeline estimate. Of course this resulted in the project going over budget and taking twice as long to complete. As this was our first flip, we sought three estimates for each job. Between obtaining three estimates per job, meeting with the subs to do the actual estimates, and waiting for their written estimates, this delayed the overall flip by three weeks. We also got estimates as needed, instead of getting them all upfront. If we knew all of the pricing upfront, we would have changed some of the decisions to save costs, and apply those funds where it was needed most. Lastly, like most rehabs we needed permits for the renovation. One permit was for an addition (We know you are saying, “Addition?!?! Are they crazy??? It's their first flip!!!!” Trust us, we know now; and that will definitely be the subject of a future posting). We did not get the architect out until after we had the property in our possession, and based on his schedule, sickness and holidays, the project was delayed for over two months!!
Lesson Learned: Before closing on a property, you should have a close to final version of the Scope of Work (SoW). Knowing your SoW will not only assist in your assessment of your maximum purchase price, but it will also serve as a roadmap to the renovation.
Corrective Action: For our next project, we will utilize the cost figures from our first project as benchmarks in creating a final draft SoW prior to making an offer on a property. (Note: I know sometimes this is not possible due to timing of the sale of the property, as well as other outside factors. In those cases, we will do our best estimate and allow a 30% rehab cushion for unknowns). When our offer is accepted, we will bring in all of the subs prior to closing on the house. We will still include a 15-20% buffer, depending on the scope of the job, for any unforeseen circumstances that arise. Then we will line-up all of the subs. Thus, our SoW will drastically reduce the possibility for poor performance to occur!
2. & 3. Having a great onsite Manager, and great Sub-Contractors
Mistake: Your first question might be why we grouped 2&3 together? To be honest, if we wrote an article prior to flipping this house, we would have separated these topics, but now we realize they are intertwined. The initial mistake we made was thinking having a great onsite Manager would negate the need for perfect subs. Often, we would settle for what we consider “just good” and unfortunately in one situation, due to time constraint, we settled on one “bad” sub. This situation not only created more stress for the onsite Manager, but affected other subs, due to delays and the overall morale on the job site. It also required the Manager to micromanage this sub, taking the Manager away from all of his other priorities.
Lesson Learned: It is vital to hire great subs, and not rely solely on the quality of the Project Manager. While the Project Manager is still responsible for the oversight of the subs, having great subs allows the Project Manager to still focus on the overall project.
Corrective Action: While we are very fortunate to have a great onsite Manager, we will not settle for “just good”, nor “bad” subs (even in times of great need). For our next project we will be more diligent in hiring subs (ie. Arriving on time, or early to provide an estimate, providing a written estimate in the requested time, and confirming references to verify both quality and timeliness). By hiring only “great” subs, the Manager will be able to focus on the overall project. Helen Keller said it best, “The world is moved not only by the mighty shoves of heroes, but also by the aggregate of the tiny pushes of each honest worker”.
4. “Expect the best. Prepare for the worst. Capitalize on what comes” -Zig Ziglar
Mistake: As soon as we identified the SoW, we had several gaps in knowledge on both the timeline and the budget of specific tasks. For example, we had a rough idea of what the metal roof repairs would cost, based on material and general roofing labour fees. However, we did not realize how difficult it would be to find a roofer who works on metal roofs in our area. We also did not factor in the some overall administrative/operational tasks. For example, when we hired subs we did not obtain their Tax ID Numbers. We have now wasted several hours obtaining this information. We also did not factor the maintenance of the house while it was on the market (specifically lawn care).
Lesson Learned: Take the time to methodically walk through every step of the process when considering a potential property. While it is important to capture budget and timeline information, it is equally important to recognize the administrative aspects in each step.
Corrective Action: For every item where we are not 100% certain, we will educateourselves until we are an expert on that topic. To insure we capture all administrative tasks, our SoW will now include an Administrative Section. We will also streamline as many tasks as possible. Some of these tasks include a standard contract for signing on subs, including the Tax ID form, payment schedule, SoW, and contractual requirements & expectations.
5. Sticking to the timeline & budget
Mistake: Even though our SoW was completed, we did not map out the work on a calendar. Having a great Manager, eliminated problems with order of tasks; however, we did not know the actual timing, and would call subs two weeks prior to start time. With respect to the budget, we thought it would save us money by purchasing the materials ourselves. Although it may have saved some money, there were often times where we needed to go and get more materials which impacted the budget. This also made it more difficult to track spending.
Lesson Learned: There are two lessons learned here. 1) A SoW needs to be translated on a calendar to define start and end dates for each job. 2) If you do not have concrete timelines, your subs will not take you seriously. They will assume an approximate start date allows them flexibility too. The lesson learned with the budget is we should analyze the cost saved by purchasing the materials ourselves to determine whether or not it is worth it.
Corrective Action: In regards to the budget, we will choose the method that yields the larger savings when purchasing materials. With respect to the timelines, after completing our SoW we will translate the tasks to a calendar to provide start and end dates for each job. We will share this calendar with all subs, and keep to this schedule as best as possible. If there are any adjustments, we will make the adjustments, and distribute an updated calendar to the subs. This will not only serve as a roadmap to us, but will also illustrate to the subs our commitment to staying on time. In the words of the late Yogi Berra, “If you don't know where you are going, you might wind up someplace else”.
It is unrealistic to say we only learned five lessons in our first flip...we probably learned over a hundred. Regardless of how many flips we do, we know we will always learn something. It is important to take a moment and do a debrief. Reflecting on your experience allows you the time, that you most likely did not have in the moment, to think not only of alternative solutions, but also actions to prevent you from getting in that same situation again.