4 Painful (But Invaluable) Lessons Learned From a Rehab Gone Wrong

Turnkey properties are not about just barely rehabbing and leaving the rest of 1972 in the house. I mean, some people are into that. But not me.

To me, the turnkey property is about leaving it in the best possible shape for both the tenant and for the owner. The goal is to minimize capital expenditures, find the best materials that will last the longest, and tenant-proof the heck out of everything.

A few years ago, our team was in the process of dozens of rehab projects and preparing for dozens more within a single month. That kind of volume brings incredible growth for a company. But there is a need for the staff to help work through the process for those properties and for depth and ruthless implementation of systems. There is also the opportunity to miss or fail within a process or a project. And that year, one week we missed the mark.

Understand Your Process (and Where It Went Wrong)

It was in the form of a pretty gnarly inspection report back on a property for a first-time client. She wasn’t pleased (understatement of the year), the inspector’s language did not help, and we were in a bad position to explain how we screwed up doing what we say we do a really great job at. #notawesome

One of the things we do really well as a company is define the type of renovation that will happen, plan the scope of work, share it with the client, and have a clear picture of what is happening with the rehab. We then communicate that with the client. We want to have a product that we are proud of, that the client is happy with, and that a tenant wants to move into. Usually, we hit that high bar we set for ourselves.

In this particular case, however, we had the scope of work together, but we didn’t execute the plan. Not sticking with our core goal of having this house awesome BEFORE the inspector was in it left us in a bad position. We had to deal with the client and solve a problem that could have been dealt with prior to the report. It left us with many subsequent unpleasant conversations.

Don’t Rush

Missing the mark sucks, especially when it’s your fault.

When I jumped on a call with our executive team to discuss, we realized quickly that we had set ourselves up to fail on this one. Our timelines were too aggressive. We hadn’t done our usual double and triple checks on site, as we were trying to make the deadline we had set for closing.

It was a stupid idea.

In this case, we went back over the project as a team and reviewed our process. We looked at the timelines and realized they were unrealistic. We needed to build in a little more time and a better process for internal review on every project before we had the inspector and appraiser in the property.

Make It Right

We have gotten a lot of business from clients who have come over from other turnkey providers. Our defining factors as a company have been our extremely high level of customer service, ability to deliver an exceptionally good product, and awesome in-house property management.

That’s all great until something isn’t awesome and you are the one who has to make it right.

It was important to me that we didn’t spend time as a team or individuals blaming anyone or anything. Our problem and our solution were very clear to all of us. There were issues, and they would need to be addressed effectively and timely. Everything would be repaired or fixed per the inspection report. No arguing about it. There was to be no asking for the client to help with this cost or that.

We took the report, we owned our mistakes, and we went quickly into action to solve the problem and fix it.

Learn From Your Mistakes

Sometimes learning is fun. Sometimes learning is hard. Sometimes learning is painful.

In this case, it was definitely of the latter variety. But that’s OK. Out of this experience, we made some immediate but calculated changes. We will market our properties later in the process after acquisition and well into the renovation. This will shorten the overall selling period for the clients. Also, we will have a better understanding of when the project will actually be finished, and we won’t feel rushed to get to the finish line.

We will also start sending our inspector out after the rehab is complete for an internal check first to clear issues prior to the client’s inspection and appraisal. By doing this, we hope to virtually eliminate any possibility for this unpleasant experience (for us or the client) to happen again.

Why This Story Is Worth Telling

I wanted to share this story for a few reasons. First, we aren’t perfect. It’s painful to imagine not being 100 percent awesome and perfect all the time. And this moment was no exception. But I wanted to make sure we are clear—things happen in EVERY rehab project that are unexpected. You should expect the unexpected.

That’s why instead of making excuses for things, I encourage you to name them, own them, solve them, and then find bigger, badder, and harder problems. It’s my goal on every house from here on out to not have more than a few inspection items we have to fix.

Will that be true? I’m sure some properties will have more, and some will have less. But we have now had an opportunity to learn and grow. We were able to show our client that we are committed to having the most awesome properties. We took the opportunity to give them the best experience we could from the moment we realized our mistakes.

Always, always do the right thing. In the end, you have nothing but your reputation—and in this case, an awesome turnkey house that needed more than a little help to get to the finish line.

When’s the last time you made avoidable mistakes in your investing business? What did you learn, and how did you make it right?

I want to hear your stories! Be sure to leave a comment below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.