Mistakes I Made In Construction This Year

[Ryland Taniguchi]

A little bit my background. I run 3 hedge funds currently and have worked 3 years as a framer and finish carpenter. I have done more than 300 construction projects and development projects. I also studied for my certificate in Construction Management at the University Of Washington. Nevertheless, I made so many mistakes in construction this year that cost me over $400,0000.

1) Mistake #1. Don't be your own GC on rehabs. I have now been a GC four times over the last 16-years. What I learned is that the cost of risk management is the same as the cost of direct labor and materials . The risks of being a GC include aesbestos fines, lead based paint fines, OSHA safety compliance, safety training costs, employee issues and complaints, HR risks, labor and industries risks, worker injury, litigation costs, construct defect management costs, quality warranties, settlement fees, construction delay penalties, work redos, workers milking the clock, inadequate project management and inadequate construction management 

2) Mistake #2. Know construction contract law inside and out. In Washington state, the GC has no rights pretty much to go after subcontractors. The GC cannot lien a property without the proper disclosures in the contract. A subcontractor and any employee in my state can lien the property easily. Have a construction lawyer prepare all of your contracts.

3) Mistake #3. Don't get the wrong supervisor. Just because someone knows construction very well, does not make them a good construction supervisor. The mistakes is costly and compounds. You need a supervisor that knows how to motivate construction workers. They set the pace, use vacations as worker incentives, and use job location placements as incentives.

4) Mistake #4. Better to hire a GC and get solid construction contracts to keep them accountable. Better than being your own GC and subcontracting out the work. 

5) Mistake #5. In the long run, you cannot do rehabs cheaper than the market averages per square foot. You may do it cheaper in the short run but just like driving without auto insurance, it works until you get into a car crash. After the car crash, it will cost you more to try to do things cheaper.

6) Mistake #6. Don't hire your own labor force. Maybe it's my state but more workers opens the can of worms for more regulation.

7) Mistake #7. You build your construction crews in the winter. During the summer, it is impossible in a hot market to build a crew in a hot construction market.

8) Mistake #8. Don't be a GC for other investors. It is suicidal because they most investors get crappy deals and underestimate the construction costs by 50%. Then they will blame the GC.