Second Flip Journal Part IV

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.