All Forum Posts by: Jason Fant

Hi Andrew, welcome to BP. I'm in the Raleigh area also. There's a great investors group in the area called Triangle Real Estate Investors Association. I don't know if I'm allowed to post links, but if you google TREIA you'll find them. If you're interested, they are having their monthly meeting tomorrow at 6:30 at the Hilton N. Raleigh. You can come as a visitor to check it out. There are a TON of great folks there. I'd be happy to meet you out there.

You'll find that BP is also a HUGE source of info. It's a great community, I hope you jump right in with questions and participate. If I can be of any assistance, let me know.

-- Jason

Originally posted by Louise Jackson-Marquez:

I don't want anyone to know my sources for materials because it is how I always win the bid... If I told every investor where to get the materials then why would they need me? They could just hire cheap labor and totally cut me out.

Louise, you totally selling yourself short when it comes to the value of a GC. If your only value as a GC is providing cheap materials, then you aren't doing very much as a GC. Based on your answers below, I don't think that's the case. While I wouldn't encourage you to give up your supplier resources, you have much more value to your customers than this, so make sure you give yourself credit where it's due.

Originally posted by Louise Jackson-Marquez:

We charge our investors 50% down, signing a waiver of ML, and 25% at the half mark of completion and the remainder at completion. It works well for us and we have their property back on the market in less than 3 weeks...

Wow! 50% deposit? You would never work on one of my jobs, and I imagine that most experienced investors on this site would agree with that sentiment. Even if I trusted you completely, I've got no guarantee that one of your other customers isn't going to stiff you and put you in a financial bind, and with you having half of the money for the job before you even start, that leaves me with very little leverage with which to convince you to finish my job when you start having to "prioritize" work and robbing Peter to pay Paul. I'm not saying that you would do that, but I don't trust any contractor that much (and I'm a former contractor). There's just way too much that could go wrong. In many states that's even illegal to take that large of a deposit and is grounds for losing your contractor's license.

Note to newbie rehabbers - DO NOT EVER GIVE A CONTRACTOR THAT MUCH OF A DEPOSIT

Originally posted by Louise Jackson-Marquez:

Most of my investors trust me completely to design the rehab, as well since I have always went with the thought that if I treat them right and do an outstanding job at a fair price, I will have repeat business and volume is what counts in construction. Plus, I know what sells... 75% of my projects go under contract within 30 days, the other 25% within 70 days, I have never had any go for more than 90. Numbers don't lie and if it ain't broke then don't fix it.

It sounds like to do a great service for your customers, and if your assertions are correct, I'm sure that you'll be hugely successful with a very loyal base of clients. That being said, the argument you are making here certainly describes why it's beneficial for you, the GC, to not have your customers buy their own materials, but it does not address what benefits the investor receives in that arrangement. You are providing discounted materials (and I question your ability to get a 50% discount unless you are buying them direct from the manufacturers in HUGE volumes), but the investor is taking on the risk that you won't pay your suppliers for any unforeseen reason, and that your suppliers will have a viable claim against their property even though they've already paid you for the materials.

I stand by my point that investors should always buy their own building materials. If you wouldn't do business with me for that reason, than there are plenty of other good GC's that will, so I wouldn't expose myself to the risk.

Why not just leave the door in place as a service door? I've got one in my garage. I'll admit that I've never done a block building so I can't give specific advice on how to properly fill the hole, but my advice about calling for the courtesy inspection still stands. If you get the inspector to buy off on your approach you'll likely be able to get the plans requirement waived. You'll still need a valid plan to fix it, you'll just save the engineer and drafting expense.

Good news about the assesor. As far as the insurance is concerned, you shouldn't have an issue. That's why BR policies are si expensive because the cover under contruction buildings. You don't want to hide anything from them as it will give them an out God forbid you need to make a claim.

IKEA cabinets have a very slick, European look to them. Make sure that will match the character of the rest of the house. Remember that kitchens and baths sell houses, but they have to fit into the character. Otherwise they'll look out of place and the mojo for the whole house will suffer from a Frankenstein effect and feel disjointed overall. If I were doing an urban/industrial flat, I would definitely use them. If I were working in a craftsman cottage, not so much.

Ditch the pool. The only people that see a pool as a feature are people looking for a house with a pool, and they are few. Everyone has visions of pool maintenance horror stories they've heard over the years.

I think the floor question has been covered so I'll leave that one alone.

As far as exterior color, based on the stone I would go with a darker taupe color with black trim and gutters. It would look good with the grey roof as well. Leave the garage door off white though, that much black would really weigh heavy on the front of that house.

Hi! As far as the engineer goes, I would contact a local draftsman and have them do the drawings. Most have relationships with an engineer that can review and stamp the drawings and you will save a little money. I did this with a foundation for a modular home that I built a couple of years back and I think the whole thing cost me around $800 in Maryland. It would have been easily twice that if I had the engineer do the whole job. I can't imagine it would near that much for simply replacing a door.

What you will likely end up with is an as built detail drawing of the door and framing and the framing detail for replacing the hole. I can't imagine why they are requiring drawings to remove a door, but each municipality is different.

Another route you might take is to have an inspector come out for a courtesy inspection and look at the door and explain to him how you are going to frame to remove the door (make sure you are providing for a header in the framing). He'll likely offer you his opinion; agree with whatever he tells you. If he's ok with it, see if the permits board will waive the plans requirement. Most of the time, the inspectors will work with you, especially since you're trying to do the right thing and bring the structure back up to code. I was able to get permits to rebuild a 2 story addition once using this process in Baltimore county, I imagine you'll probably have success with it for just framing in a door.

As far as the assessors are concerned, I don't imagine you'll have any problem, but then again stranger things have happened so I wouldn't dare say for sure that it will be ok.

How much is the job? If it's more than just a minimal job, then I'd move on to the next contractor. For an example of why, just watch any episode of Judge Judy or People's Court :)

Totally agree with P NW. Get an engineer. Trust me, lot drainage is not a simple science as there are so many factors to consider, plus it is of critical importance to the foundation of your garage and home.

Engineers aren't cheap, so if you want to save some money you might think about a landscaper. However, some landscapers are good with drainage, but most just think they are so if you decide to go with a landscaper, check their drainage references throughly. In any event doing it wrong can lead to expensive consequences, so definitely consult a professional.

My advice would be to hire the engineer and if you can handle implementing their recommendations, then do it, but it's best to let a professional prescribe the solution.

The only problem I have with the parging over plywood is unless you are building a frame behind the plywood it will be way too flexible and cause the parging to crack. If you want the look of a parged foundation wall, I'd just go the masonry route.

Another option, albeit a totally different look, is PVC lattice. You can get it in a really tight weave and it would be much less expensive than masonry. Then just put some shrubs around the foundation and be done with it. I have done this on several pier/beam additions I've done and it always looks nice.

So here's a couple of points in support of buying your own materials.

First, I agree with Dennis around HVAC equipment (and other specialized equipment). You should purchase these through your HVAC contractor. Why? Because this is different from building materials in that the HVAC contractor is going to be an authorized dealer for that equipment and not simply a 3rd party going to a materials supplier for merchandise. Why is that distinction important? For the reasons that Dennis stated concerning warranties as well as it eliminates the risk I'm about to describe in my second point. Bottom line, if your contractor is an authorized dealer buy through them. If they are not, you might as well buy the equipment yourself, but I'd likely look for another sub at that point.

My second point is in support of the original post in that you ABSOLUTELY should buy your own materials. To illustrate my reason why this is important I'll tell a story from my early days of rehabbing.

I hired a siding contractor to do the vinyl siding on a 130 year old home I was rehabbing. I had used this contractor twice before with great success and he came recommended by my step-father who had used him for years. Like before, he did a great job and I paid him in full. Got a ML waiver and was good to go. Or so I thought. 90 days later I got a certified letter from ABC Supply. They were placing a lien on my property for an unpaid materials bill. What happened? I paid the contractor and got a ML waiver, how could his supplier come after me? Well as it turns out my sub had gotten in over his head on a large job where the client went bankrupt. He couldn't cash flow his business so he stopped paying his trade accounts and guess what, he just disappeared, Literally. Packed up, left town, whatever, he was gone. Meanwhile ABC wanted their money and we were just finishing up the house, so I needed a clear title. My attorney advised us to pay ABC and try to recover from the sub since we had a lien waiver. So that's what we did. I ended up paying the $4500 materials bill twice, and wasn't able to locate the sub to serve suit. Even if I had found him, my chance of collecting was pretty much zero since he obviously was insolvent and judgement proof.

My point? When you allow you contractors to purchase the materials for you, you are putting a lot of faith in them. While I agree your contractors are trusted members of your team, you unnecessarily expose yourself to risk when you put that much trust in them.

Regarding the point about contractors buying cheaper through Stock and supply houses rather than you going to home depot, that's a simple problem to solve. As a rehabber I have trade accounts with Stock, Sherwin Williams, HD Supply, Ferguson, ABC and many other supply houses. As you do more business with them you will get the same discounts. I have net-30 terms with all my trade accounts, so I can float the materials just like my contractors can, except I can control that they actually get paid. There's no mystery to doing business with trade suppliers, you just go there and set up your account. Just because you're not a GC doesn't mean you are relegated to paying DIY'er materials prices from HD and Lowes. If you are rehabbing houses, you are in the trade.

Bottom line is that I will never let a contractor provide building materials again with the exception of HVAC and a couple of others that are direct materials dealers. Mine was an example of a trusted contractor, not just some guy from craigslist. Bad things happen to even the best people sometimes. Why expose yourself to the risk.