All Forum Posts by: Lee Huffman

For many years, I prepared my own tax returns, but as life got busier at work, with a young family, and buying more properties, I turned to an old friend (CPA) to do our taxes.  He did a decent job, but I don't feel that we receive the guidance and strategic help that we need as we expand our flipping and rental property portfolio.

We have an interview coming up with Tom Wheelhouse's firm ProVision (Rich Dad, Poor Dad recommended)(and am looking for a couple other firms to interview) and was wondering what questions you would ask to help make a decision if a firm is the right fit for your real estate business?

Thanks for your responses!

Lee

Good point @Account Closed .  I'm just going to pay him, then work with an attorney to see if it is worthwhile to pursue after the fact.  I just want the house done and listed to get my equity out.  Dealing with this can wait... I have enough written evidence between our conversations that should put things in my favor.  However, depending on how the deal works out in the end, I'll probably just drop it and take it as a lesson learned.  The time, effort, and drama involved wouldn't be worth it... and only the attorney's would win.

@Matthew Paul thanks for the perspective from "the other side".  I didn't choose which items to delete from the original estimate.  Essentially, when additional items started popping up (ie: sewer, kitchen subfloor), I asked the contractor if there were some adjustments we could do to the original estimate so we could stay closer to the original estimate.  He suggested laminate vs. tile, stone vs. glass backsplash, etc.

@Cole Walker we didn't get a formal inspection of the property.  Some items, of course, you'll never realize, and for those I have taken responsibility and am paying for.  But others are fairly basic and should have been caught.  For example, looking at the electrical panel and noting that it needed to be upgraded to 200amp.  Even with that, I begrudgingly signed off on as an add-on that I am paying for.

The big issue is that, for the itemized list of repairs we agreed to, the contractor underbid on those items.  The additional work is not part of the issue.

I'm still waiting for his reply to my email on Sunday night... I'm giving him time to think it over and reach out to his subs.  Hoping to talk with him later today.

Thanks @Account Closed .  While he and I were talking, I told him that I relied upon him that his bid for the work listed was the correct number.  I said that I don't go to HD, Lowe's, or contractor's warehouses to verify his numbers... and if he had overbid and there was more profit, he wouldn't have refunded money because I agreed to pay $26k for the work to be done.  This was not his first job... and my realtor says that he has done many rehabs with him in the past and this the first time there has been this kind of issue.

The 2nd estimate (from the other contractor we didn't pick) was only $3k higher for a very similar list of items.

@Walt Payne thanks for the suggested language for the next deal.

Overall, I'm not disputing the additional work performed that we didn't anticipate (upgraded electrical panel, replace sewer line, replace copper pipe under house, replace rotted kitchen sub-floor) and that amount is in addition to the contract amount.

We went from contract at $26k, minus $6k adjustments for downgrades/work not performed to stay closer to budget, plus $11k additional work = $31k.  He is now saying that the job should be $40k... and the difference is that he said he underbid by $9k, which I don't buy because the other guy bid $28k (the other contractor did our other rehab house without any hitches).

Thank you all for the very valuable feedback and suggestions!!!  I'm certainly trying to avoid a pissing match or turning it into a bad situation, especially since there's still work to be done to get the house finished.

I live in California, and the project is in North Carolina, where I have some family.  So, I rely on getting multiple bids to ensure that nobody is underbidding by a wide margin.  His bid was $26k and the other guy's bid was $28k --- so not a big swing.  We didn't choose the other guy because he was already selected on our first project, so we thought we'd diversify and try out 2 contractors.  Both guys have done several jobs with our realtor, so everyone's surprised that it has come to this because it is out-of-character.

I've asked him to go back through his numbers and to talk to his subs to see if everyone takes a bit of a haircut, we can all get out of this without any one person taking the brunt of the goof-up.

I'm hoping he is successful in cramming down his subs without cutting corners.  I'll be sure to update this post to share the follow-up!

Thanks again everyone!!!

Lee

PS:  If we received bids in the $35k range, we wouldn't have pursued the property and moved on to the next opportunity.

We are doing our first 2 flips simultaneously.  The 1st was pretty much as expected.  The 2nd was the typical nightmare that you hear about so often from other investors.

Our original costs were $26k, which was a signed contract (with line items of work to be performed without dollar figures attached) that he prepared.  Then we agreed to not do $6k worth of upgrades to offset an additional $11k in unexpected costs, like upgrading electrical and replacing the sewage lines.

I have been getting messages from my contractor about how much he has spent and how much he expects to spend in the next week, but these numbers don't jive with what we expected.

Finally, I asked him to break down for me 1) original estimate/contract 2) minus work removed from contract, 3) plus additional unexpected work, 4) to arrive at a total amount.

We started at $26k minus $6k plus $11k to equal $31k.  So far, I have paid him a little of $26k, leaving an expected balance of $5k.

Now, he's talking about the job's expected cost to be $40k.  I had a LONG heart-to-heart with him today after sending him an email questioning his figures yesterday.

Ultimately, he admitted that he underbid the project... and rather than the $26k that he estimated, he now realizes that he should have submitted a bid for approx $35k.  $35k - $6k + $11k = $40k.

My question is... what the heck should I do with this guy?  I told him that it seems like he is asking me to be 100% responsible for his underbidding... and that I'm not sure I should be held responsible for his underbidding the project, especially when another contractor bid approx the same amount.  Playing Devil's Advocate, if the project only cost $20k, rather than the agreed upon $26k, he wouldn't have refunded me the extra $6k profit.

Please help!!!  What would you do in this situation, especially when there's another week's worth of work to be completed.  Thanks for your input!

I would appreciate input from BP readers, especially... 

@David L. @Brandon Turner @Joshua Dorkin @Dawn Brenengen @Mike Ritter @Jacob A. @Jon Arthur @Account Closed 

Thanks @Walt Payne for the great suggestion on the book.  I'm looking forward to learning so much from interacting with everyone and everything that has been posted before.  So glad I was introduced to this site.

Thanks @Dmitriy Fomichenko , it's nice to meet someone who lives in my backyard.

Wow, it's not every day that I meet people who even know where Fayetteville is @Dawn Brenengen @Jon Arthur and @Mike Ritter .  My business partner is @David L. - he's like a brother from another mother and my Dad treated him a like son.

We'll have to coordinate and do a little meetup next time I visit with my wife and son and/or David.

Yes, my brother still lives in the area after getting out of the 82nd Airborne and settling down.  He works near Raleigh on a flight medic team, but is pretty available should I need him to do anything for me.  My property managers are pretty great too, so I'm sure they would check in for me also.

We're on track to get both houses listed this month, so that's pretty exciting... although we wish it would have been earlier in the Summer.  Live and learn.

Talk to you soon!