All Forum Posts by: Liam Goble

I'm working a flip right now and plan to utilize some of the rehab stores locally: ReStore (Habitat for Humanity), G&R (a local demolition company). I also plan to use eBay and some of the consignment auctions to see if I can get better deals than HomeDepot/Lowes.

You may try to see if you can sign up with some of the local contractor supply houses that specialize in certain trades (electrical, HVAC, plumbing, etc). They can usually beat the box stores by 10-45% depending on the item.

Update on the flip after the end of the third full week:

As my most recent update mentioned, I had a 'small' problem with my contractor: he removed all the drywall from the bathroom, rather than only the portion that needed to be removed.

(Note to self: Should have listened to @J Scott and fired the contractor at that point)

However, I didn't. I figured the contractor simply needed some more direction with more defined parameters from which to work.

I was wrong.

On Monday of this week, I had a discussion with the contractor regarding the bathroom on the 2nd floor. My contractor has wanted to almost gut the entire room; I only wanted to remove and replace most of the major components. Close to the end of our conversation, I said "Do not touch the plumbing or flooring until we've reviewed everything with my partner. We will talk Tuesday evening about this issue. Do not touch the plumbing." The contractor acknowledged this request.

Tuesday morning, I received a phone call from my contractor. He had a few questions regarding some of the other work occurring this week. At some point in the conversation, he let slip "well, you've got all the flexibility you want in that bathroom." To which I replied: "John*, I said we're not touching that plumbing."

He replied "Well, I figured it would be easier to replace it with plastic and people would rather plastic than cast. It only took me four or five hours yesterday [Monday] to remove the plumbing and flooring."

Me: "John, you're kidding right?"

John: "No, it was relatively easy, and its only going to take like two or three hours to put it all back and about $100 in materials. It'll add like $3,000 to the value of the house."

Me: "No, it won't add anything to the value of the house because no one really cares what is under the floor. It will subtract from this flip's profitability. Don't do anything else to the 2nd floor, finish the framing on the first floor and don't plan on any more days this week until I get a chance to review the work."

So I was hemming and hawing about what I should do, and finally decided to fire the contractor and not pay him for the removal work and reduce his final check by the estimated amount of the repairs (time and materials). This morning, I met with him to square up our accounts (I hadn't seen the bathroom yet). Strangely enough, John apologized for the 'miscommunication' regarding the bathroom. Fair enough, but still not good enough to stay on the job. John is now gone from the job.

After leaving my meeting with John, I headed up to assess the damage with my partner and formulate a new plan forward. When I got to the house, my partner asked me "How much did you ask John to remove?" I said "just the tile and backer board, why?"

My partner replied: "Well, the bathroom is gone." I didn't believe my partner.

The bathroom is really gone:

My brother is a magician and I don't think he could have done a better job at making something disappear.

My partner and I are both contractors, so we were able to quickly formulate a new plan. A little sweat equity on our parts will right this ship, but jeeze-oh-man, this is not how I wanted to start this flip. I figured, better to quickly cut ties than let it drag on.

*not his real name

@Tim G. @Jimmy Hong

I agree with @Josh Justiniano , working capital is key. I used all cash on my very first deal, and had to let many good deals pass me by while I worked to increase my available cash for purchase.

I have a bad tenant, but that's a story for another time. My story is the contractor on my first flip (started only three weeks ago).

I had some hesitation using my contractor, but wanted to give him a shot for a few reasons. I knew the most difficult part of working with him was going to be management of his time/energy. Because of this, I negotiated a great rate from him, with specific bonuses in place if he hit certain milestones. The rate we negotiated was $15/hr with a $1,200 bonus for completion by contractors-anticipated-completion-plus-2-weeks. In addition, if we sold the house for more than a certain price, he would receive an additional $800.

My first clue was about two days after we discussed the pay situation, and he called to say "Well, since it'll be a $2,000 bonus anyway, why don't you just give it to me now?" My reply: a flat "No".

Warning number two came when the contractor called me up while he was completing the demolition and said "you know, I've been thinking about that upstairs hallway. How about we put in a nice hanging light to augment..." the rest of what he said was lost on me. I told him the thinking had been done by my partner and I, I just needed him to execute the plan.

The final strike came this week. On Monday, we were discussing the bathroom layout and my contractor again reiterated his stance that we need to move waste plumbing around in the bathroom. I said "[Contractor], do not touch the plumbing until I talk with my partner and we can discuss on site on Tuesday evening." I thought I was fairly explicit in my request.

Tuesday morning, I called to check in with the contractor and determine how far he got with some of the framing that needed to happen. He replied "Well, I didn't get around to the framing, but I spent about four or five hours yesterday tearing out all the plumbing in the bathroom."

[Me] "You're kidding, right?"

[Contractor] "No man, it's going to be easy and cheap to put it all back together. Don't worry, it's going to be like $100 or so in labor and another $130-$150 for the materials."

At this point, the room was almost spinning around me. I asked if he knew what I had said on Monday. "Yes, yes, but I just thought that it would be easy and cheap."

Needless to say, I asked that he not return to the site this week, and today, he's getting paid for the proper work he completed, less the time/cost to repair the plumbing that he screwed up (plus getting fired from the job).

Nathan, welcome to Bigger Pockets. I'm in State College, but have been interested in the Pgh market, just unsure where to invest. Are you in the gas field?

@Bernie Huckestein I invest 25-30 minutes away from my home and manage my own properties. I try to keep a few contractors on call to handle the disasters, but the non-disasters/major improvements, I generally handle myself (I'm also a contractor).

I've been interested in investing in the Portland area for a few years, but haven't taken the step as I would need some experienced PM group to handle my investments. Why do you say it would be cost prohibitive for someone to manage your properties? I haven't done the research in Portland, but in most other areas I have considered buying, the PM fee is usually about 10% of monthly gross.

I don't know all of the answers to the craziness of insurance, but I believe I was in a similar situation when I was driving pizzas as a young (foolhardy) guy. I didn't get any additional insurance for my car, so if I was in a wreck, I would have to pitch the pizzas out of the car so my driving was 'personal', rather than for work. I believe the same holds for when I'm driving to and from my rentals, but I'm not positive.

The situation you describe is why contractors are required to carry Worker's Comp. If an employee is injured on the job they are covered by WC insurance, rather than their personal health care.

Welcome to BP. I'm a relatively new investor, so it's really nice to have additional REI veterans on BP. Please keep people posted with your triumphs as well as setbacks so we can all learn from each other.

I actually purchased units of an LP in a tax-deferred account. Even though you can shelter some income from the purchase of the units (not shares) of an LP, you would be taxed in every state the LP operates in, but only if you earn more than $1,000/year from the LP units. For me, it's not a problem. I only earn about $200/year from my investment, so I'm well under the threshold for reporting. However, at an initial $40k investment, you may very well be over the reporting threshold and you may have a very complex tax 'shelter' to deal with.

Looks reasonable. I assume it doesn't need much work for the $20k, or you're planning to do most of it yourself? That is the only number that may be questionable or need some back up from a professional GC.