The scope of work is to confirm and cross-reference your estimate. Managing your own scopes of work allows you to have a very consistent approach while at the same time ensuring that contractors are being reasonable.
The scope of work is to confirm and cross reference your estimate. Managing your own scopes of work allows you to have a very consistent approach while at the same time ensuring that contractors are being reasonable.
Preparing a Scope of Work:
1:30: I've never heard an investor tell me that you know, I just keep overestimating my rehabs.
2:18: Not every property put an offer on do you want to put together an entire detailed scope of work, it sometimes takes too much time. Ryan is sending offers to 150-200 sellers per month, so a 300 line item scope of work doesn’t make sense every time.
5:21: Always be detailed with your scopes so you prevent an opportunity for a contractor to cheat you. Ryan had a fire at one property and a contractor came back with a $90,000 bid. That was literally one line item that said repair house.
7:23: Andrew breaks it down by multiple categories, Pre-Construction, Construction, By Room, Landscaping, Interior and Exterior. The last two would be a Vendor-List (any work being completed outside of the main contractor) and then a final, punch out list of items needing to be done.
9:27: Once owned, the 300 line item sheet as mentioned previously gets loaded into a software called Smartsheet and is then sent out for bids. This systematize your scope process and allows you to control the cost as well as the outcome.
13:11: if you haven't used someone before you should be getting more than one bid.
Employee VS Hired Contractor:
14:51: With the contractor, you know what you're going to pay. With your in-house staff, your hope is that you get them trained up and as you scale, the same decisions are being made over and over.
16:33: Regardless of employee/vs contractor, know what these constructions cost you daily so you maintain efficiency.
Scopes of Work Advice:
19:25: BE DETAILED. Don’t forget the sewer. Get it scoped for $150 rather than not and be on the hook for a $15,000 repair.
22:02: when you're dealing with contractors, you get two out of three speed, cost or quality. Pick two of those and you’ll identify which contractor fits for your business. Good project management, thereafter, allows you to actually raise the bar on all three of those: speed, price and quality.
27:56: Make sure you're not asking them to do a scope when you're trying to figure out if it's a deal or not. We typically will walk through with our contractors and say hey. You know, give me like the quick and dirty on this what we think this is going to cost
30:30: Outline the payment structure in the agreed scope of work. Verify the scope and progress as you complete the project before issuing payments.
How To Find Contractors:
24:26: Pull competitor permits, go to Home Depot at 6am, go to a REIA and ask other investors or there might even be contractors there looking for work. You can even go “driving for contractors” by driving by worksites that look like they’re going well.
3:08: Jay Scott’s, The Book On Estimating Rehab Costs
Connect with the Good Stewards:
Andrew: The scope of work as to the one it is to confirm your estimate and the second it is to give to a contractor and make sure they're being reasonable. You want to have a very consistent approach.
[00:00:12] Intro: Welcome to the good Steward podcast. The only podcast dedicated to seasoned Real Estate Investors who want to maximize the cash flow potential in their business. We are Buy and Hold investors with a thousand plus properties in markets across the u.s., who bring an insider's view into the nitty-gritty details of real estate investing. If you're looking to develop the mindset teams and systems that can dramatically build your real estate business and net worth. You're in the right place.
[00:00:45] Welcome to this episode of the good stewards podcast. I'm Ryan dossey.
[00:00:49] Amanda: I'm Amanda Perkins.
[00:00:50] Bill: I'm Bill Syrios,
[00:00:52] Andrew: and I'm Andrew Syrios.
[00:00:53] We are the good stewards, please join us at thegoodstewards.com and follow us, follow our podcast. We have a pretty much everything you could want to know about buying hold real estate or just real estate investment in general. But today we're going to be focusing on putting together a scope of work. Which is something that a lot, I would say in my experience and I think everyone here you could would agree with me that the biggest area that I see new investors screw up and is the rehab. I think they
[00:01:20] Amanda: And seasoned investors sometimes screw up as well.
[00:01:23] Andrew: Yeah, seasoned investors or yeah, pretty much all up and down the lot and it. I don't think I've ever seen. I've never heard an investor tell me that you know, I just keep overestimating my rehabs.
[00:01:36] Ryan: I just have all this leftover cash I don't know what to do with.
[00:01:38] Andrew: I have all this leftover cash from my private lenders or whatever. I've never seen anything like that. It's always the other way around occasionally, they'll be you know, obviously some hit their budgets, but or maybe have a little bit left, but by far the most likely thing that I've seen is for them to have a bunch of extra money that they need to put into the property that they weren't expecting to.
[00:01:59] And so this this podcast we're going to focus a little bit less on the due diligence aspect trying to figure out exactly what you need to do upfront and more about what you need to do when you're putting your scope of work to actually have a good plan for the rehab so real briefly in the due diligence phase.
[00:02:18] You're going to want to you want to look at the property and you're not doing. Not every property put an offer on do you want to put together an entire detailed scope of work, it's just too much time. I mean we were back, we were making well over a hundred offers a year. We one point we're making several hundred offers.
[00:02:35] How many offers you think you made last year, Ryan?
[00:02:38] Ryan: Gosh, I mean we have on average a hundred and fifty to two hundred sellers call us every single month requesting cash offers. So we're going through and doing kind of like quick dirty like roof carpet paint not getting down to like squares or how many square footage of carpet Etc.
[00:02:54] So, I mean we do a lot.
[00:02:57] Andrew: Putting the other 300 line item scope of work for each of those 150 or 200 potential sellers is probably not practical.
[00:03:05] Ryan: Not a good use of your time.
[00:03:06] Andrew: So you want to you want have a very short one? Like I have we have a one-page sheet that we go down based on Jay Scott's the book on real estate rehab expenses and we just like, okay, we think it's to be $2,500 in paint. We think it's going to be you know, $2000 in carpet, etc. Etc. Etc for these. We have 26 main items and then we add a contingency on top of that if you'd like but usually 20% for any sort of rehab expenses that just come up. Things you don't see, you not going to see everything especially a property that needs a lot of rehab and then also holding cost. How much is it going to cost to hold the property with whatever debt you have also utilities and things like that.
[00:03:43] Once you own the property, or even preferably if you can get in and do this before you purchase the property, is putting together an entire detailed scope of work every single line item that needs to be done. And so this is I mean this goes down to we try to be, in our opinion the more detailed the better because I mean obviously you're not going to want to be like paint this like, you know paint this wall and paint this wall and paint this wall and also paint that wall in this room. You can just say paint the room but.
[00:04:12] You do want to be extremely detailed replacing doorknob replace the door stop placed this light fixture instead of just to fix the room. I've gotten I've gotten these bids before where it's like, you know, we're going to do x y z in the kitchen and make it all nice and I'm like, well, you know, can I get a line out of you know, can I see exactly what you're going to do is like well, I'll fix it all up. I'll make it all good and that has never gone out well for us. My experience is pretty much entirely negative with that. I don't know. Do you have any of you had any experiences with the the "oh just trust me I'll do everything that needs to be done" will have this like, you know, just.
[00:04:51] Bill: Well, particularly if you have homeowners tracing around with you about how little it'll take to you know, finish up that kitchen or redo that bathroom, everybody, homeowners and investors, even contractors underestimate how much rehab really costs and that's just what you can see then you get into the wall, you get under the ground where the sewer is, you get on top of the roof in there things you do not see.
[00:05:21] Ryan: If we talked about it in the last one or not, but we had a fire at one of our properties and contractor came back with a $90,000 bid. That was literally one line item that said repair house. It was like yeah. No, you're not getting this job.
[00:05:37] Bill: So really Andrew you're talking about doing two scopes of work, right you're going in and doing an initial one that you might just do as you walk through the house maybe taking some notes, maybe not. But then going back and, if you get the house under contract or the property the multifamily under contract, then you do a do you really get down to your due diligence and do a you know detailed scope of work?
[00:06:01] Ryan: It's like getting engaged. You don't just hide it in marriage
[00:06:06] Andrew: This might be a little little hyperbolic there. The first one I consider more of an estimate. I mean, it's like I'm not saying exactly what we're going to do to property everything needs to be fixed. Just like I think this category needs this much work and it's just for me.
[00:06:19] I mean I'm not I would never accept that from a contractor. It's just but if I'm you know, we were going through several hundred houses a year. I think even more than that. We made offers on several hundred houses a year just a few years ago. We were working back to that stage now and it's just you don't have enough time to do this and it's not worth your time because you can get pretty close and you just need to be pretty close on your estimate. The scope of work as to the one it is to confirm your estimate and the second it is to give to a contractor and make sure they're they're being reasonable but a lot of times with our scopes of work, you know,
[00:06:56] so we'll break our scopes of work down by several stages we have the pre-construction part of it, which is the top part. We use a program called smartsheet, which is like excel on steroids. It just has more capabilities that we can attach pictures of things to the to the cell and then they can just click on that and then look at the pictures. So we try to take pictures of each of the things, you know that at least the things that matter that might have any sort of like what exactly were they talking about. So we take a lot of pictures and we attach them to those line items.
[00:07:23] The first stage is the pre-construction and it's just whatever needs to be done in order for the construction be done. So if there's you know, if there's no electricity in the house is all the copper wiring gots got ripped out. It's hard to do the rehab. So the first thing you got to get the electrical repaired that's in the pre-construction. You got to you know, he there's just they left the dump their there's you know, an enormous amount of trash that needs to be all about that's pre-construction. So those sorts of things.
[00:07:46] And then we have the construction phase. And at this point I would say to anybody this is there's no perfect way to do this. Like this is works for us. I think there's some differences between the way you guys work in Oregon and the way you work in Indianapolis Ryan, but I think you want to have a very consistent way of doing it. You can't it can't just like I'm going to go with my feel. I'm gonna go with my gut whatever like we'll just see what happens. Like this time we'll get a scope. This time I'll just get a line item. This time we'll just have you know, just have some employees go there and just like yeah make it good or something. I don't think. You want to have a very consistent approach. So the first part is the pre-construction. The next part is the construction and this is the way we see this is just anything that can be done by our contractor by our employees by whatever is who's ever doing the main work.
[00:08:33] After that, and we break that down by room. So it's like the out we have the the Landscaping, than the exterior, then the interior, like the living room, kitchen, bathroom, second bath and etc. etc. After that is the vendors list and this is just anything being done by someone outside of the main contractor. So the the flooring like the carpet and and the vinyl or the refinishing hardwoods, maybe HVAC, the, you know just anything like that.
[00:09:01] And then after that we have the the final one is the punch-out list. And this is the last bit of things that need to be done for property. Usually after the properties paint it so our contractors generally go back or sometimes we'll send a different contractor but usually send the same contractors go back and they'll do you know, this is like the little like putting the door stops on, putting the door handles on, putting the blinds on, and then installing the appliances. All those little last items that need to be done. And then finally we clean the property and listed on the market.
[00:09:35] So I think this is our orderly way of doing it. It goes from putting together scope where we have a large basically a six-page sheet where we go through and you make notes on each item in each room, and we transcribe that over to smartsheet. And then we send it out for bids and we can. I mean there are a lot of advantages to having line item, one is that we can just like if we don't like a number that a contractor gives us on a particular item, we just crossed it off. And so.
[00:10:04] Ryan: They tend to vote with their budget if you get a quote for something that's just insane on a particular item that's their way of telling you they don't want to do it.
[00:10:12] Andrew: That is that is true or they don't know what they're talking about and they're just guessing. I've seen that too. But yeah and it gives you and then. You know, you can pair, like you can we've had times with contractor, where one contractor was higher than another but that was only because they were high on a couple items and it's like well those items are sort of not really that important.
[00:10:30] Bill: You know, I think what you guys have done too that I've seen and we've tried to do it as well is you stay with the same scope of work sheet. So you are supplying your contractors with the same sheet and they're not coming in with contractor A gives his sheet and contractor B gives her sheet and contractor C is another one. So it's really hard to compare when they're doing it on their template, but when we're giving them our template, so we see everything consistent across the board that is that is like if you have an if you're not folks who are listening if you guys aren't doing that. That's the first thing to do. Get on the same template.
[00:11:12] Ryan: Yeah controlling the scope allows you to control the cost as well as the outcome. I know when I first started chatting with Andrew about what we were doing that was like the biggest takeaway for us is most investors, I know, don't write their own Scopes. They're doing what Bill mentioned. It's, "hey, give me a bid", you know quick walkthrough. I want this done this way this done that way. Let me know how much it costs versus here's exactly what I want done down to the line item. Bid it. It makes it really easy to price shop, compare shop but you also you don't run into that like "oh that wasn't included in the scope", which I think is every investors like favorite thing to hear from their contractor, "Oh, that's a change order."
[00:11:52] Andrew: And so we almost always do here. I'm a we did a rehab on another small apartment complex and I think like we were placing on the window AC units, which is not an enormous expense. But you know, it is an expense and it just it, you know, I sent it to him. And then he sent me back his bid on his sheet and some of these contractor bidsheets are there is hard to read as Home Depot invoices and it's like.
[00:12:17] You know, it's it's you know, there's just like there's a lot they have all these like numbers and they kind of liked it and they're extremely long and they're broken down and they're not really they don't seem too broken down in a way that makes any sense. I'm sure they are for contractors somehow based on like the type of work needed to be done.
[00:12:33] But yeah, if you're comparing is one of our early mistakes is comparing, you know, just sitting out basically sitting out a scope not nearly as detailed as now but sending out of scope and they would send us back a bid and their own template that they had from their software whatever. And comparing these was just an extraordinary arduous task you compare the price, but sometimes they miss something or they didn't bid something.
[00:12:55] I mean often contractors, but I can't do that or I don't want to do that. You know, I'll bid everything but that. And I've never had a contractor even give me a little bit of lip about about bidding it on our sheet and that was even the first even including the first time we used the contractor even back when we were relatively small.
[00:13:11] I don't think many contractors have a problem with this, but, you should, you should put the scope of work together yourself and you should demand that they put the bid on that sheet so you can compare it and also especially if you haven't used someone before you should be getting more than one bid.
[00:13:25] So I mean and it's much easier to compare to when you have your own sheet, especially if it's in something like smartsheet or even Google Docs or Excel. Because like we'll have like a lot of times they'll have recommendations. Like we did we have this a lot like, you know, they'll have bid everything we have maybe except for two line items and then they'll have like, well I recommend you should do this and this and here's the price form and then you can just line that up on the sheet when you're comparing different bids much more easily than you can if you're, if you're looking at these ones in Excel and ones in this weird, you know PDF from this weird software program. They bought that you've never heard of and another one is like handwritten and illegible, but you can read the price or you know on and on and on but I think the more you can systematize it, make it straightforward make it put it digital. I'd say it's important for it to be digital because that way it's much more easy to compare any discrepancies and and base and it needs to be broken down by the line item. Those things are really critical.
[00:14:22] Bill: You know, I think it might be worth it to talk about the difference of having employees on staff who are doing rehab and contractors and maybe Amanda you could address that a little bit because we have some of both in Oregon in particular.
[00:14:37] Amanda: I mean, that's definitely what the scope of work that's going to be the same. But when you're managing your own crew, you're going to not be getting a bid from yourself most likely. So there's good things and bad things with both sides.
[00:14:51] With the contractor, you know, you're going to get that bid. It's going to be finite. That's what you know you're going to pay. With your in-house staff, your hope is that you get them trained up. They know, you know, if you're managing a portfolio for rentals and rehabbing rentals, you're probably going to be making the same kinds of decisions over and over again. Like this is kind of the product that we put out. This is the flooring we put in, these are the countertops, these are the light fixtures, these are the electrical outlets all of that when you have your own crew you can they become familiar with all of that. And so it's less the expectation is easier to explain because they know what our product is because they have continued to do it.
[00:15:35] What you can't control is the time because your own staff are going to work their job. They're going to work their hours. And you know, you have to keep pushing them along because that time is really what can that can go over. Whereas a contractor, he is, you know pretty tied to his bid. So he is going to be trying to hit those numbers because he doesn't want to go. You know, he he wants to go less time and make a profit on it. But whereas an employee they're you know, they're going to try to do your best for you. But you also need to make sure you keep a handle on how it's going so that you don't run amok as far as the time spent in to the project because it's not necessarily the materials that are the cost, it's the labor that's the cost. And that skilled labor is not a cheap thing that you're going to be paying for. So it works both ways for us.
[00:16:33] Bill: Having a sense of what it cost you per day is really helpful too because that that sobers you up about if it's going to take three more days on this project. Well this going to cost this much more so keeping efficiency in your staff if you particularly if you have employees doing the work is critical, but it's also true of contractors because there's holding costs that are kind of the Unseen line item that is going to hurt you if they're dragging along kind of thing. If they have other projects that our priority over yours.
[00:17:07] We have a kind of a mix of contractors and staff that is really helpful are we actually have a few contractors that work full time for us? These guys are very skilled. We've come to trust them very very much. They do a good job for us at a reasonable price and they also help educate our guys on staff who are less skilled and we've seen some of them start out barely able to swing a hammer and now on their own with their own truck running around putting in doors, taking out windows, you know countertops on kitchens. It's kind of a thing of beauty when you see a younger person who has teachability and the gumption to hustle and get ahead to really be trained in the skills, in these skills.
[00:17:54] Ryan: Andrew as somebody who's not necessarily used a ton of scopes of work, what would you say are the major like things we want to make sure they include, things that aren't necessarily necessary. What are kind of the pitfalls you see that people tend to leave out that end up coming back?
[00:18:11]Andrew: I mean, I think the biggest Pitfall is just not being detailed enough. It's very tempting to just not like, oh well, whatever, you know, the you say something like like, you know, putty, all the holes, putty all the nail holes in the walls or whatever. I think that kind of stuff is like that it's very very broad. It generally would work. But I probably even just include that for like for you don't want to say putty the 19 holes in the house, but you should probably put that in each room things like, you know, like. If you're if you're broad about like with regard like counting the number like if you have like not taking pictures of things that might be might be difficult to sort of just convey with text. Like if you want them to repair three pieces of siding on a wall, you know, outside that's mostly good and you say the three pieces and that's it. It might be a little bit difficult for them. Like which three are you talking about? Especially if there's a couple scuffs and this that and the other on different pieces. So taking I think taking pictures of that like that's why smartsheet I think is so useful, but I think generally the biggest problem is just not, kind of rushing through it spending maybe only an hour or something like that.
[00:19:25] Bill: Here's here's one thing that can really get you. That is the sewer. You know, we've I think learn to scope the sewers which only cost a couple hundred dollars maybe even less if you have somebody who does it regularly. I remember just recently we bought a four-plex and there was $15,000 to do to replace the sewer because it is some serious problems with it. At the same time, we were doing a duplex and I just flat-out forgot to scope the sewer and when it came down the guy said, oh, we got a sewer problem and I go oh, you know, I was thinking of that other bill. Fortunately, it was just in a place in the yard that we dug up and it was a repair that was under a thousand dollars, but you know kind of that stabbed in the heart when I thought this could be really bad.
[00:20:11] It's a great thing to know ahead of time particularly if you're negotiating with the seller and you know that this is the case. So you certainly want to note before rather than after.
[00:20:21] Ryan: They actually heard sewers are a good way to retrade get them scoped the inspection.
[00:20:25] Andrew: You can't do with banks, they don't care but, well you can do it with local banks. Can't do with FHA or HUD or some like that.
[00:20:31] But yeah, if you find a sewer line that's shot that's a great way to ask for some money off and they should pay you some or it drops the price because you know, it costs money to replace sewer lines. You want to find. Yeah. There's a lot of things you want to find out before the. Beforehand at the instead of after the fact and these that that's a that's for another podcast, but I think with this I think the biggest the biggest thing we've found with bad scope was bad scopes of work is just lack of detail and I do that you can overdo it.
[00:20:59] I think you can make it. So arduous to read that your eyes glaze over you want to kind of keep it each line item relatively pithy, you know, kind of make it get to the point. You're not writing an essay. You're not writing the Great American novel. You're just trying to get but you're trying to the details more and hitting every point and like this and then this and then this and this and not allowing things to get bundled together because that will often be that when things get bundled together in one line item, like line items to do, you know the door and the frame and also the window and this and that then something gets missed. That's when things get missed. And that's when one contractor bids it was certain way. It was getting something in another contractor was doing something else and that's when you start you start either making bad decisions in the regards of which contractor you use or you start making or you start getting properties back there not in the condition that you expected them to be. And also when you keep having to send people up again and again and again that delays the project and that's just more clear more holding cost more opportunity costs Etc.
[00:22:01] Bill: You know, I think. Lot of it too comes back to project management. Maybe we could talk as we end this about project management a little bit but you when you're dealing with contractors, you get two out of three speed cost or quality and some somewhat you got to pick two of the three that you're going to take whichever contractor you're going with but good project management allows you to actually raise the bar on all three of those speed, price and quality. And that's really what you want to do.
[00:22:35] Ryan: Yeah, I think writing your own Scopes the perk is, like a lot of investors. A lot of contractors don't really know their numbers. So if you've ever had a contractor you're getting towards the end and they're out of money and it's like well, there's still money left in the budget. Where'd it go? Chances are they didn't bid it properly. So I find that having a detailed scope of work that you're putting them through makes them think through the actual work a little bit more but it also makes them really understand what they budgeted for what items especially for using a GC and they're pulling in subs or something.
[00:23:05] So, I think it also helps to make sure that at the end of the project, you want it to have been a good experience for you and for the contractor ideally. And if they're constantly under bidding jobs, it's not going to go well, at the same time, if you're getting projects back that you're not happy with the quality, that doesn't go well either. So I find you kind of give them a framework to work off of and you're going to get better results.
[00:23:31] Amanda: You'll have less conversations about, "well I didn't do that because it wasn't in it wasn't in the scope." It wasn't in this, you know, it helps manage your expectations. So that what you get back is what you explain and conveyed that needed the work in the first place and you know again it helps them too.
[00:23:52] Ryan: So Andrew, how would you suggest for somebody who's new, right? You you have contacts, I have contacts, Bill has contacts. We know people in our markets that we can approach for work like this, your brand-new, you know, you read Rich Dad Poor Dad or something you stumbled on our podcast and you're like, hey, I want to give this a go you find a good deal. How do you go about getting your scope of work in front of people to get bids on it?
[00:24:15] Are we trolling Home Depot parking lots at 5 a.m. Are we pulling permits of competitors? How would you recommend somebody new goes about this instead of just like, you know throwing it on Angie's List.
[00:24:26] Andrew: I mean, I do think those are ways to do it. Well mostly going to Home Depot and looking at which contractors there on six o'clock and just asking if they're looking for work, I think the best way is referrals. I think that's with generally with most things and so now people are a little bit tighter to the chest about referring their contractors.
[00:24:48] I'll give out any bank, but I won't go out our contractors. But having said that's not true of everyone especially people who don't have a ton of projects. You know, they do one here and then one there. So is the first place I would go is to I would go to your local Real Estate Investors Association and start asking other investors there. You know, who do you have any contractors you be willing to recommend.
[00:25:10] Amanda: There might even be contractors there.
[00:25:12] Andrew: There usually are. Yeah, well, I can't remember finding one at one of them. But yeah, we found ones we haven't used but yeah, you can certainly find you can find you meet contractors there, can be people to refer them.
[00:25:26] You can also I mean, I don't I don't think Craig's List or Angie's List or especially indeed are bad place to look we found good contractors there. Certainly can. You got to make sure to vet them more when that's probably another topic for another podcast. I think any any investor that you already know from another way going to like Bigger Pockets and asking and the forums, you know, it contractors you would recommend and trolling the Home Depot parking lots and whatnot.
[00:25:52] Ryan: I think one of my favorite is driving for contractors instead of driving for dollars, right? You whip passed a project and it looks like it's going well and there's people there, hop out real estate to like a people business and I think especially now in our culture .It's so common to try to make it this like mechanical like I hired you through an app and some of the best guys, you know, the skilled laborers that Bill mentioned they don't necessarily have a website. Or business cards or something. They may just be working at a job site. I find most of these guys you stop and say, you know, hey, I'm a local investor, you know is the owner on-site? Good way to network. If not, "hey you looking for more work" and they're all too happy to run to their truck and pull out cards.
[00:26:38] Absolutely. Yeah, it's one of those things. I don't think you should always be kind of talking. You don't need to be rubbing, you know, just just throwing that people's throwing people's face that you've invested in real estate, but always keep like always be mentioning it and always don't be afraid to talk about it. Have your little elevators pitch or just discuss what you're doing post on Facebook, you know, your last rehab or something Ryan does that all the time and you know, sometimes you just run across these people like oh, yeah, I do construction like I'm.
[00:27:05] Andrew: I know this contractor what not. You can find leads for just about anything in, you know, just throughout your day and going through your normal normal routine. If your kind of keeping it making it very obvious what you do don't don't be annoying, please but the the more you kind of let people know what you're doing the more if they have some connection or maybe themselves have some skill. It might be beneficial. You're going to learn about that. So so keep it, you know, make it make it a very obvious what it is that you do.
[00:27:41] Ryan: I think a quick distinction I'd make we kind of talked in the beginning about almost like the quick and dirty numbers for deciding if something's a deal or not versus the scope of work. When you're new and you're looking at deals and you have a contractor who's been kind enough to walk a property and kind of confirm your assumptions.
[00:27:56] Make sure you're not asking them to do a scope when you're trying to figure out if it's a deal or not. We typically will walk through with our contractors and say hey. You know, give me like the quick and dirty on this what we think this is going to cost here's where I'm at or do you think this is that we actually don't tell him our number we kind of we almost always end up in about the same ballpark, but then we say, okay, perfect.
[00:28:15] I think that'll work out. We do that during kind of our due diligence while we're under contract and then we can say perfect get me, you know a full scope. So I would make sure you're not asking contractors to spend hours writing out line-item bids that you have no intention of hiring because you don't think it's a deal.
[00:28:33] Andrew: No, absolutely. You don't want to waste their time. They will stop answering your phone calls. I mean getting like. It also, I mean, I think instead of getting like a scope. If your very new can ask contractors just take a look at and give a give you a ballpark. If you if you buy them lunch or something like that. Or you can do that same thing with the seasoned investors. But yeah, you don't want to ask for one scope of the next especially like very detailed long Scopes if it's not something you're planning on doing.
[00:28:59]Ryan: Real estate is a small Niche, so if you get annoying people won't forget especially locally.
[00:29:05] Bill: Yeah, and if you form win-win Partnerships really with contractors. It might not be a formal partnership, but there becomes a point when you have somebody that's really quality that it's like, you can I can trust this guy now, you know. He's my painter and I maybe I don't have to get a bid on everything. So I mean that can be dangerous but there gets to be a point where some folks are like that and it's really a point of joy when you can have that kind of relationship.
[00:29:39] Ryan: I think the one thing I'll just kind of say in closing on this a lot of new investors struggle with the scope of work and issuing payments. How do you pay contractors? And I think one of the most expensive lessons I learned, that hopefully I'm not the only person who's learned this, is not verifying your progress through the scope before issuing the next payment. I had a deal that I was actually in Hawaii on vacation with my wife got this like emotional phone call from a GC who I never I don't use anymore and it was like, "Man. I gotta pay the guys ,they've got, you know, kids to feed Etc, and you know, man, we just we need that we need that final draw, you know, that's almost done." You know, it's we're in punch out and so, you know from my phone I wired the guy the final like eight grand.
[00:30:28] I think I held back a thousand bucks. Got there and he was maybe halfway done. And it's a lot easier to get them to do work when you still have the money they want versus they're like, uh, there's a whole bunch of work I have been paid for that I didn't have to do. So, I would recommend as you have a scope as you've outlined kind of their payment structure through it, make sure that you're verifying the scope and their progress before issuing payments. It's really really easy to get in trouble if if you don't do that.
[00:30:59] Andrew: Absolutely, I would I would rather my I think we'll go through the final takeaways here. I my final takeaway is the biggest thing is the mistakes are always almost always in one direction. It's almost always, you know, you almost always budget too little money for project. You almost always don't have enough detail enough line items. So the mistakes are generally, it is not one of those like find, I mean it is find the Goldilocks zone, you know, not too much not too little but. Almost every time the mistakes are made with not enough detail and not enough money budgeted.
[00:31:32] So those are the things to those are the the way to think about when you're trying to make sure that you don't when you're not trying to make a mistake know where most of the mistakes are made and you'll usually be able to avoid them.
[00:31:43] Ryan: I don't think I've ever got to the end of a deal that I made a mistake on and been like wow, that was not preventable.
[00:31:52] Bill: I'd say one thing I would recommend when you're walking through and you're saying things like well, I think we could probably live with those kitchen cabinets. I think we could probably live with that vanity. I think we could probably live with that carpet. You might be fooling yourself and when you get back in those might actually be real cost that you have to incur so be careful not to be naive about what needs to be changed.
[00:32:16] Ryan: And if you're making a lot of I could live with that chances are you didn't get enough? You didn't get a good enough deal. So you don't have enough budget to really rehab it. You're basically lip sticking a pig or slum lording it at that point.
[00:32:26] Amanda: Which just means, down the road you're going to be putting more money into it. So.
[00:32:32] Andrew: All right. Well before this goes completely, awry, thank you for tuning into this episode. If you like what you heard, remember to like and subscribe to the podcast and get your free copy of our ebook. Visit www.thegoodStewards.com for more info. Connect with us and submit any questions or topics you'd like us to talk about. Thank you again for joining us and we will see you next time.