This post will not apply nor make sense to every investor out there, because part of the reason these ideas work is due to volume and consistency of work. That does not mean that individual investors cannot use these ideas to greatly improve the relationship with vendors regardless of volume. That better relationship should absolutely be used to improve over-all quality and reduce costs.
If you are an investor or own an investment company that provides services to other investors, implementing a few of these ideas will go a long way in reducing costs and improving the quality of the work.
1. Schedule Two Annual Meetings With Your Vendors
The first meeting should be held in the Spring and should be an appreciation day. A chance for you to provide lunch and a little relaxation for your vendors. Don't be scared to let them invite their families and get behind the table and serve. Whether its pizza and coke or spaghetti buffet, taking the time to serve those who are working for you is a great way to build trust & camaraderie as well as strengthen the ties that enable you to negotiate better pricing.
The second meeting should be held in the Fall and should be a standards meeting. This is where you lay out to your rehab crews and every contractor or company servicing your properties EXACTLY what you expect from them. This is your opportunity to lay down the law on exactly how you expect your renovation jobs to be completed. From conduct while on site to the condition you expect the site to be left in at the end of the day, if you are very clear with the standards you expect to be upheld, then there is no mi-communication in regards to your expectations. Do not forget - nothing is too small! From where contractors park to no smoking, drinking, drugs, pets, loud music or girlfriends at the job site; this is your project and you are providing the payments. Make sure your standards are clear.
2. Simplify the Details
When working in volume, the fewer questions a contractor has, the quicker they can complete the work. With that in mind, create materials list complete with detailed name and serial code of all products used on your renovation jobs. This list should include every material from carpet, tile, grout, wall color, trim color, lighting package, hardware package, lock package, types of doors, windows, preferred water heater brand including size as well as all HVAC materials. Be specific and provide a copy of all materials used in your renovations. If you can reduce basic questions and focus on the scope of the job, your contractors can go to work quickly and they will be much more efficient.
3. Inspect What You Expect
This should be a mantra repeated every day on every job. Your contractors and renovation crews should know with absolute certainty that you will be inspecting every job and paying attention to every detail. It is not enough to expect them to do the job correctly. They should know you are inspecting the work as well and will hold them accountable to your expectations. If you are clear, it will only take a couple of times with you taking a vendor to task on poor quality, for that quality to improve and them to begin to police themselves. This is key to keeping quality high when volume rises.
4. Pay On time - Every Time!
A great policy to institute if you want to insure that you are getting the lowest rate possible is to pay often and reduce the lag time that a vendor waits for money. I would suggest a policy as such: IF the vendor provides the invoice by Wednesday at noon, You will provide the check by Friday at noon. This is a very basic policy, but it guarantees safety for your crews and their employees. It allows them the freedom to work on smaller margins because they have reduced carrying costs and general overhead. They can guarantee work and payment to their employees which helps them to retain their crews and stay active.
I do not just make these suggestions because I think they are good policy - these are the exact policies that are instituted in my business. I know they work and the results they lead to are real.
Best of luck with all of your investing endeavors!
The author has permitted the reprinting and redistribution of this article.