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The Secret to Saving Money on Rehabs

by Brandon Turner on September 30, 2012 · 17 comments

  
holes in the wall

Last week I purchased a pair of jeans for $100.00.

I’m not kidding.

Perhaps this is part of your daily shopping routine, but for a guy raised on Wal-mart and Goodwill, spending $100 for a single pair of jeans was disconcerting to say the least. I’ve been casually looking for a pair of jeans that would actually fit me for some time now (I wear a 36 length, which is nearly impossible to buy without special ordering) and finally stumbled upon the perfect size – for $100.00. After trying them on, I bought the jeans.

For $100.

Did I mention I paid $100 for jeans? It still blows my mind.

However – it was the best shopping decision I’d ever made.

Who knew that jeans could fit so well and be so durable? I have spent years wearing jeans that didn’t fit right and wore out in months because I was too cheap to spend any money on quality jeans. I look back now and wonder, “how much money have I wasted from trying to save money?” My jeans may have cost $100, but for the first time in years,they actually fit my unnaturally long legs. Additionally, the material used just feels superior and I believe these jeans will last significantly longer than previous jeans I have paid for (if for no other reason than I will take better care of them due to the hefty price tag.)

Ironically, this week I learned a related lesson in real estate investing. Perhaps you have learned the same already.

Filling Holes by Cutting Corners

I am in-process of remodeling a home for re-sale and have several contractors working various different jobs. If you are familiar with the process of rehabbing a home, you know that legitimate contractors don’t come cheaply. In an effort to save some money (and help out the brother of a close friend) I hired a young high school kid to come fill nail holes – and there were a lot of nail holes.

To me, filling nail holes is a fairly simple procedure. I set up the kid with a bucket of spackling and with a little instruction, let him start working. The painter was hired to come in the next day and begin painting, so the high school kid worked all day filling hundreds of holes.

The next day the painter showed up to paint and, since I told him all I needed him to do was start shooting the paint, that’s exactly what he did. I stopped by at the end of the day to see the completed paint job – and was greeted by one of the worst looking paint jobs I had ever seen. The painter did an excellent job – but the walls that once had hundreds of nail holes now showed hundreds of smears of spackling that was never smoothed correctly.

Each and every spot.

Hundreds.

Those spots not only stood out because of the difference in texture on the walls that were a nice orange-peel, but the paint looked different on those spots and created a completely different sheen. For those of you who have no idea what I’m talking about – just trust me, it looked terrible.

I realized my mistake immediately: don’t hire nonprofessionals to do professional work.

A Lesson Learned

I now had to hire my much more expensive contractor to go back and sand each of those spots, one by one, and re-texture those areas, followed by another coat of paint.

All in all, the mistake probably cost me several hundred dollars in wasted labor and pushed me back a full day – all because I wanted to save a few bucks on the prep work.

I tell this story to illustrate an important lesson when you rehab a home. Sometimes you feel that you are going to save money by cutting a few corners and hiring cheaper labor to do work. However, professionals do not charge high rates because they are greedy. They charge higher rates because they are generally worth it. Had I simply used the correct professional to do the work that they are experts at doing – I would have been much better off.

To sum up: Sometimes it’s cheaper to pay more money.

Obviously, I’m not suggesting to go out and hire the most expensive contractors you can find. I am, however, advising that you budget from the beginning the correct person to do each job and don’t get greedy.

Like spending $100 on a pair of jeans that actually fit right, paying the right amount of money for the right kind of contractor for a rehab job will save you time, money, and headache.

Have you come across this lesson yet? Do you have a story or a lesson you want to share? I’d love to hear it! Please leave a comment below and let’s talk about it!

Photo: Dov Harrington

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{ 16 comments… read them below or add one }

Dale Osborn September 30, 2012 at 11:53 am

The right person for the right job always works out best. Great article. One other thing on cutting costs – never allow tenants to do their own work or remodels! It will cost you a lot to go behind them and have the work done right.

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Brandon Turner September 30, 2012 at 3:22 pm

That is very true Dale. I’ve had tenants ask, and I almost always say no. I don’t even let them paint, unless they pay an extra deposit. Thanks for the advice!

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Maria September 30, 2012 at 12:49 pm

This article is so true! I’ve totally spent $100 on a pair of jeans before but they are ALWAYS the ones that actually fit well because they are well made and they last longer. The cheaper jeans that I would buy were either too short and ripped in a matter of months! Quality over Quantity definitely makes sense. You have a way of taking everyday situations and translating them into real estate and I like it. It’s a great way to make the issues in real estate understandable and relate able.

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Brandon Turner September 30, 2012 at 3:23 pm

Thanks Maria! Yeah, I love these Jeans. I’ve had jeans before that have lasted just days before ripping (back when holes in the knees were popular for guys, my toe would go through and destroy them!)

Thank you for commenting!

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Alison September 30, 2012 at 1:14 pm

I was incredibly lucky to find the right contractor the first time out the door, I have continued to use him and recommend him to everyone who asks. Not everyone learns this lesson though. Here’s a conversation I have at almost every REI event I attend:

Random Investor: Wow, I’m really struggling with my current rehab. My contractor did a crummy job and now my property won’t pass close-in inspection. This is going to cost me a fortune to fix!

Me: Why don’t you call Carlos? He’ll come get it straightened out.

Random Investor: I had Carlos come bid on the job originally. He’s way too expensive!

. . . and so it goes until that investor learns the value of hiring a good contractor to start with.

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Brandon Turner September 30, 2012 at 3:24 pm

Hey Alison,

I’ve been on the other side of that conversation for years! I finally now have a few guys I trust to do almost everything! Thanks!

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James September 30, 2012 at 1:45 pm

We all have to learn some where- the mistake you made was not hiring the kid to do the work, it was in hiring a kid who had never filled nail holes before and failing to give proper instruction and supervision. If you didn’t have the time to do so, then you should not have hired someone who had no expereince. Things that seem simple to you because you have expereince, can be difficult for a beginner. He probably thought what hehad done was the way it was supposed to be done, and it was perfectly normal. He didn’t know what he didn’t know.

Now, if you did have a bit of time to spend with the young man, you could have taught him a valuable new skill. Once he had completed a project or two for you, he would have been able to work with less supervision. If he was going to be around for a while and you treated him well, you probably would have seen a return on your investment in spending time with him.

The mistake you made was wanting a quick and cheap fix, rather than spending the proper time mentoring the young man up front.

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Brandon Turner September 30, 2012 at 3:26 pm

Hey James,
That’s really insightful! It’s true – mentoring the kids would be a much better plan. This kid is actually someone I’d like to have around for more projects, so I think I’ll do just that. Maybe put him on my contractors crew so when I’m not around, at least my contractor can help train him.

Thanks for chiming in James! I always appreciate your insights!

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Al Williamson September 30, 2012 at 11:20 pm

Brandon, thanks for sharing the hard knock. I feel your pain on this one.

I do a lot of construction management as part of my 9 to 5 (currently inspecting the repair of a dam near Lake Tahoe). And non profession work blares at me – I’m calibrated to see it. Yep, I’ve learned the lesson as well – the low bid is too expensive.

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Brandon Turner October 1, 2012 at 9:14 am

Thanks Al – I like the way you put that:
“The low bid is too expensive”

Great!

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Mike October 1, 2012 at 6:40 am

Hey Brandon, can I edit my post from Sunday and add this onto it? Can’t tell you how many times I’ve done this one so it hits home big time! “Sometimes it’s cheaper to pay more money”. How true. Well done as always.

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Brandon Turner October 1, 2012 at 9:15 am

Ha, we’ll call it number 9 on your list! I’m making a public confession here so I stop doing this in the future! We’ll see if it helps!

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Joe Delia October 1, 2012 at 8:49 am

Or, the painter could of called you after doing the first wall and told you it wasn’t looking right.

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Brandon Turner October 1, 2012 at 9:17 am

Hey Joe- that’s very true. However, I did walk through the house and didn’t even notice it either until the new paint was on (I don’t know how I missed it, but it hid well when everything was pure white).

Either way, it would have taken the same steps to fix. Sanding those spots, spraying with new texture, and repainting. Sucks either way!

Thanks for the comment Joe!

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Kristine-CA October 1, 2012 at 9:26 am

I think maybe you need to worry more about hiring a professional painter. Your painter isn’t really a “professional” or a team player if they painted over bad prep without any notice to you. That’s my main frustration with rehab and contractors. We seem to have created a culture of contractors that just do their job without consideration for how their work is part of a whole. Lots of painting crews can’t make any money unless they run from job to job, so that’s what they do. A good painter would have called you (or their supervisor) and said 1) are you aware of the bad spackle, and 2) if I paint over this, I’m not responsible for less then perfect result, and 3) I can fix it for $xx.

A team player who cares about your rehab doesn’t just come in and shoot paint, even if you told them to, without consulting with you about problems. I think we need encourage and pay contractors to care about their role in the big picture.

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Brandon Turner October 1, 2012 at 10:25 am

Hey Kristine- I think you are right. It’s hard for me to be too tough on him since I didn’t notice either- but I’m not a pro painter. He really should have noticed and addressed it earlier. I wish more contractors did think in terms of “the whole” because they often really don’t!

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