Real Estate Investor Case Study: The Plumbing Problem that Kept on Giving…

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We all enjoy gifts and/or people that “keep-on-giving”; however, in some instances, we want it to be done with as soon as possible. Unfortunately for me, I recently experienced an unfavorable “gift” that just refused to stop giving!

My goal with this article is that you as a newer real estate investor can use this real life example and apply it to your business. Hopefully you are already applying the principles I will talk about, but if you aren’t, the following is what can happen in the nitty-gritty-non-guru world of real estate property investing.

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The Real Estate Deal

One of my top wholesalers brought me a smokin’ hot deal. The deal was attractive in two ways. First, it was simply a quality wholesale deal. It was priced right in a great neighborhood. It allowed for the wholesaler to make money while also left plenty of meat on the bone for me. Second, he already had it sold to an interested party via land contract. We call them land contracts here in Michigan, but they’re also referred to as contract-for-deed, installment sales or owner financing.

There was a catch though, the end buyer needed to move in asap, and there just wasn’t enough time on their schedule to get the house dewinterized and everything up and running. The wholesaler told me they wanted the house, but for their protection, they wanted the plumbing, electrical, hot water heater and furnace guaranteed for two weeks after utilities were turned on. This probably sounds crazy on my end (I plan on writing a blog article about this point alone next week), but I accepted those terms.

The Phone Rings

A week and a half later, * Ring Ring * I answer and it is the buyers of the property. They go on to tell me that they finally got everything turned on, but there are a couple leaks in the basement.

They didn’t sound too severe, so I called my plumber and had him go over there and assess the situation and give me a price.

The $150 Plumber Phone Call

Later on that day, * Ring Ring * I answer and as is always the case, I have butterflies in my stomach and adrenaline flowing through my veins. Did the plumbing explode? Did all the pipes disappear? (insert any sort of wacky scenario).

It was great news though, there were a few leaks in the galvanized pipes, and he’d get it all up and running for $150. Awesome! I approved and figured that was the end of it…

The $1,800 Phone Call

A couple days later, * Ring Ring * I answer with a not so good feeling in my stomach. The plumber tells me that for some reason, as soon as he fixes one section of the galvanized, an area further down “splits” and begins leaking. He informs me that he can just replace it all right now for $1,800, or he can keep working section by section and continue to work at the hourly rate. A quality plumber ain’t cheap, so I had to weigh the Risk vs. Reward.

There was no way I was going to keep the plumber on the clock at his hourly rate. Besides, getting all new galvanized plumbing isn’t such a bad thing anyways. No need to skimp out on the new buyers for the sake of trying to save a few nickels.

The Drain Phone Call

A week later, * Ring Ring * I answer and it is the buyers. They tell me how professional the plumbers  have been and thank me for being so prompt with things…. HOWEVER, now there are drains that aren’t doing their job.

I get a hold of my plumber again and have him get the drain guy they use over there to clear things out.

The $2,450 Phone Call

A few days later, * Ring Ring * I answer and its the plumber. He tells me the drains are all cleared up; however, there were a couple sections where the drain clearing machine could not get past. Those sections need to be replaced and a couple toilets are leaking and need to be rebuilt.

The final total after all this (including drain cleaning) was $2,450.

Key Points for Your Real Estate Investment Business

I can’t say I’ve ever had an original quote of $150 turn into $2,450, but the element of “surprise” didn’t catch me off guard. If you are getting into real estate investing with the mindset that everything will always be filled with rainbows and puppies, reality is going to hurt quite a bit.

Let’s look at some aspects for you to remember…

  • Worst case. Worst case. Worst case. – While the above may sound terrible, it didn’t ruin anything at all. In fact, I was happy about it because I came out better than I had planned for in my spreadsheet. Given the price I got it at and the wiggle-room I had, the $2,450 rehab bill still came in far below what I had entered into my spreadsheet of $7,000.

Point being – always enter in large numbers and assume the worst. Be sure you “stress test” your spreadsheet.

  • Customer Service with a Smile. – Remember your companies reputation is always on the line. Getting those phone calls from the buyer was not my ideal situation; however, they happened so they need to be take care of, and taken care of promptly. After they called about the original plumbing issue, my plumber was in contact with them setting up a meeting within an hour.

Point being – being prompt and courteous does not only maintain your reputation, it can lead to future revenue when your customer begins to tell their friends. Word-of-mouth marketing is by far the cheapest!

  • Contractor Relationships. – The plumber I used in all this was someone I’ve used in at least seven or eight of my projects. In other words, I trust him and he trusts me. I trusted him so much that I handed the customer service reigns over to him and allowed him to work directly with the buyers. And as I mentioned earlier, the buyers specifically made sure to tell me how pleased they were with the plumber and his professionalism.

Point being – building quality relationships with quality contractors is a great way to save yourself time and headache. You may have to pay slightly more, but in my mind, this trade-off is worth it.

All in all, this was a great deal for me despite the plumbing issues. While it was no doubt an “issue”, it wasn’t a “problem” because I planned according with my numbers and used a quality contractor. On top of this, maybe it will lead to some more revenue since the buyer’s made it clear they were happy with my company’s customer service.

How about you? Any stories where an originally small renovation quote balloons, and balloons and balloons some more? Leave a comment below, I’d love to hear your stories!

Photo: Vitor Sá – Virgu

About Author

Clay Huber

Clay (G+) is a licensed real estate agent and the owner of Huber Property Group, LLC, a real estate investment company located in Grand Rapids, MI. His company purchases distressed properties with the main exit strategy of fixing them up and reselling with owner financing, particularly, land contracts.


  1. Steve Toohey on

    Yup. Old houses with galvanized… I just go ahead and plan to replace it all, including the main line to the curb stop. If you find it, it is most likely past its life expectancy and any that is left in place will only continue to push debris into any new work that is done. I’m putting in a new main now… well, as soon as the ground thaws, which likely means another few weeks of delay.

    • Exactly Steve. I would have been shocked if it was still working up to par, and I was not shocked. Rather, I was forced to reach in my wallet.

      I wish you all the best in your venture of putting in the new main! (Hope the ground thaws out soon for ya!)

    • what does an overhaul like that run? I bought a 1900s house and noticed the shower drain is slow in the unit I’m working in now. Not that I want to go tear everything up right now, but just curious.

      • Steve Toohey on

        Kurt, Was that for me or Clay? Sewer mains are another issue and can be fixed in several ways… traditional dig and replace, or lining (sort of like chimneys can have an inflatable lining with mortar pumped around the liner). For a sewer main or a main water line, price will depend mostly on the distance of the run, then what has to be dug up (dirt, concrete, trees?, etc) and the depth. These factors will vary wildly from one property to another. Material types matter, but are likely going to be a rather insignificant part of the overall cost when compared to the cost of excavation.

  2. In the future I would advise you to use the warranty form that I like to use.
    It starts; all items of this property are fully warranted against any and all defects for 30 days or 30 seconds whatever comes first.

  3. Yes Clay, I can feel your pain

    One of my best friend manages many properties and spends over 40K per year, just on plumbing. I was talking to him once and he said it is very important to pick a plumber that you can trust, and use often.

    And then I asked him, what makes a good plumber then?

    He said, “Well my plumber is very smart, without opening/drilling everywhere. Just by looking, he is able to guesstimate where the leak is”. Like what you mentioned earlier, the plumbing cost just sky rocket phone call after phone call. Scary.

    Over the years, my best friend has watched how the plumber work and learn a few simple tricks from him. Other than serious damage/leaks to his house, he is able to fix it himself.

    But if I were going to invest in real estate today, I will probably read up on how to do some of the basic repairs of the houses or I am going to hire a few plumbers over a few months and select the best one.

    Just wanted to share a short story.


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