Learn from my mistakes

Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes

Good lesson @Nathan Harden . Sorry you experienced this.

I thought about OOS and decided I would need what was an owner occupied normal , decent house in a B area or better. Rural C is fine for age but I'd avoid C or less for all other reasons.

No rehabs or someone else's flip.

2 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

3y

Your biggest screw-up was paying in full before the work was complete. However, it seems this was not on you entirely...you say you had a PM? Why weren't they managing the project for you? Wasn't that their job?

1 Reply

Travis Hill

Investor · Multiple · Member since 2019 · 175 posts · 150 votes

3y

@Nathan Harden like you I am an OOS investor. I had a very similar situation happen to me on a 5 unit. The contractor came with the wholesale deal. After spending $50k and having to fly out to see the property and the lack of work over the previous 3 months, I fired him, his project manager, and the wholesale company. I later learned the contractor was served for over $1.5 million in bad practice. The contractor I did find and use to finish the job did a fantastic job and I ended up flipping the property instead of buy and hold. Bought for $30k/door sold for $70k/door. Super lucky. Don't give up. Communication is key. Use technology to validate and inspect what you expect. Create a GC contract. Reward for completing before deadline and a penalty when it goes past deadline. If the contractor is worth a crap ,they understand.

1 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

3y

Quote from @Nathan Harden:

I am an out of state investor that was handcuffed when picking a contractor. I bought a property to BRRRR, the next day it was broken into and stripped of everything. I was handcuffed to get this project started asap because the house now had the front door kicked in and a couple broken windows and I had the city code enforcement on my case so I panicked and I was only able to obtain 1 bid for this project and took it with no hesitation. The rehab took 3 months (was supposed to take 2). I have paid the contractor in full, $40,500 and I sent my property management out there to check the progress. They said it's about 60% finished. Naturally, I called the GC he then told me to take him to court.
Things I’ve learned (and still learning)

All contractors are not the same.
Make sure to have PM check progress regularly, even if it’s a service call charge.
Never pay in full until PM has given the thumbs up, not the contractor.

Learn from my mistakes!

I have done 1ks and 1ks of reno/repairs over the years ALL out of state. Its all about your team. NEVER do a deal without a trusted team. I live in FL and do all my business in Cleveland. I fly in twice a year, WARM season only.

All the best

3 Reply

Nathan Harden

OP

Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes

3y

Quote from @Bruce Woodruff:

Your biggest screw-up was paying in full before the work was complete. However, it seems this was not on you entirely...you say you had a PM? Why weren't they managing the project for you? Wasn't that their job?

Yes, I did have Property Management and they did charge me those months of not checking in on the property. I am not entirely sure if they were aware of the size of rehab that was going on or what BUT this will be addressed with them forsure.

0 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

3y

Quote from @Nathan Harden:

Quote from @Bruce Woodruff:

Your biggest screw-up was paying in full before the work was complete. However, it seems this was not on you entirely...you say you had a PM? Why weren't they managing the project for you? Wasn't that their job?

Yes, I did have Property Management and they did charge me those months of not checking in on the property. I am not entirely sure if they were aware of the size of rehab that was going on or what BUT this will be addressed with them forsure.

Depending upon how your contract was worded, you could have some leverage to get some money from them. Work this carefully, maybe consult an attorney first....?

1 Reply

Nathan Harden

OP

Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes

3y

Quote from @Travis Hill:

@Nathan Harden like you I am an OOS investor. I had a very similar situation happen to me on a 5 unit. The contractor came with the wholesale deal. After spending $50k and having to fly out to see the property and the lack of work over the previous 3 months, I fired him, his project manager, and the wholesale company. I later learned the contractor was served for over $1.5 million in bad practice. The contractor I did find and use to finish the job did a fantastic job and I ended up flipping the property instead of buy and hold. Bought for $30k/door sold for $70k/door. Super lucky. Don't give up. Communication is key. Use technology to validate and inspect what you expect. Create a GC contract. Reward for completing before deadline and a penalty when it goes past deadline. If the contractor is worth a crap ,they understand.

This is a good tool to have in my back pocket going forward. Thank you.

As for my exit strategy, it was to sell the property if all else failed. Bummer deal now because the GC did an awful job on the work that was completed so either way this one will probably be chalked up as a loss unless I hold it for years which might be my best bet and have a little cash flow in the meantime.

0 Reply

Nathan Harden

OP

Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes

3y

Quote from @Bob S.:

Quote from @Nathan Harden:

I am an out of state investor that was handcuffed when picking a contractor. I bought a property to BRRRR, the next day it was broken into and stripped of everything. I was handcuffed to get this project started asap because the house now had the front door kicked in and a couple broken windows and I had the city code enforcement on my case so I panicked and I was only able to obtain 1 bid for this project and took it with no hesitation. The rehab took 3 months (was supposed to take 2). I have paid the contractor in full, $40,500 and I sent my property management out there to check the progress. They said it's about 60% finished. Naturally, I called the GC he then told me to take him to court.
Things I’ve learned (and still learning)

All contractors are not the same.
Make sure to have PM check progress regularly, even if it’s a service call charge.
Never pay in full until PM has given the thumbs up, not the contractor.

Learn from my mistakes!

I have done 1ks and 1ks of reno/repairs over the years ALL out of state. Its all about your team. NEVER do a deal without a trusted team. I live in FL and do all my business in Cleveland. I fly in twice a year, WARM season only.

All the best

Then this didn't happen too far from where you invest. This actually happened in Canton.

When establishing your team in Cleveland, did you fly out and meet them in person or did you come across them by referrals?

0 Reply

Nathan Harden

OP

Real Estate Agent · Puyallup, WA · Member since 2022 · 551 posts · 379 votes

3y

Quote from @Bruce Woodruff:

Quote from @Nathan Harden:

Quote from @Bruce Woodruff:

Your biggest screw-up was paying in full before the work was complete. However, it seems this was not on you entirely...you say you had a PM? Why weren't they managing the project for you? Wasn't that their job?

Yes, I did have Property Management and they did charge me those months of not checking in on the property. I am not entirely sure if they were aware of the size of rehab that was going on or what BUT this will be addressed with them forsure.

Depending upon how your contract was worded, you could have some leverage to get some money from them. Work this carefully, maybe consult an attorney first....?

This is just a whole Jacked up situation.

Yes my PM should pay me back. Will they? Time will tell.

This was their contractor that they brought to the table as well so hopefully they find a way to make this right.

The only positive to come out of this is that I learned ALOT of things of what not to do.

Win or Learn I guess.

1 Reply

Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

3y

Don't settle on this one! They definitely have a huge responsibility here, especially since it was their Contractor too! They should refund you everything not satisfactorily finished. It was their Contractor, they can go after him for damages.

1 Reply

Richard F.

Honolulu, HI · Member since 2008 · 3k+ posts · 2k+ votes

3y

Aloha,

Definitely sounds like the PM failed you big time. Check local law, and ensure the PM recommended/used properly licensed contractors for the work, if not, that is huge...if the PM is required to be licensed and follow the laws.

"All contractors are not the same". Truer words were never spoken. I have seen some of the most half-a____ work done by "licensed professionals", and some of the most beautiful craftsmanship done, and at a lower cost, by unlicensed handyman with English as second language. All a license does is give the State something to "take" from the person/company, but as I have seen time and time again, they just open up with the same crew and a new name, and keep on ripping of customers. To make matters worse, many Owners, and for that matter just Retail Customers of contractors, that randomly pick a contractor, wouldn't know "quality" products and workmanship if they had an electronic quality finder to help them. MOST "new" work looks pretty good, but some of the shortcuts taken in the name of "profit" are shameful at times. Do not rely on a contractor alone if you are not reasonably familiar, get some input from a professional Consultant in the field that you require.

3 Reply

Bob S.

Real Estate Consultant · Cleveland · Member since 2020 · 6k+ posts · 3k+ votes

3y

Quote from @Nathan Harden:

Quote from @Bob S.:

Quote from @Nathan Harden:

I am an out of state investor that was handcuffed when picking a contractor. I bought a property to BRRRR, the next day it was broken into and stripped of everything. I was handcuffed to get this project started asap because the house now had the front door kicked in and a couple broken windows and I had the city code enforcement on my case so I panicked and I was only able to obtain 1 bid for this project and took it with no hesitation. The rehab took 3 months (was supposed to take 2). I have paid the contractor in full, $40,500 and I sent my property management out there to check the progress. They said it's about 60% finished. Naturally, I called the GC he then told me to take him to court.
Things I’ve learned (and still learning)

All contractors are not the same.
Make sure to have PM check progress regularly, even if it’s a service call charge.
Never pay in full until PM has given the thumbs up, not the contractor.

Learn from my mistakes!

I have done 1ks and 1ks of reno/repairs over the years ALL out of state. Its all about your team. NEVER do a deal without a trusted team. I live in FL and do all my business in Cleveland. I fly in twice a year, WARM season only.

All the best

Then this didn't happen too far from where you invest. This actually happened in Canton.

When establishing your team in Cleveland, did you fly out and meet them in person or did you come across them by referrals?

Started all online then met them. I now have about 25 guys and 5 full time handymen, All for Cleveland/ Akron Canton,

All the best

1 Reply

Jack SmithPro Member

Rental Property Investor · Massillon, OH · Member since 2017 · 216 posts · 168 votes

3y

Quote from @Nathan Harden:

Quote from @Bob S.:

Quote from @Nathan Harden:

I am an out of state investor that was handcuffed when picking a contractor. I bought a property to BRRRR, the next day it was broken into and stripped of everything. I was handcuffed to get this project started asap because the house now had the front door kicked in and a couple broken windows and I had the city code enforcement on my case so I panicked and I was only able to obtain 1 bid for this project and took it with no hesitation. The rehab took 3 months (was supposed to take 2). I have paid the contractor in full, $40,500 and I sent my property management out there to check the progress. They said it's about 60% finished. Naturally, I called the GC he then told me to take him to court.
Things I’ve learned (and still learning)

All contractors are not the same.
Make sure to have PM check progress regularly, even if it’s a service call charge.
Never pay in full until PM has given the thumbs up, not the contractor.

Learn from my mistakes!

I have done 1ks and 1ks of reno/repairs over the years ALL out of state. Its all about your team. NEVER do a deal without a trusted team. I live in FL and do all my business in Cleveland. I fly in twice a year, WARM season only.

All the best

Then this didn't happen too far from where you invest. This actually happened in Canton.

When establishing your team in Cleveland, did you fly out and meet them in person or did you come across them by referrals?

@Nathan Harden
thats too bad… I invest in Canton and very active with the local REIA. I would love to know more particulars of who was involved. Stay in touch if you’re going to invest more in the area. I’ll DM you to talk off line.

1 Reply

Kerry Noble JrPro Member

Investor · Indianapolis, IN · Member since 2018 · 2k+ posts · 1k+ votes

3y

so i work with out of state/country investors. Im that go between that can provide value to my partners.

I go and check the properties. I send progress videos back.

they can check the progress before the send the funds.

Pay per your SOW. Break it up into draws like hard money if necessary.

I would definitely connect with boots on the ground in the market.

1 Reply

Carlos Ptriawan

Member since 2019 · 7k+ posts · 4k+ votes

3y

Quote from @Richard F.:

Aloha,

Definitely sounds like the PM failed you big time. Check local law, and ensure the PM recommended/used properly licensed contractors for the work, if not, that is huge...if the PM is required to be licensed and follow the laws.

"All contractors are not the same". Truer words were never spoken. I have seen some of the most half-a____ work done by "licensed professionals", and some of the most beautiful craftsmanship done, and at a lower cost, by unlicensed handyman with English as second language. All a license does is give the State something to "take" from the person/company, but as I have seen time and time again, they just open up with the same crew and a new name, and keep on ripping of customers. To make matters worse, many Owners, and for that matter just Retail Customers of contractors, that randomly pick a contractor, wouldn't know "quality" products and workmanship if they had an electronic quality finder to help them. MOST "new" work looks pretty good, but some of the shortcuts taken in the name of "profit" are shameful at times. Do not rely on a contractor alone if you are not reasonably familiar, get some input from a professional Consultant in the field that you require.

100% correct. Most of the Subcon job by the unlicensed guy is someimes better because they're subcon for the licensed GC anyway, it's just the money going to them is higher when they work for unlicense gc rather than when they work for the licensed gc.

1 Reply

John Clarken

Contractor · OR · Member since 2021 · 42 posts · 33 votes

3y

Quote from @Nathan Harden:

Quote from @Bruce Woodruff:

Quote from @Nathan Harden:

Quote from @Bruce Woodruff:

Your biggest screw-up was paying in full before the work was complete. However, it seems this was not on you entirely...you say you had a PM? Why weren't they managing the project for you? Wasn't that their job?

Yes, I did have Property Management and they did charge me those months of not checking in on the property. I am not entirely sure if they were aware of the size of rehab that was going on or what BUT this will be addressed with them forsure.

Depending upon how your contract was worded, you could have some leverage to get some money from them. Work this carefully, maybe consult an attorney first....?

This is just a whole Jacked up situation.

Yes my PM should pay me back. Will they? Time will tell.

This was their contractor that they brought to the table as well so hopefully they find a way to make this right.

The only positive to come out of this is that I learned ALOT of things of what not to do.

Win or Learn I guess.

I had an similar issue in Cleveland, PM recommended a GC, GC did bad work, PM didn't confirm but paid them out anyway. Sold the property and got out as there were headaches and management wasn't competent. I'd get a quote for $3.5k, call around for a 1/2 hr and get the number down to $1k. having a PM with construction knowledge is key, otherwise you need a trusted GC who isn't booked way out.

1 Reply

Learn from my mistakes

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