Rehabbing from out of state

11 Replies

Hey, BP'ers. I need some advice.

I'm in contract for some units within a community. Each building within the community is a row of 6 attached townhouses, all identical with the exception of the end-units only sharing 1 wall, while the other share 2. The interior layouts are pretty much all the same.

I'm not quite done with inspections yet, so I don't know the condition of the electrical and mechanicals, but I do know the that the interiors all need updating (floors, cabinets, counters, sinks, paint, etc.)

The problem is is that I'm out of state. How would suggest I manage the rehab? A couple of options that I can think of, but please feel free to suggest others.

1) My local PM who will manage this property has an in-house maintenance crew. He says he can use them for cabinets, floors, etc, and then subs-out trades (hvac, electrical, plumbing, etc.) We have a good working relationship, and they have my trust, but it's a relatively smalls shop and I haven't worked with them that long, much less used them to rehab.

2) Find a GC myself, and pay my PM to oversee the project.

3) Ask the PM to sub-out all of the work to specialists, and have them to act as GC.

or some combination of the above.

Advice and experiences would be appreciated.

Thanks!

James

James, I don’t think it’s s Problem to give to the PM as long as they have the experience of doing and overseeing rehabs. Maybe you could talk to several of their clients that they have performed rehabs? This would  give you a good  idea of their capabilities. 

Kim Meredith Hampton, Real Estate Agent in FL (#BK0601196)
407-253-9324

Hey James,

You have already outlined some good options, but my two cents would be to let your PM get you 3 bids on each phase or trade. 

If he is talking about being one of those Sub's and doing one or more part in-house with his crew, it would have to be after you have seen 3 outside bids first. You could then pick the one that you like the best and if he wants to match the bid, then award him the job.

I would also suggest that you agree up front before he even start chasing bids for the project, that you agree on a FLAT FEE to be paid to your PM for managing the job. Do not even consider a cost + or % or anything other than a flat fee. 

I would break the job down into 4 phases i.e. 

1. Painting 

2. Cabinets Installed 

3. Counters & Sinks 

4. Flooring

Then, agree to pay 25% to the PM after the completion of each phase.  Now he's got the motivation to get the next phase done, and you know you haven't paid out to much to soon. Require your PM to text you lots of picture and video as the project moves along, and then  FaceTime with him when he is on at job when he is asking for his next draw.

If you PM is on a flat fee, and your sub-contractors are all summit bids that include materials & labor there will be far fewer surprises, and you can manage the project just find from out of state. 

Bringing in a GC will just add to the cost and you don't need a GC with good sub-contractor they will protect your investment. 

Good Luck!

Bill

James, get quotes from the PM and from some licensed contractors. Make sure who ever you get is competent and confident in the work they are able to do and the quality along with their timeline. Whatever you do, set expectations high and stick with them. Get a solid contract with deadlines and payment standards and hold them to it. 

I personally like hiring a 3rd party contractor and having the PM be the project manager that oversees everything. This gives you layers. 

@William Haltom :

If I go with outside bids, how do I go about getting those bids? Do I have one come up with the scope of work, and have the rest bid on that same scope, or do they each have to walk the property to come up with their own bids? I'm already disturbing tenants with inspections and walk-throughs, so I'd like to avoid having 3 more trips for contractors!

@Todd Dexheimer : when you say "3rd party contractor" are you talking about a GC or specialists?

Thanks!

James

Hi James,

Saw this thread and am very interested on where you are investing.  Would appreciate any info.  I'll be following this thread closely, thanks for starting it!

Originally posted by @Cosmo Lee :

Hi James,

Saw this thread and am very interested on where you are investing.  Would appreciate any info.  I'll be following this thread closely, thanks for starting it!

 Hey Cosmo. If you're looking for ideas about out-of-state investing, see @Todd Dexheimer 's latest blog post on the subject. If you want to talk specifics about what I'm doing, feel free to PM me!

James

Hey James,

Your PM should be the one gathering all the bids for you! That's what his flat fee is for, to get you 3 bids on each and then manage the project. He should be willing to be really fair on his flat fee in mt opinion because when this job is done it will be a nicer property for him to manage and easier to keep rented.

Your PM should go in one time and write up a scope of work for each unit. The sub's should just be willing to go by his office and pick up a copy of the scope-of-work.

But, it's even easier than that. I think you said that they where basically all the same on the inside well, if that true all your PM would need to do is let them in to see a vacant one. If your completely full then all they need is an 8.5 x x11 floor plan. I've been building for 30 + years and most all sub's bid by the S.F. or yard or some formula that works for them, so even if he does see the unit a vaulted ceiling to a painter is not a big deal, so a small floor plan and a fair description of the unit from your PM is all and sub should really need. 

Bill

Personally, I would never do a rehab by remote control. I do flips and dealing with contractors is the hardest part of the business. I'm convinced that contractors are the worst people in the world. I just had a roofer try to rip me off for $1000. A couple of weeks ago I had to fire my carpet company after two shoddy installs. Last year I tried hiring a GC so I could concentrate on real estate. The rehab took months and the GC showed up three times total. Once to bid the job. Once because I complained enough about a problem. And once to collect a check. If I'm not on site almost every day everything starts to go to hell. Sorry if I sound like a downer, but just search the forums for contractor nightmares.  Good luck.

@Matt Shields : I know what you mean. I've had business dealings with exactly 3 general contractors, 2 of which ended in various levels of "disaster." As a result, any level of rehabs scare the bejeezus out of me. There has to be a business model in there somewhere that can mitigate those risks.

That said, it sounds like the general consensus is that my PM needs to be the person who manages that risk for me, since I can't be there myself.

James

The challenge first will be to find a good PM, then they will have to have a good GC. Sounds easy, but finding good people who actually care about your business is very difficult, especially in this market. Contractors are so busy now (At least here in Phoenix) that they don't care if you never hire them again because they have so many people begging them to do work. 

BTW if you find that business model, please share!

Originally posted by @James Kojo :

@William Haltom :

If I go with outside bids, how do I go about getting those bids? Do I have one come up with the scope of work, and have the rest bid on that same scope, or do they each have to walk the property to come up with their own bids? I'm already disturbing tenants with inspections and walk-throughs, so I'd like to avoid having 3 more trips for contractors!

@Todd Dexheimer : when you say "3rd party contractor" are you talking about a GC or specialists?

Thanks!

James

 A GC not in business with the pm 

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