When the contractor is over the timeline, by A LOT.

Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes

I’m on my first flip, and the official start for renovations was November 1st 2018. I was told it would take 12 weeks to complete the project and now we are well past that and still having issues. All of a sudden I need a new electric panel, and as of today “something” is wrong with the plumbing, and little things that I could (and should at this point being that I’m so frustrated) just do myself are taking too long.

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My questions: How do I expedite things, and how do I prevent this in the future? I’m very new so go easy on me. I have made too many mistakes to count and have beat myself up worse than anyone else could.

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Off topic: is having panic attacks a normal side effect of real estate investing? Asking for a friend.

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Jared W SmithBusiness Member

Architect · Westchester County, NY · Member since 2018 · 681 posts · 476 votes

Originally posted by @Mandi Martinez:

@Brian Pulaski ok that is good to know. See he actually created the SOW which in hindsight is not as detailed as it should have been but it did not have an electric panel.

They are close to being done. It really is just little things that are incomplete. They are dragging their feet and I’m not sure why? Don’t they want to get payed? As far as the plumbing : last week it was the toilet, then three days ago it was the shower draining, and today there were people under the kitchen sink.

First thing's first, you never let the Contractor create the scope of work. And if they do, you should be reviewing it against the property to make sure everything is included. Usually a set of engineer or architect plans would detail everything that is needed and the Contractor would price the project off these.

It's a huge conflict of interest for him to determine his own work and fee and you being a novice, he likely left these items out of the SOW so he can now charge you for it and say "oh it wasn't in the original SOW." No way a good Contractor wouldn't know by his first walk through if a toilet or sink needs to be replaced. Quite suspect if you ask me.

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Dennis M.
Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes
7y
@Mandi Martinez
I had a 5 month project turn into 13 months. It’s sadly very common with them . They usually way over extend and also use your money to pay for the next project down the street
2 Reply
Jimmy Deringer
Real Estate Agent · Spokane, WA · Member since 2013 · 123 posts · 66 votes
7y
@Mandi Martinez there’s a stipulated damaged clause that you can include in your contract saying the price will be reduced by $x for every day that the job goes over.
This is super easy to implement in the next job of you include a bonus for the contractor if the job is completed before the end of contract. And also a stipulated damaged clause on the back end.
When you determine the end of the project date ask him “are there any problems that you see might arise on this job?” He might add a few days as extra padding. Then ask him “is there anything else that would prevent you from completing the scope by this date. He’ll probably say no and be happy with the completion date. Now you have an exact date to count on and a happy contractor who will work harder for that bonus if early. You can make the bonus the money that you will save from the hard money fees and holding expenses so you’re technically not owing any more money.
Another idea that we’ve done is to walk through Home Depot (or wherever you buy material) with your contractor, pick stuff out together and have him tell you when he expects to be installing each item. After you know what materials he needs and when, just phrase this like you’re going to do him a favor and handle all the delivery and material purchases so it will either all be on the job site when he needs it or he’ll be able to pick up materials at the store that you’ve already paid for.
You will either be paying him for all the work that he will be complete the coming week or you could always pay him at the end of each business day for the work that he’s done.
Some contractors have time managing finances so this will give you a much better chance of having nothing go wrong on your project.
Those are just some ideas that I‘ve done. Hope that all makes sense. No horror stories from contractors yet! :)
1 Reply
Destiny Holmes
Lawndale, CA · Member since 2018 · 18 posts · 3 votes
7y
@Mandi Martinez read the book by Paul Esajian “The Real Estate Rehab Investing Bible” that will tell you most things about handling a contractor and creating a system so next time it won’t happen. Great job going at it and being fearless!
1 Reply
Dawn Burwell
Rental Property Investor · Overbrook Hills, PA · Member since 2019 · 84 posts · 26 votes
7y
@Brian Ploszay what does that mean ? ” Expand your holdings “
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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
7y
A contractor around me has a cigarette boat named "Contract " he puts it on the deck of his 110 ft yacht named "Change Order" .
6 Reply
Emilio Ramirez
Contractor · Denver, CO · Member since 2009 · 399 posts · 166 votes
7y
Regarding the schedule, was holiday time discussed? Is it in the contract? If the project started nov 1, you have three huge holidays in there. That can easily result in three lost weeks. It sounds like the contractor is close to finishing other than the extras you refer to. If he is and you consider those holidays I would say he is right on time.
If you're going to be a flipper you need to educate yourself on the construction process. You need to be able to deduce if the electrical and plumbing changes he's referring to are necessary. You need to know from the beginning if those are part of the scope. Of course with remodels there is always the wildcard factor of what am I going to find once I open the walls. Hard for anyone to know what surprises will be uncovered which is why your budget and your schedule need to accommodate the unknown.
Lastly, you need to define the scope of work for the contractor, not the other way around. Congrats on your first flip. Hope you are learning alot and that it is a profitable one for you.
2 Reply
Pete Barrow
Investor · Indianapolis, IN · Member since 2017 · 145 posts · 158 votes
7y
I think a lawyer will tell you that often, very often, problems come from not having a clear and complete contract. In this case, you say yourself that the contract sets a finish date but no penalty for missing the date. That's a little like saying, "murder is illegal", but not setting any penalty for it...and it makes me wonder who wrote this contract. Saying that a person shall or must do something, is meaningless unless you say what will happen if he doesn't. You could specify a money penalty of so much per day late, and that rate could rise as time goes by.
Of course the other thing is to be very clear about the scope of work, about what happens when hidden conditions pop up (they always will), about the schedule of payments, control of the jobsite, etc etc etc. And you might look into what the law says in your jurisdiction about resolving contractual disputes. If your contractor says you need to pay for X because it's unanticipated, and you say he should have anticipated it, how do you resolve that without a lawsuit? Is it possible to include a third party abitrator, maybe an inspector or architect, in the agreement, to resolve these things quickly? If you're going to do this again, ask your lawyer if he has a boilerplate construction contract you can use, that addresses all these issues.
Might start trying to develop relationships with other contractors while you're at it. The sky is the limit as to what can go wrong on any construction project. One part of controlling that is a good contract. The other part is a good contractor.
BTW: By construction standards, I wouldn't say you are "well past" your due date. Stuff happens...plus the holidays.
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Jon Cunningham
Member since 2019 · 1 post · 0 votes
7y
Hi Mandi,
Can you share a little more about the contract? Is it open ended time and materials? Fixed price? How is the scope of work (i.e. the 12 week project) defined? It may be that the contractor is going above an beyond (it happens), or ripping you off, or most likely, just struggling to get through the job. Keep in mind that just about everyone on the Gulf Coast who owns a hammer has unlimited work opportunity in the pan handle right now, so it can be hard to get trades scheduled for smaller projects.
My experience (CPA with construction background, not a lawyer, no legal advice) is that a contract that does not specify damages leaves you able to recover actual damages (lost rent due to delay etc.). The cost and effort of a lawsuit is probably not worthwhile for a small project that goes a couple weeks over. Next time, you may want to consider specifying liquidated damages - $X per day or week of delay. There are some standard construction contract forms you can find online that will include this language.
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William C.
Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
7y
@Mandi Martinez according to my bad math, he is about 4 weeks past the due date?? In my experience, I’d consider that to be a little, compared to A LOT past due. Now don’t misunderstand me, I’m not saying this is OK, or should be the situation you are in, but I have had at least 3 projects take 6 months rather than the 3 that was estimated. Projects typically take longer than expected, for countless reasons. The was we avoided going over on time frames was finding a contractor that was not only good at estimating costs, but also timelines. It al comes down to experience.
Others have mentioned that a more detailed description of the “plumbing issues” as well as why you need a new electrical box should help to bring some truth and clarity to the situation. It is not uncommon to open up walls and floors to find plumbing issues that need to be taken care of that could not be seen before they started. Needed a new box all of the sudden seems VERY odd to me. The electrical box should be one of the first places a contractor looks. After all he’s going to need electricity to work, so there is that. But also with most renovations, new kitchens mean more amps needed, which means bigger boxes. So until we have more detail about the exact reasons you need these items, everyone is simply guessing what the real reason might be. I hope for your sake that he is just running into issues as they peel back the onion, rather than simply being an inexperienced contractor flying by the seat of his pants and figuring things out as he goes. Iv certainly been a victim of the latter early in my flipping days. Those cheap cheap Reno prices were good to resist, but in the end they were also too good to be true...
So with all that said, delays are to be expected, I wouldn’t let that cause any panic attacks. Get some concrete details from the contractor and report back. Don’t let him be vague. Why do I need a new panel? Why are we finding out now, isn’t that something we could have planned for from start? Do I have options other than replacing the panel, like a sub panel?
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Tyler Bushey
Investor · Biddeford, ME · Member since 2017 · 282 posts · 180 votes
7y
Next time I would put that he owes $100 per day, each day he is over the date on the contract.
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Bill Plymouth
Real Estate Agent · Philadelphia, PA · Member since 2018 · 416 posts · 396 votes
7y
@Mandi Martinez I am new as well still looking for my first deal. A strategy that I will Implement in my first deal I learned from listening to @David Greene. After your contractor gives you a time-frame of completion, offer them a small bonus (about 4-5% of the cost of the work) if it is finished ahead of schedule. Conversely, after each week the contractor is behind schedule, tell them you will be subtracting 4-5% from their quoted price.
This should be included in the contract. I hope this helps. Good Luck!
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Frank Geiger I did not give him all of the rehab money. I do like the idea of having the contractor as a partner. I can see how that can be beneficial. I truly appreciate your advice and your kind words. I will try not to overreact. You are right: what’s done is done.
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Marie Holmes I still have about 8k to give him. That’s so true about the buyers inspection. I didn’t even think about that. I thought I have to pay him in full so he can close out permits and then I put it for sale? Is that not right? How would I “hold” his money for the buyers inspection?
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Will Mace I really appreciate your response and great advice on what to ask. I didn’t even know there was a builders association so thank you for that rod but as well. I like your optimism about it being a valuable learning experience, you are very right. Thank you for taking the time to help me.
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Mandi Martinez
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Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Keith Lyons this is great advice that I definitely will use in the future. Its nice just to know that I’m not alone. Thank you for your response and well wishes.
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Karen Margrave Yea I didn’t verify any of that I am ashamed to say. I’m very embarrassed at the mistakes I have made but I won’t let it happen again. I appreciate you taking the time to respond and encouraging me to take control. I have taken notes on everyone’s pieces of knowledge/advice, now know better, and will do better.
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Gus Kazek love this advice and I will do it from now on! Penalties if not completed within a reasonable time frame. Thank you for your response it is very much appreciated.
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Liza B. Liza you are awesome for this. I have written down your words of advice and will implement what I can immediately and use it in the future. I am grateful that you took the time to respond to me. Thank you.
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Otho Keller it’s nice to know I’m not alone. Thank you for your response.
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Mandi Martinez
OP
Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@David Robertson I know he told me why, but I know nothing about construction so really he could tell me anything. I honestly feel stupid. You are right that I need to understand WHY. I really appreciate your advice and taking the time to respond. Maybe I can message you when I speak to him again and you can tell me what you think?
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Mandi Martinez
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Flipper/Rehabber · Tampa, FL · Member since 2018 · 60 posts · 20 votes
7y
@Jared W Smith in all honesty if I created the scope of work I’m afraid I’d miss hundreds of things. Do I include every electrical outlet? Do I included aesthetic decorative things like accents walls? I assure that I will be taking a step back after this and assessing ALL that I have done incorrectly. I am so grateful for you taking the time to respond to me and hope I can contact you in the future.
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Ashton Day
Member since 2018 · 14 posts · 25 votes
7y
"I still have about 8k to give him. That’s so true about the buyers inspection. I didn’t even think about that. I thought I have to pay him in full so he can close out permits and then I put it for sale? Is that not right? How would I “hold” his money for the buyers inspection?"
I have never heard of a contractor who would allow you to hold money for work/services performed until you as the homeowner are able to successfully get a buyer on the flip side. What if you are listing the house too high and it takes a year to get to a contract and buyer's inspection? Not sure what craziness happens in other states but NEVER seen this.
You would have recourse to pursue legal means with a contractor over issues that come up at buyers inspection if they cause you loss/damages, but you can't just keep fees for services performed depending on a contract with another separate party, and more variables involved outside of contractor service/fees.
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Account Closed
Rental Property Investor · Jacksonville, Florida Area · Member since 2016 · 106 posts · 48 votes
7y
@Mandi Martinez I would hire a good certified home inspector to go in and do a full home inspection beforehand.
This knowledge about the home will give you a better advantage when you create your scope of work and will help when dealing with contractors, because you'll know what needs to be done. Plus, if anything comes up that was not pointed out by the home inspector, you can call him back out to look at what he missed, to give you a second opinion on it.
I believe the money spent on a good home inspection, could really save you alot of time, money, and frustration, and would be well worth it.
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Account Closed
South Bend, IN · Member since 2014 · 318 posts · 156 votes
7y
@Mandi Martinez
"Asking for a friend"......I burst out laughing. Thanks for keeping some sense of humor about the whole thing. I pray for you that it all works out.
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Bernard B.
Investor · Huntsville, AL · Member since 2012 · 50 posts · 50 votes
7y
This is just my opinion of course , for whatever it is worth. You said that there was not much work left in this job. I would pay this contractor whatever that I owed him, then I would fire him to prove that I was serious about my deadlines and budget. I would then get a different contractor ( based on referrals, maybe from BP or a local real estate group meeting). I would finish this project with this contractor , and in the future, as other suggested , I would create my own scope of work and possibly have it verified by a certified inspector if a lot of work was required. Time is money, and budget overruns can cost you a lot of stress and money. You did the right thing by soliciting opinions in this forum. Remember, many of us have already been through this ordeal before, so you don't have to reinvent the wheel.
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