Success starts with a plan

It's been said a thousand times, that the planning phase of any investment venture is the most critical part.  However from experience as a contractor I see over and over investors who haven't planned, end up surprised, disappointed or the project fails.  So let me share a few suggestions that every investor should consider.

Scope 

More often than not, I get asked to look at and bid projects where there isn't a scope of work.  As an investor, part of your due diligence when looking at the property is to determine a draft scope of work.  It is impossible to determine the profitability of a project without at least having a good idea of the scope that needs to be completed.  It's not up to the contractor to build the scope of work.  However if they do that you can pretty much guarantee things will get missed, work won't be what's expected, or really big surprises may come up.  If the contractor is asked to build the scope and these things happen, that's not on the contractor it's on the investor.  If you have a contractor you've worked with for years, have a solid relationship with, and trust to put this together...great.  From my experience many investors don't have this relationship.  What you want from your contractor is a partner who will help you with building the scope of work.  We provide a scope of work template for our clients to use.  I require that they complete it and bring it with them to our first meeting to look at the property.  From there I can help them with any elements that may be missing or that weren't thought of that need to be added.  You need to drive the project, not the contractor    

Bidding and Materials

Often we are in a position of bidding against other contractors.  For you to get a genuine price you must know exactly what you're getting.  The level of sophistication with contractors varies greatly.  Some will give you printed, software driven bids (like we do) others will give you something hand written that's general in nature.  We bid medium grade materials on all our jobs.  I also provide a materials sheet with the bid so you know exactly what is being bid.  In order to get bids you can truly compare, you need to have an idea of the type of materials you want.  It doesn't have to be down to the SKU #, but do you want a medium grade D4 vinyl siding, 30 year laminate roof or 3 tab shingles, single hung or double hung windows, etc.  Often when we bid we find out later that the bids aren't an apples to apples comparisons.  You need to make sure you know what you're getting with that bid.  

Spending more time on the front end building your scope of work, knowing your materials and fairly estimating your cost will dramatically increase your chances of success with your project.  It is a critical part of building a successful real estate investment portfolio.