All Forum Posts by: Chad Clanton

@Joseph Canini I agree with Seth, as pure referral is now the only way that my colleague in San Antonio and I find contractors; that said, if you have the time, you may want to look over these other posts, as I just got burned myself by a San Antonio contractor, and I'd love for you not to do the same.

http://www.biggerpockets.com/forums/86/topics/126953-beware-this-crooked-contractor-in-san-antonio

http://www.biggerpockets.com/blogs/4568/blog_posts/37028-now-for-a-whole-bunch-of-lessons-from-our-first-rehab-experience

Good luck, and invest smart!

It's my understanding from reading here on BP that flipping is taxed as income, not capital gains; as such, would the money from a flip I bought and started last year but which is still owned count as a loss for last year's taxes, or is that money somehow now incorporated into my taxes at all until I sell the property? I imagine the answer is floating around here on BP somewhere, but I still haven't found it just yet. Thanks all!

@David T. , thanks for the support. That's pretty much how I feel about it as well; it's easier when things go smoothly, but I don't think you learn nearly as much. When things go this far awry, you HAVE to learn ;-)

@Karen Margrave , I think you are correct in that it is much easier to start investing nearby rather than at a distance, and I know I've seen that advice before, as well. My reasoning is that I wasn't all that familiar with my local RE market at the time, anyhow, and given my fairly insane work schedule, I might as well invest out of state given how little time I would have available to physically go check out my property. That said, I have a number of friends down in Texas who I trust to help me keep an eye on things; with me heading down there more often and given that they learned the same lessons I did from this little incident, I'm pretty confident going forward. In this case, all the failures were business failures on my part, not market, price, or analysis failures. If he'd been fired when my gut told me, things would have been less severe. Live and learn.

@Karen Margrave Thank you for the comments; this being our first flip, I would say that nearly every mistake we made came back to bite us, including my failure to properly check references. That said, I'm going to reiterate for our other investors in San Antonio, CALL the San Antonio Development Services Department, DO NOT necessarily trust the online license-check database, as it has been incorrect/out of date on four contractors I've checked online and then called about. Also, for out-of-state investors, be aware that contractor licensing and registration in Texas is through the municipalities (and counties in some cases? not certain), not the state, something which it took me a while to wrap my head around after the fact.

@Jay Hinrichs , the regional perspective is something which is very relevant and that I'm just learning to pay attention to, as we are not set on sticking with only one locale over the long run. It also means that we have to get used to different expectations, norms, etc everywhere we look to invest. I am, as demonstrated, brand new to all this, but I'm looking to put this HUGE learning experience to good use, and everyone's input is definitely helping with that. Thanks again to all who have replied so far, it is much appreciated!

@Jay Hinrichs , thanks for that information, it's always good to know the good distributors. I'll be sure to check into them; I had no idea that non-compliant items would be sold on a broad scale either, and it would probably behoove me to ensure that anything I need is to spec. Good stuff.

Thanks for the fantastic information everyone's been posting here, I know that I for one am getting a lot out of it. I hope that this thread gets a lot more attention, and that newer and out-of-area investors will learn the lessons which come from it without having to go through similar circumstances. If anyone would like to read more, please check out my associated blog post at:

Now for a Whole Bunch of Lessons from Our First Rehab Experience

Good luck everyone, and invest smart.

@Jay Hinrichs Thanks for all that information and the anecdote; I think it really helps to see things from the contractors' perspective, something which I realize I've not done in any detail. Everyone has their own circumstances and expectations, and keeping those realistic all the way around is probably best for everyone. Also, the liability of materials which you mentioned is definitely something I'd never thought of, and I can see how it might creep up later. Thanks for the input Jay.

@Aaron McGinnis , I agree that there are definitely extremes; you can't treat everyone like a crook, but you can't be too trusting (like, say, me...). Honestly, I'm not going to be buying any materials from 1,500 miles away, either. I've pretty much decided I'm going to shoot for a compromise in my contract: contractor provides an approximate week-by-week timeline for the project, correlates the draws to the work to be done each week, with large budget items e.g. hvac, appliances, foundation work, etc limited to their own draws; that shouldn't over complicate things too much, it limits my risk, and doesn't force the contractor to pay out of pocket.

@Matthew Paul As a contractor, what would your take be on an arrangement like I just described?

@Matthew Paul , thank you for the contractor's viewpoint, it definitely makes a lot of sense what you're saying, and it would be easy to see only the investor viewpoint. The part about the contract is particularly relevant, in that a contract is really about solidifying what is acceptable to both parties; sure, most tend to favor one or the other, but the bottom line is that both must agree to it, or it is non-binding.

One issue with our situation is that he did a lot of work; the problem is, he was set to do the more expensive work (hvac, some more electrical, appliances, etc) last, so the final draws were still rather high, but they had to be bulk draws because you can't parcel out portions of an hvac system or things of that nature. That was where he got us, because he received those bulk amounts to acquire those expensive items, then bailed; it was only afterward when we pulled out the magnifying glass that we found all the hidden things that we have to redo.

As to the licensing, well, failure to verify on my part. Personality won over diligence; that's purely on me. Furthermore, it's largely irrelevant where the license is concerned, because by all appearances he doesn't have the assets to square us all away anyhow, even if we won something in court. Lesson #1072 learned.

Now, a question: one thing I intend to put in my contract going forward is a requirement for government issued ID, copy of the contractor license, and proof of insurance, as well as same for all subcontractors used, whether hired by me or the GC: how much resistance am I likely to run into asking for all of that, in your experience? Thanks for your input Matt, it has been very informative and is much appreciated.