All Forum Posts by: Jeffrey Stasz

@Alex Saleeby you got it man. I think one of the things that folks miss out on from always trying to "be there own GC" is a deeper understanding of the trade offs and long term performance of materials. 

I've learned SO SO much about materials and what not since going full time into construction and development. 

A good resource is the Journal of Light Construction (JLC) and Fine Home Building. You probably already know this but it might be worth the time to set up an account with your local building materials supplier (Not lowes or HD) those folks always have their ear to the ground and can often recommenced better options. 

@Andy R. I work in SC so I am not as familiar with GA codes. In SC we insulate all duct work between floors, due to extreme heat loads and high humidity. 

@Sara C. you are responsible for this repair. If you hired a licensed and insured GC then you could take it up with them. But if you chose to GC this project yourself then you are the GC and therefore responsible. 

Yes it is unethical not to address this repair. 

@Andy R. HVAC codes are supplemental to the IRC. What you do in NJ has no bearing on what is required in GA. 

@Mike H. going to court is probably the worst possible outcome. Sara will almost certainly loose. 

Look at from the consumer's point of view: 

Consumer does not want to buy a flip because most flippers do shoddy work and have no idea what they are doing. Consumer demands Flipper guarantee their work for an extremely limited amount of time. Flipper agrees to this condition. Flipper's work turns out to be defective and Consumer activates guarantee. Forget the what you touched vs. did not touch. If you went to the studs you touched everything. 

Also the downside of getting into the nitty gritty of this could be severe. Does the permit pulled reflect the actual SOW? How did you calculate the 50% rule? Is that methodology standard in your municipality? If it's different there is a good chance you invalidate you Permit and open yourself up to fraud charges.  

@Sara C. I am not trying to pick on you. I am developer and a GC. I have been where you are and really feel for you. But, you built a product and put your name on it and in under 12 months the product you built is leaking. That's unacceptable and you should take responsibility. 

I'm no attorney but if I were in your position I'd fix my work before I sought advice of counsel. 

The other thing to consider is your brand.  If you fight this, you should expect this owner (rightly in my opinion) to trash your reputation.

@Andrew Taylor the typical seasoning period is six months. It could also be a year. 

If you choose to sell then you can sell at any point but the discount rate applied to the cash flow may be more of a discussion to reflect the uncertainty of a new product. 

Disagree on Vinyl Plank. It does not hold up as advertised, it can't be refinished and consumers are wise to it. 

For rentals I've had great luck with #2 Red Oak. It's affordable. It's beyond tough and when it get's beat up a cheap sand and poly job has them looking like new. A typical sand and refinish in my market is going to run 600-1500. 

You also get a little premium for having "hardwood floors throughout" 

Typically when folks are shopping for hardwood floors they are looking at #1 or Select and they usually run at 8-9sqft installed. But the lesser grade lumbers like #2 offer a great value and the irregularity can add tremendous character to your rental. 

@Sophie Lee you are probably out of luck and it sounds like you have made more than "a few" changes to the SOW. Anything above 3 is really typically a red flag. Minor is subjective. You could have asked for some things that were profoundly difficult.  

Should your contractor have explained each and every cost change? Probably. But it's also true that you should have finalized and understood the SOW prior to commencing work. 

As a rule a change order is 30-50% more expensive then a planned item. The contractor usually has to undo the agreed upon work (Time and Materials) and then figure out how to accommodate the new request which takes much longer and is inevitably much harder. As an example: One of my trim guys was building out a sweet set of stairs for another client. Toward the end of the project the owner asked for a "minor change" to replace the specified wood tread with tile. That was a 100K change order. The product thicknesses were different and the entire stair system needed to be retrofitted to accommodate the change. 

I'm not a lawyer but I am a contractor and chances are your legal options are pretty thin. You are both in breach of contract. You both agreed to only make changes in writing. The first time you paid for changes that were not in writing you violated the terms of the contract. Yes subsequent changes should have been in writing. But you helped establish a working relationship that deviated from the contract. Contractors do not change things randomly and we get stiffed/sued all the time and most judges/jury's understand that. There is a reason that a contractor can put a lien on your house. 

Your best bet is to talk to your contractor and develop a game plan to finish the project for what you can afford. 

Final note. Your contractor can very easily walk and still put a lien on your house. Getting another contractor to take over is going to be EXTREMELY difficult and unbelievably expensive.

I'm sorry this is a tough situation but to get to a reasonable outcome you are going to need to see this from your contractor's point of view and work with her to resolve the problem. 

If you would like someone to talk to or just a shoulder to cry on feel free to DM me and we can set up a call to go thorough the specifics and generate some win win scenarios together. 

Best 

Jeffrey  

At this scale the rough process is as follows: 

1. Bring on equity investors to secure the dirt and front the costs associated with getting phase 1 shovel ready. 

1a (depending on experience and local lending environment) Deploy additional equity capital to do the horizontal (roads, sewage, sitework) 

2. Bring stamped plans and permits to a local lender with your pro-forma. Secure commercial construction financing for the vertical portion of the build. They will generally take a first lean position on the dirt and associated IP

3. Build 

4. Lease up and sell phase 1 cash flow or convert that phase 1 debt to a long term loan and retire the previous debt. 

5. Phase 2-3 rinse and repeat. 

For me the easiest way to understand the role of a developer is as a bond maker and seller. You take a non-cash flowing piece of dirt. Add capital and create cash flow and then sell the cash flow. 

@Dae Sandridge New Construction is the way to go. It is more intimidating but actually easier then a full gut especially if the subject property is older then 50yrs.  

As a bit of background I am a developer AND a builder specializing in historic restoration and new construction urban infill. My new construction stuff is always much less of a headache. 

I could go over the specific reasons why this is true and I have in multiple posts elsewhere in the forums. If you'd like to read those feel free, or you can DM me and we can get on the phone if you're super interested/nervous. 

To keep the forums fresh let me offer you a few rules of thumb to help your new build go right: 

1. Be honest about your experience level with the core members of your team. Just tell your architect and your GC that this is your first rodeo and you will need some hand holding. You'll know you have the right team when they are excited to work with you and help you learn the business.  

2. Related to number 1: When bidding out the job you'll want to start with the architect and then interview the builders they recommend. New construction is a team sport and the folks who play in the space have squads they consistently work with. The architect/builder relationship is important and can take a long time to cultivate. It will be tempting to mix and match. Don't. While it is possible that Tom Brady and Bill Belichick would have be equally successful apart as they have been together I'm not sure I'd want to bet 500K to find out. 

3. Find a builder you can fight with. You will be married to this person for 6-18 months and it is going to be overwhelming, expensive and stressful. At some point, you'll have an argument. It's important to be able to fight with this person without doing permanent damage to the relationship. 

4. Sweat every detail and enjoy the ride. The first new build is really really special, you will quickly learn how little you actually know but you will also learn more then you can imagine. 

Good luck. 

@Cody L. I agree with this strategy. I know raising capital is hard, but in my exeperience the capital raise is often the easiest part. Finding and executing on the deal and really adding value is much harder. 

It's also the all the same amount of work so might as well make more. 

@Jay Hinrichs the WFP title report has consistently signaled the 850K+ market to be the strongest. Fewest days on market etc. If you were building a McMansion in MT. P then I'd be concerned but the downtown market is solid. Inventory is mediocre and the demand is high. Most importantly the folks that are moving downtown are overwhelmingly coming from expensive markets so the 2mm does not seem so high. When are you guys looking to wrap that thing up? 

I have never made less then a 100k on a flip. Granted my stuff is big and time consuming so it is usually closer to 60-70k/yr when we are all done but we still do pretty well. 

If I am going to make 25-50k on a project it's going to be as the GC. Low risk, limited capital investment and provides cash flow for larger development projects. 

My market (Charleston SC) is pretty good right now and a lot of flippers are killing each other in the 260K and below market while a lot of developers are killing each other in the 10-15mm market. Obviously a big gap but we are seeing solid success in the 550k-1.5mm market. It's an expensive enough product that the capital outlay acts as a barrier to entry while the total cash return is still too small for the larger outfits. But it is hard to find inventory. 

I know @Jay Hinrichs is about to do a new spec build a little bit above this price point and I suspect he is going to be pleasantly surprised with the outcome. 

I am firm believer in the simplicity of the business. Either you're lending money, enabling transactions (sales/brokerage) or creating new product (construction/development). If you're not operating in one of these three verticals then eventually you'll get squeezed out of the market as margins compress and markets become more competitive.  

I meet with a lot of aspiring flippers and while it's always flattering to have people seeking your advice, I worry their is a lot of magical thinking in the current market. 15-25K on a flip in my view is simply not enough margin to compensate for the risk. Construction is an expensive business and small misses can add up very very fast. In addition, consumers increasingly want ultra high-end finishes while paying big box prices. Even with the limited inventory the folks at the median seem happy to sit out of the market and wait in the belief that prices will come back down (I don't think that is going to happen) or they go out and buy a brand new track home. 

So, my strategy is to build higher quality product and target a higher segment of the market. As a result of this strategy, I have set a minimum cash return of 100K and a minimum ROI of 20% (With 50% being more of the norm). My volume is much lower then most but I am okay with that. I would rather focus on getting two projects a year right and making a 1mm then getting 50 projects a year almost right and making less.

My two cents.