All Forum Posts by: Kyle Jiron

@Lisa S. Welcome to the BP community! There is a great market in WNY for multifamily properties and you have picked some great areas to invest in. I went to college at UB and rented for 4 years like an idiot; I'm still kicking myself for not purchasing a home while I was enrolled there. The real estate prices are great for first time investors, multifamily properties are extremely prevalent, and the ROIs are fantastic.  

Have you and your husband put together an action plan / investing plan yet? I strongly recommend it if you haven't done this yet. This will help guide you through your investing career and keep you focused. Best of luck to you both and happy investing!

@Chad Michael another great point for active management of a GC. In commercial as a GC, we complete a daily report of all the subcontractors onsite, the number of workers they had, the areas they were working in and a description of the work. We also require our subcontractors to submit daily work reports for their specific company. This allows for a double check of who/what/where we are seeing on our sites, and what the subcontractors are telling us. Definitely a good way to ensure the people are onsite when you are being told they are. 

@Mark Sewell as you said, getting in with a good GC who is investor-friendly / investor-minded will make all the difference. Once you have that working relationship and/or financial buy-in with your GC, there is a much higher likelihood they will be looking out for your best interests because it also is impacting theirs. It's a shame that there are a lot of short minded contractors out here taking advantage of people. It's a very simple business, that can be very profitable if done correctly. I think a lot of them are too short minded / sighted to realize they cost themselves a lot more money in the long run than they are saving by pinching pennies or taking advantage of people. If only they could see the bigger picture (especially with investors) and properly communicate and run their projects, investors would never let them go hungry for work!

@Matthew Paul Good catch! Having clauses in the contract related to changes directed by the owner are a must! In commercial, this is in every single contract we do, otherwise we run the other direction. Anytime an owner directs a change in the project, the contractor is entitled to the money and time (this is really only applicable if the change affects the over all completion date of the schedule) associated with the change in direction. Of course, there is a process for changes, which should also be laid out in your contracts. If the owner would like to make a change, then receive their direction, evaluate the cost and time impacts, and review with your owner and await final direction. It's definitely important for both sides to understand this process and communicate effectively. 

That is very sad to hear for that customer, sometimes you just cant get a break. When I was referring to allowances, I was speaking more for parts of construction that you could just never know until you really start cracking open walls or removing finishes (mainly for the younger guys who just don't understand yet). For example, carrying an owner's allowance to replace some percentage (or all) of the sub floor or sub roof when doing a replacement, because you just never know what the condition will actually be until you unveil it. This way you have an established pot of money to pull from if you reveal something unexpected, and if you don't need it, the owner hangs on to it for something else. 

And another great point for the contractors out there! Knowing your customer well is also very important, and could save you tons of headaches. Just as there are shady contractors, there will be shady "owners / investors". Another fantastic reason for everyone to be doing their homework.  

@David T coello Definitely some good responses in here regarding payment and contractor vetting. As someone who works in commercial construction as a GC, my perspective is a little different, just because the game is played a lot differently in a larger scale. There is no doubt about it that there are great contractors and absolutely terrible contractors in the residential world. As an investor / owner, it is your responsibility to properly vet and manage your contractors. Just because you hire someone to do a job, doesn't mean you can just sit back and relax on the beach and wait for them to finish. While you may have a project manager (GC) running the construction project, you are running the overall investment and project. In the commercial world, you would be considered the construction manager; you make sure the GC is hitting their schedule, getting compensated adequately for the work completed and ongoing, and making sure that the quality of work is where it needs to be. If you aren't prepared to take on this role, then you can always hire a construction manager (this is what most owners do in large scale construction or they have someone in house that does this for them). Managing your own expectations of how the process works is very important here. It is important to understand you have a role in the process and that just because you hire a GC to run the construction, doesn't mean your part is done.  

Some good management / best practice tips:

1. Have a well written contract with the GC 

- Make sure the scope of work is clearly defined

- Include the construction schedule and clearly define the required completion date and any project milestones (i.e. all framing completed by DD/MM, walls and ceilings inspected and closed in by DD/MM, construction completed by DD/MM, etc.)

- Include or discuss liquidated damages associated with not hitting project milestones or the completion date (i.e. "project to be completed on DD/MM, failure to meet the required completion date results in liquidated damages of $500/day following a 3 day grace period after the aforementioned specified construction completion date"

- Make sure the project's cost is clearly defined and any contingencies or allowances are noted (i.e. the project value is not to exceed the $135,000.00 budget laid out by the contractor with an owner allowance of 10,000 for unforeseen conditions). Include language regarding any additional costs ( All additional costs to be submitted to the owner for review prior to proceeding). 

- Clearly define payment procedures - As some of the folks before me have said, some projects could be 1/3 at the start, 1/3 halfway through and 1/3 at the end or you could pay the entire project at the end. It all varies so make sure to discuss with your contractor and clearly define this in writing. 

- Permitting fees and inspection costs. Make sure it is clearly defined who is paying and obtaining all of these. If you are covering the permitting costs and getting the permit or if the contractor is providing a price to apply and obtain the permit, make it clearly defined. 

- You can google construction contracts and find a lot of good examples to help you with verbiage needed to ensure you are protected and the project is run properly. You are a professional and this is your business, run it as such. Make sure you have good contracts and procedures in place to protect yourself and your project. 

2.  Make your contractor submit you weekly or monthly progress reports. Review their reports and pay close attention to make sure your project is progressing properly. 

3. When hiring a contractor for a project, get at least (3) bids. This will allow you to really understand the total cost of the project, some contractors may be high, some may be low, but this will allow you to find the middle ground and really understand if someone is low balling you to get the job or if someone is high balling you and taking advantage of your lack of knowledge in construction. Have the contractor break the bid out (never accept a lump sum price for a project) into the different aspects of the job (i.e. paint = $2,000, drywall = $5,750, etc.). Check all three bids and compare them to each other to make sure they all priced the same scope, have all the required components and double check that there aren't any exclusions noted. It's easy for contractors to make a fine print note saying they have excluded some aspect of the project and then you have no ground to stand on when they tell you it will cost extra to have it done. 

4. Check in frequently and make sure your project is being well managed before you step back and let the contractor run with the project. Many investors / owners will check in 2-3 times each week until they are confident the contractor has everything under control. 

5. Get the contractor's licenses (driver's and contractor's licenses) and keep a scanned copy on file. This will ensure you are working with the person they are saying they are, and that they have the proper credentials to be doing the work. 

As far as finding good contractors, word of mouth is always a great way to find out about good contractors; people who have a good experience (or bad) will always be willing to tell you about it. Ask your friends, family, or if you are confident enough, swing by a local jobsite and get familiar with the GC or reach out to the owner and ask about the GC on the job. I strongly recommend staying away from hiring anyone on craigslist, but that is my personal preference. Angie's list is a good place to look for contractors, and they have reviews and ratings for each business. 

Once you have a couple GC's in mind, ask for references (minimum of 3) and past projects (maybe even ask for tours of previous work if the other owners are willing). Review their work and call all their references; make sure to ask each person about their experience, if their needs were met, how the contractor responded if changes or additional work was required, etc. Really do your homework to make sure you are dealing with a good contractor. 

Lastly, as others have said, keep in mind that you get what you pay for. If you go with the lowest bidder to cut some project costs, you very well may end up with tons of cost on the back-end fixing low quality or incomplete work and craftsmanship. But be weary: just because you choose the highest bidder there is no guarantee for your project to go perfectly and have the best quality. Do your homework on the contractor, get multiple bids, be active on the project, and communicate clearly and effectively. If you can do all this, then you have the highest chance for a successful project. 

Hey @Sean Wenzel welcome to the BP family! I second @Account Closed's comment, 5 (soon to be 6) people in 1000+ SF is impressive! What king of real estate investing are you and your wife looking to get into? As Brandon and Josh always say on the podcast, a great first step is to start putting together your investing / business plan. Having a road map will get you moving in the right direction and keep you from running in circles. Best of luck to you guys!

Hello BP World,

My wife and I are looking for a SFH property near the Maryland ICC route 200 to purchase. We are looking for a stand alone property with 3+ BRs & 1,800+ SF for a family residence, and we are just having no luck on the MLS with such a competitive market. Willing to take on a major renovation project (sale price in the $200-300k range) or a move-in ready home ($450k or under). Not sure if any wholesalers out here could help us out, or if any real estate agents know of some good off-market properties they can send our way. Any help is much appreciated!

Kyle

 Welcome to the BP Family @Zach Gard! I am also a newbie investor who currently works in the commercial GC world downtown. Let's connect sometime and share some war stories! Best of luck investing.

@Erick Garske Do you have a photo of the porch? 

As far as contractor questions go: 

(1) The contractor should have general liability insurance, which would cover them in the event that damage happens to an unassociated person or property at the worksite. As @Matthew Paul said, the neighbor will come after you first, they will not go after the contractor. It will then be your responsibility to go after the contractor after the fact. 

(2) I haven't seen the property or understand the logistics surrounding the working area, but I am leaning towards this contractor is looking to get a little more work, which is why he is saying your neighbor would need to have his side repaired too. Most contractors understand the need to work carefully around other property and people, and will take the measures to limit the impact on those surrounding areas otherwise they risk getting sued themselves. 

(3) I don't have a similar SFH home experience, but I work in commercial construction and there are always complaints from neighboring properties regarding work and/or damage. What I recommend is having your contractor or someone take photos of the entire area that will be worked on and the adjacent areas. Document EVERY crack, scratch, etc. and have this put together in a readily accessible report, maybe even send it to your neighbor and have them sign off on it. This will be a huge headache saver on the back end, as you will have a detailed report you can reference back to when everything is finished. This will allow you to easily describe what damage was existing and what damage (if any) came as a result of your work. Hopefully this isn't the case, but if your neighbor did come after you, this existing conditions report will go a long way in any legal battles.

I would not recommend the neighbor sign a hold harmless agreement, because all this is doing is pardoning your contractor of any liability and putting all the liability back on you as the homeowner. This will come back and bite you if you are not careful. 

Have you thought about using a different contractor or are you dead set on using this specific one? 

@Shane M Christie Welcome to BP! Student Loans are definitely a struggle, but you can always find a way to invest that will work with your current financial situation. I'd recommend looking into getting involved with a local REIA event or Bigger Pockets meetup (Link: https://www.biggerpockets.com/forums/521-events-and-happenings). Get involved and meet some of the investors working in your area and I'm sure you can find someone that would be willing to partner up with you. In the meantime, be a sponge: listen to as many of the BP Podcasts as possible, there are a lot of great books out there to get you started but here's a quick guide from the BP guys (Link: https://www.biggerpockets.com/renewsblog/wp-content/uploads/2017/06/The-Best-Real-Estate-Books-Ever.pdf). Best of luck to you and happy investing!

Welcome to BP @Jason Chan ! I'm also a newbie from the DMV area starting out, looking in the PG and Montgomery county areas. There's definitely lots of opportunity around here, it just takes a little more digging to get good deals since the property values in the area are much higher. You may want to link up with @Jason Taliaferro who can get you lists of absentee owners in MD to start searching for potential properties and opportunities. @Ken Nyczaj gave me some good tips on books to learn more about the process and strategies for investing, which are (1) Brandon Turner's - Book on Rental Property Investing, (2) Brandon Turner's - The Book on Investing in Real Estate with No and Low Money Down and (3) Jay Scott - Book on Flipping Houses. He also has a great post about his strategy in getting his first property under contract. Welcome to BP and happy investing!