Optimizing Rental Property Renovations: Avoid My (Costly) Mistakes
This week, continuing with our renovation blog series, I want to share some (painful and expensive) lessons we learned from completing over 550 renovations. Note that if you are working with us, everything below is baked into our processes and services. If not, I hope you will get value from this post and avoid my mistakes.
You Only Get What You Document
This is where things can go seriously wrong. You will only get what you want if you unambiguously define it.
For example, below is a description for painting the interior of a house.
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The interior, ceilings, walls, doors, casings, and baseboards will be painted as follows:
- Walls: Sherwin-Williams White Duck in eggshell sheen. The code is SW 7010. Here is the link
- Ceilings: Behr Flat White ceiling paint. Here is a link
- Doors, casings, and baseboards: Swiss Coffee, semigloss sheen. Here is the link
The price will include all labor, materials, surface preparation, and cleanup. All switch and plug cover plates will be removed and reinstalled after painting. All door knobs will be removed before painting and reinstalled after painting. Doors will be removed, sanded, spray-painted, and reinstalled. The hinges will not be painted.
An unopened one-gallon container of the three paints will be left in the garage. The manufacturer, paint name, code, and sheen will be marked on the top of each can.
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Even if you think there is an adequate description, I have the vendor walk through the property and describe each task, including how they will do it, how many people will be working each day, and approximately when the work and cleanup will be complete. I video this walk-through, and it becomes part of the documentation.
If there are issues with the vendor's work commitment, I play the video for them. For example, I had one vendor claim that they did not agree to do a task under the contract price. When faced with the video, he did the work at no additional charge.
Creating unambiguous documentation for every item is time-consuming but essential.
Make Sure There’s Someone to Overwatch
We do several renovations each month, so we have a trained team member who overwatches what is happening and takes progress videos. Unless you have a trained person (working for you, not the vendor) monitoring progress and quality, the renovation will cost more, take longer, and the quality will be less than desired. Also, if the vendor knows there will be frequent inspections, they will do better-quality work and be less likely to play games.
Coordinate Your Vendors
The order in which work is performed is important. For example, you do not want the walls painted and then have the electrician cut into them to install wiring. Also, you do not want carpet installed before the walls and ceilings are painted.
Without proper coordination, your project may encounter issues, leading to increased costs and delays. Consider a situation where one vendor is responsible for painting doors and another for replacing the doorknobs. There's a good chance you might encounter the painter claiming, “My job was to paint the doors. The damage caused by the doorknob installation is not my problem.” Similarly, the doorknob installer might argue, “I installed door knobs and am not responsible for the paint.” This happened to one of my clients’ properties, and the result was that I paid for the repair cost.
In most cases, having one vendor in charge of all work is better, even if it costs a little more.
Manage Change Orders
Every change must be documented with a change order. The change order must include a description of the change, any additional cost (labor and materials), and how much more time will be required. If a vendor performs work without a signed change order, we will not pay.
Price Is No Indication of Quality
Some of the worst-quality work I’ve seen was performed by licensed contractors who charged two or three times what a handyman would charge. Some contractors didn't even pretend to follow the schedule they signed. We've had the best work performed by handymen at much lower prices.
Use handymen to control costs and only employ licensed contractors when necessary. For instance, you don't need a licensed contractor to change lightbulbs. We use licensed professionals, such as plumbers and electricians, for tasks when they are needed, especially when permits are required.
Leverage Your Investment Team
Many contractors are reluctant to take on small jobs. However, your investment team can provide the leverage to ensure even small tasks are completed promptly.
Prohibit Drugs, Smoking, or Alcohol on Site
I've fired multiple contractors because workers (and even the supervisor, in one case) were under the influence. Also, the odor of smoking or pot can result in expensive odor removal. Stop this before it happens.
Licensed and Insured
The contract must include a copy of their license and proof of insurance. I've encountered many vendors who make ridiculous excuses about not providing their licenses and insurance. If you let people do work on your property without insurance and someone is injured, they will likely come after you. If they have no license, trying to sue them is like catching smoke in your hands.
No license, no insurance, no work.
Always Fixed Price
No matter how low the hourly wage is, you cannot afford to pay by the hour. If paid by the hour, there is no incentive to finish the job.
Manage Payment Appropriately
We pay 50% upfront before work begins and the remaining balance after final acceptance. For projects with substantial material costs, we may include progress payments, but we never issue the final payment until after final acceptance.
Final Thoughts
Renovating can be a nightmare without proper documentation and management. Remember, this is an investment, not an "experience." Working through an investment team is the best option to complete the renovation cost-effectively, hassle-free, and in a timely manner.
