The Railroad Wreck: Remote Renovation Management
Hey there! On our last post we talked about one of our new properties in Minnesota that we closed on to be flipped; well we officially named it! It is in a neighborhood of St Paul called Railroad Island and is in pretty bad shape so introducing The Railroad Wreck:
About two weeks after closing, Bryndee and Kade flew out to Minnesota to check on progress with the rehab. At that point we were still in the beginning phases of construction and had finished demo and installed new windows (many were missing or broken so it was a security risk and high priority). Currently underway were foundation repairs and framing. As you can see in the photos above the outside still needs a lot of work but there are new windows and doors! Here are some other photo updates from the trip:
Walls gone and some new headers in to make a more open concept:
P.S. do you like how we label the rooms in the house when the layout is changing? :)
The stairs in the back of the house used to be where the red arrow is, now this will be a small fourth bedroom upstairs! (And we have to get rid of that window in the previous stairwell since it is too low and unsafe/awkward for a bedroom):
New framing going up to redo floor plan:
Talk about foundation issues! We have to put in some posts to level the floor and had to do some repairs to the foundation, and this wall started falling apart on the workers because it was just rocks and mortar that is basically sand now. So now we have to redo that wall too (yay for surprises!...not really, but you have to take it all in stride!)
We often get asked how we manage a renovation from another state. First of all, whether you have a project locally or remote the #1 priority should be setting written expectations! Back in the day people may have been able to get away with a verbal agreement and handshake, but let us tell you—there is nothing more important than getting things in writing (ask us how we know…)! It may seem like overkill, especially with people you work with frequently or are already close with. However, it is not a trust factor, it is about communication. We do a lot of contracts, documents, spreadsheets, and more to manage our real estate business to keep all the moving parts in order and people on the same page. So let’s talk about a few that we use for our renovations!
Contractor Agreements
Anytime you hire or partner with someone you should always have a written agreement in place that shows the payment, timeline, responsibilities, and other legal logistics. Even our most simple hires (like a house cleaner) we have sign contractor agreements. This ensures everyone is on the same page to prevent disputes over payments or work completed. In the contractor agreements we also require our contractors to be licensed and insured and they agree to sign lien waivers upon completion of the work. There are a lot of components in contractor agreements themselves so we will have to go into more depth on another blog post but for now, just keep in mind that you must have contractor agreements in place before anyone begins working for you!
Scope of Work
One of the attachments of the contractor agreement, and perhaps the most important, is the Scope of Work. This outlines everything that needs to be done on the property. We create this as soon as the property is under contract so that we can give it to all the contractors giving bids as they walk through the property. That way they can see exactly what the project entails and give an accurate bid for it, and know if they are qualified and able to do all of the work necessary. This Scope of Work evolves as we pick a contractor and work through details and adjustments but a finalized copy should be complete when signing the contractor agreement. When you are working remotely, the Scope of Work details are especially important because you aren’t there in person to see if the wall goes up in the wrong place, or if the contractor put in the tile vertical instead of horizontal until the work is done. Here is an example of our scope of work:
Materials List
In addition to the Scope of Work, we provide a detailed materials list at the beginning of the project. It is a lot of work to put together because we literally pick out every thing down to the cabinet knobs before work is even done on the property. But having all of this picked out at once prevents there from being delays when the contractors are ready to install something, but waiting for you to make a decision on what material to use. We typically have these picked out, or at least material budget, in place when we have contractors bid the project in fact. The scope of work shows the material, color, store, price, and SKU number so the contractor can easily order exactly what you when as he needs them for the project. Of course, sometimes we find something on sale or that we fall in love with and drop it off at the house (…and haul it in a suitcase across the country) in place of what is there if it has not been purchased yet, but having the material list completed from the beginning helps the expectations be set, relieves the stress of lots of decisions throughout the project, and prevents delays. Here is sample of how we do it:
Timeline and Payment Schedule
The last essential document for managing your rehab project is the Payment Schedule. The way that we pay our contractors (and what we would recommend you do too) is to create milestones and then make payments based upon when those milestones are complete. Many contractors will give pushback on this and say they do half up front and half at the end, but for us this is a requirement to work with us because we want to ensure work is done before giving money and we want to motivate them throughout the project to stay on schedule. It all depends on the project length but we try to break it down to 4 or 5 payments. Here is our Payment Schedule for The Railroad Wreck:
Communication
The second part of how we manage our properties remotely is our communication strategy. Since we are not there to physically stop by and see how the property is coming along whenever we want, we set up a weekly touchbase with our general contractor. We want to make sure the contractor does not feel like he is being babysat and we are calling all the time, yet we want to be in touch with progress and issues at the property. After some trial and error on previous properties we have realized that this weekly touchbase is the good middle ground. So my general contractor and I do a phone call every Thursday and we discuss how things are going on the project, any things he needs decisions from us on, and other logistics that have come up. In addition to that, if that Thursday falls on one of our Payment milestones week he sends me photos or we do a video walk through of the property to ensure that those milestones have been completed and then I send that payment his way. Communication with your contractors is really important not only for the project’s success but building a long term relationship with your contractor.
