Acing Your Real Estate Project: Managing Contractors and Materials

Mike DeHaan: [0:02] On Air Brands.

Dan Austin: [0:04] These aren't always slam dunks. They're not always wins. But at some point, like, you get to the other end of it and all that due diligence that you did upfront, all that work you put into and effort you put into it does pay off at some point. It may not be immediately like sometimes you flip a property and it pays off right away and you're doing great. Sometimes you buy and burrow a property and you don't love it until year three. But you're doing, you're making the right decision upfront. You just have to survive and get through some of these things that are not, they don't feel great sometimes.

Speaker 3: [0:33] Welcome to the Collecting Keys Real Estate Investing Podcast with your host, Mike DeHaan and Dan Austin. From wins, losses, horror stories, and tactics for optimizing your business, Mike and Dan take a real uncensored deep dive into the ins and outs of running a full time real estate investment and wholesaling business.

Mike DeHaan: [0:57] What's going on, everybody? Welcome to episode 43 of the collecting keys real estate investing podcast.

Dan Austin: [1:04] And we still have We have good news.

Mike DeHaan: [1:06] What what's that? What am I gonna read?

Dan Austin: [1:08] You oh, the opening. Sorry. You'll probably edit that out. Never mind. No. Keep it in. Oh, the star button. It'll feel more candid.

Mike DeHaan: [1:16] Keep it for authenticity. Yeah. Exactly. But we have good news, though. The, the oil house has finally come to a conclusion. After six months. That should happen in February, bro.

Dan Austin: [1:30] Yeah. Well, it's really actually almost been twelve month a twelve month trilogy. Trilogy. Trilogy. We closed on that August 31. Right?

Mike DeHaan: [1:37] Yeah. Right. Yeah. Something like that. Yeah.

Dan Austin: [1:40] Yeah. That I mean, that's such a funny story too. Like, so Mike and I have been sent to collections and threatened with a lawsuit on this place because we refused to pay the remediation company.

Mike DeHaan: [1:54] Well, let's let's backtrack. If I'm case somebody hasn't listened to all of our episodes. So we bought this property. It's pretty big fixer upper. We did a full renovation on it. We're using it as an Airbnb. We cash out refinance out of the house. This is after a bunch of ups and downs with the property rehab in general. And then approximately two weeks after we cash out refi, oil furnace leaked, and we basically had to gut the entire lower level of the property down to the studs and re and redo the entire renovation we had already done. And we've been dealing with insurance, like not providing good service. The insurance contractors just like making the house even

Dan Austin: [2:32] worse, this whole

Mike DeHaan: [2:34] sort of thing. And we've been under getting, I guess, not necessarily sued, but threatening with lawsuit because we were. Yeah. So you were refusing to pay the insurance companies, contractors, ridiculous bill for terrible work that they provided.

Dan Austin: [2:48] For terrible work. Everything with that they did was terrible. Right. And they walked off the job and didn't finish it, even though they're claiming they did. All sorts of things happen. And I just, I just think the, you, when you say the, the, the threatening, threatening to sue, I was, it was funny because I had the final resolution call with their, claims, what do you call them, debt collector yesterday. And he's like, this is not a threat, but they said if you don't agree to this, they're gonna sue you. And I was like, that is absolutely a threat, guy. And he's like, it's not a threat. They're just saying they will sue you. Yeah. This is not I a just him and I were in that him and I were in that loophole for like ten minutes. I was like, no, that's a threat. He's like, no, it's not a threat. They're just saying they will do this if you don't pay them. I was like, that's a threat. This is this guy that I I think I Yeah. I think I conquered you in at like thirty minutes of that phone call. And I was like, hey dude, do you wanna jump on a

Mike DeHaan: [3:42] call with me right now?

Dan Austin: [3:43] Because I was getting so frustrated with the guy. And I just wanted to see if you could, if you wanted to get some anger out just because it was one of those things where I was just like so frustrated. But the problem, so the problem here is, and this is a learning lesson for those of you that do get into insurance claims. Definitely do not absolutely 100% do not let your insurance company, which they're technically not supposed to, which is a whole nother story for a future date, dispatch a remediation company. We did because the oil had been sitting there for we didn't know how long because the property was vacant between like a week long, at least between guests. And the reason why we found out was because a guest walked in and like late at night was like, oh, I can't even breathe. They're trying to check-in because the oil smelled so bad. And anyhow, so we wanted to get the oil up off the ground as fast as possible. The insurance adjusters like, gotta get that oil up. It's gonna do more damage. Are you okay with me dispatching this company? I was like, Yeah, that's fine. In hindsight, we should either use our own crew or dispatched a company ourselves that we that's reputable within our market. This company is clearly not reputable. And so that was a big learning lesson for us And, yeah, they've obviously make you sign a contract.

Dan Austin: [4:55] This was a, a company that rhymes with Smurf Pro, I think is the, is how it rhymes with You another can put them

Mike DeHaan: [5:03] on blast, dude. They're a public company. It's Smurf Pro. It's like the standard franchise, that kind of thing. And they're a freaking joke. And the thing is like, that's kind of known by a lot of people that they suck. I mean, They're gonna like sue our tiny podcast. Fuck them. I don't care. Like, they have nothing to take. Yeah.

Dan Austin: [5:19] That's the funny thing I told the guy, like, honestly, I don't care if they sue me because this property's in an LLC and the claim's against the LLC and I've already got the money out of the property I want, so what are they gonna do, foreclose on a house? I don't care. And so we, you know, we went down this path. But either way, we settled at a negotiated price that was below what they say we owed them, which is still too much. But the good thing is, is the insurance company paid us for the amount that they requested. I just was refusing to pay that amount because I thought, because they did do additional damage and it was a pain in the ass to deal with them. So some things are worth fighting on principle. But the whole property is a great story, great case study, because nowhere along the point where we like, this is a win. Like we bought the property, we knew we were gonna subdivide it, the subdivision of the sub plat took longer than expected, just timing, labor with surveyors, the city, all that sort of stuff took longer, we were hoping to have it already done by now, which is fine. The house was in worse condition, we had to end up jacking it up, leveling it out, we spent more on the rehab, took longer rehab.

Dan Austin: [6:26] We got into Airbnb, and then it failed because of the oil furnace, right? So all these processes, the whole time, this thing was just kicking us in the gut. It was not easy, but we're finally on the other end of that. The house, we now have a second lot out of the house. We just rented to a long term renter, which we like, for a really good amount of cashflow. I think just on this one door, we'll probably be around $809,100 bucks in cash flow. And what are what are the other perks about this? I mean,

Mike DeHaan: [6:56] I mean, that that lot alone, we should net about 150,000 on that. And now we are now we have a hat. We have a house that's in top neighborhood in Spokane. We have, you know, it's prime, property in the condition that's all fixed up now. We're in a fully furnished for $3,000 a month. You know, our payment on it is I was going to say, I think our total payment with tax insurance is like 1,800, You know? So we have fat spread on it. And because it's higher class too, it's funny. This actually got me thinking as how easily we rented that out because there's the people that, like, want a six month rental that's fully furnished while they, like, build their dream home or something like that. And they sent over their rental application and their monthly income as a house, like, thousand dollars a month. And it's like, that's not usually what you see from a rental applicant. No. And I saw that. I started thinking of, like, there's, like, a niche here if you can provide you know, lot of people talk about traveling nurses, things like that. But I think if you provide just, like, high class properties for, you know, in growing areas where people are gonna need, like, that gap housing, you could probably get some primo rents for some from some really good people.

Mike DeHaan: [8:05] Yep. You know? Yep. No. I I know. Would invest. Like, if I was the the person moving here, I would prefer something like that as opposed to having to unload all my shit Yep. And, like, figure all that out. If I could just go and live somewhere for two months in my new job while my new house is being built.

Dan Austin: [8:20] Totally, yep. It's a great niche. Mean, it's like any other niche and you gotta adapt and it's perfect timing that we chose to adapt because again, Airbnb is not doing great, short term rentals aren't doing great. This would be more of a midterm, like where people would say like traveling nurses and that sort of stuff. But this is a little bit more mid midterm because we're going with a six month lease and then going month to month with these people afterwards. So, I think it has a great potential. You might have some gap months there, but if you're able to get a premium rent and reduce your risk of having terrible tenants that don't wanna leave, which is, you know, always a good reduction in risk. I think it's a great niche to be in. But yeah, anyways, long story short, my point in bringing that up, the whole thing up is like, these aren't always slam dunks. They're not always wins, but at some point, like you get to the other end of it and all that due diligence that you did upfront, all that work you put into an effort you put into it does pay off at some point. It may not be immediately like sometimes you flip a property and it pays off right away and you're doing great. Sometimes you buy and burrow a property and you don't love it until year three, but you're doing, you're making the right decision upfront. You just have to survive and get through some of these things that are not, they don't feel great sometimes.

Mike DeHaan: [9:28] Yeah. And most deals are not easy. Why I like, you know, our goal with this podcast was to share real shit, real stories, because even still I listen to other business and real estate podcasts all the time. People are just always fluffy. And the problem is it's so excessive that sometimes I find myself listening to these. I'm like, man, are we just idiots? Like how do these guys do this so well? Know, yeah. But that's also why I like, you know, being in GoBundance and those sort of groups where there are guys that are actually crushing it because, you know, they will go on a podcast and they will give their version of whatever because that's what their, the host wants is they want like the fluffy things, people want to hear that. Then you meet that person in person at a GoBundance conference and they're like, oh bro, this fucking shit show. Yeah, exactly.

Dan Austin: [10:15] And know, I were joking around not too long ago, man, we've never gotten lucky on a single deal. Like everything we've earned has been like just fighting it, right? Like getting to where we wanna be by just like hard work and like, I don't I don't even know what else, like sweat, tears, and blood. You go listen to a podcast and like, that definitely hasn't happened

Mike DeHaan: [10:34] to me yet. I know, right? Yeah. Well, I mean, there's some truth to that, but we've always been opportunity creators with a lot of the stuff that we do. So it's funny, like I've told other people about just like a different range of deals. I mean, we've done everything from like this lot separation to wholesales to, you know, wholesaling like land, wholesaling houses. We've bought value add multi families. We've done short term rentals. We've done long term rental. We've done basement conversions. We've done hoarder houses. We've done A Class, C Class. Like we've done everything. Whereas like a lot of people, they will have like their box and we're kind of always just like, well, there's an opportunity. Let's just figure it out. And that's why we run around like an insane people all the time, you know, trying to figure out what the hell we're gonna do in high stress. That's also why we've been able to do very well in a highly competitive market. And I will also say too, because of that, I think that we approach things with kind of skepticism, and we kind of like to have different exit plans for all the different properties that we pursue. And that's also why we I don't think we have, like, false confidence in the stuff that we do go after. And that's also why, like, in in this current market condition, I mean, as we've been looking out at our competitors here, a lot of our competitors, we have sort of found talking one person to the other are literally disappearing before our eyes.

Mike DeHaan: [11:52] Like, people that were massive buyers in our local market that were doing massive amounts of deals over the past couple of years are calling it quits. They're all or they're, like, losing huge amounts of money, and they're going under because they had their box and they were so confident in that box, and they don't have the ability to solve hard problems and just get through. Yeah. They're not problem solvers. They can't adapt Mhmm.

Dan Austin: [12:14] To the current market shifts, which is inevitable. Yeah. And they they are like one trick ponies. Exactly. And they're one trick ponies. Exactly. Yeah. Yep. There that's a really good way to put it.

Mike DeHaan: [12:25] You know? And and because they're so confident in that, they're like, I'm put all my eggs in this basket, but all of sudden that basket tips over and you're in big trouble. Right. So, you know, I already got confirmation that one of our main competitors is doing a hard, hard shift. It's gonna be a completely different company here in about, you know, a little a little bit, not too long by the end of the summer. Another one of our companies, I I have heard is doing very poorly. And based off who I heard it from, I imagine they're doing even more poorly because I'm sure that they Yeah. They're they're suffering a little bit. So Absolutely. It it's it's gonna be I'm sure that's happening in in different markets all across the country as Yeah,

Dan Austin: [13:02] and we're at a point where we're, you know, we're removing, we've always removed risk and, you know, we're kind of at a crossroads with actually, one of our properties, our last piece of inventory that we wanna move, that we've been, this has been an up and down process, but like, even though I've lost some sleep over those last week, like we're still in a good position because we didn't That over leverage

Mike DeHaan: [13:23] wasn't last week, this is how poor you're sleeping, that was two days ago.

Dan Austin: [13:26] Oh yeah, see exactly. I think it

Mike DeHaan: [13:28] was that thing yesterday we had this conversation.

Dan Austin: [13:31] Right, it seems like whatever. Yes, sleep deprivation on my part for many reasons. However, it's like we didn't over leverage ourself in other parts of our business. And then this deal, of course we have two extra strategies. We could either flip it or we could bury it and we would be fine either way. It's not like we want to though. We'd probably have to leave a little bit of potentially leave a little bit of money into it if we bury it. Either way, we're in a spot now, or this is like our last thorn in our side recapture capital and rebuild our coffers for the buying opportunities that we think will be there in the next twelve months. So maybe you want to jump into how this worked out for us, Mike, but it was kind of a punch in the gut earlier this week, as you said, two days ago, because we sat on a property for a couple months that we didn't need to sit on, that we've actually been We sitting on since

Mike DeHaan: [14:21] were planning to partner with one of the companies that's making a hard shift in what they're doing, And we kinda had a handshake deal on it. Our our thought was they were better equipped due the size of rehab. We were sort of stretched on projects at that point. We had, like, four or five different projects that we had on the docket that we were trying to get done. And we were like, yeah, we should partner with you guys. We'll give you guys a large portion of the upside in terms of so but, in return, we wanna leverage your crews and have you guys do the work. So that sounds great. It's like six weeks ago. Six weeks go by, obviously, the market's changed a lot. Their business has imploded. And now all of sudden, they're like, I know we had this deal six weeks ago, but sorry. It sucks to suck. And, you know, like, the the unfortunate thing is with that, like, a, we're in a bad spot within that. We're not in a bad spot. We're we're in an unfortunate spot where we wasted a

Dan Austin: [15:13] bunch of time. We've lost money because of it. I mean, bottom line. We're not we've lost profit, I should say, because of it, because we've carried it so much longer than we would have, and we made decisions based on that.

Mike DeHaan: [15:23] Yeah. And I think the moral of the story is if yeah. The moral of the story is regardless of how much you trust people, how well you know people, you need to get things signed around and get legal attachments going quickly and make sure that people have stake in the game if they're gonna, you know, be talking the talk like that. Because otherwise, people have a stake, and they can just walk away consequence free. Especially if things get weak, they're gonna do that. So Absolutely. And if, if any of people in that that company, you'll know exactly who you are. If you listen to the show and, you hate me, you can send me a text, but I still like you guys. But it's also hate you. Yeah. I don't hate you, but, you know, just, like, I'm I'm I'm I'm, like, upset, like, if you have a friend who's, like, screen peeking when you're playing Goldeneye or Halo, and you're like, you motherfucker. Like Screen watcher. Like, I was about to snipe you in the head and you ducked just magically. Like, that's a bunch of bullshit.

Dan Austin: [16:18] Oh, gosh. My level of fear. Yeah. Gamer and you coming out.

Mike DeHaan: [16:22] And they're all gamers too, so I know they would get that joke. Oh, that's great. Yeah. So Yes. Anyway, it's yeah. It's been it's been interesting. Lots of pivots going on and

Dan Austin: [16:32] Yeah. I mean, but it it just goes it just speaks to being able to adapt and and pivot and not being over leveraged in any market that you're, you know, potentially in as far as the cycle or where we're at in the cycle because it's it's just important to be here tomorrow. Who cares if you if you give up a little bit today for tomorrow?

Mike DeHaan: [16:48] For sure. Yeah. And I and I think one of the biggest changes we're gonna start seeing to not even just like on a real estate as a whole standpoint, but on doing projects is the availability of contractors, contractor prices coming down. We had lunch with another business in town here yesterday, and, he was talking about when he was investing kind of after the 2008, 2009 boom. And he's like, was super similar right now where there was, contractors that were charging so much money because they could. And then all of a sudden that stopped and those people were, like, desperate for stuff. So if you do have rehabs, you know, it's gonna be pretty critical, I think, to learn how to organize contractors and how to find them because you're gonna have people come out of the woodwork that maybe don't know what they're doing that are trying to, like, figure out how to make ends meet. So that was actually what we wanna talk about for our educational portion this week was tips and tricks that Dan has used to organize contractors and to get projects done effectively, because doing that is gonna be a key thing. And, you know, it's been key over the past couple of years to do that, to be moving product effectively. But going into the future here, when you can no longer rely on the market to save your ass, it's gonna be a lot more important that you know how to manage a contractor while not blow your butt.

Mike DeHaan: [18:04] Absolutely. So really quick and talk about the instant investor program, and then we're gonna dive into how to manage contractors and renovations. So we'll be right back. The instant investor program is our twelve week group coaching program, which includes a self driven course and access to our private investor community. We will take you through the full process of how we find our leads, how we market, how we do our sales and follow-up, and how we determine the best strategy for every opportunity that comes our way. On top of that, you will also join a community of other like minded investors nationwide that are all marching towards the same goals, and you will have direct access to Dan and myself so you can continue learning and growing with us as we continue to adapt and grow our business. So whether you're a new investor or already established, our systems can help take you to the next level. So if you think you might be a good fit, go to the instantinvestorprogram.com and schedule a call, and we can have you talking to motivated leads in as little as two weeks. Alright. So when it comes to renovations, managing contractors, there's kinda like a couple different ways you can approach it.

Mike DeHaan: [19:05] Right? Like, I know what a lot of people will kinda preach is if you have, like, a good general, you know, they can kinda, like, run the project for you. Of course, it's never actually the truth. If you wanna be a little bit cheaper, you can try to be your own general and find your own subs. You're always going to run into issues with materials, like, you know, timing all the subs correctly, you know, making sure you're not getting ripped off while doing good work. If you're like new or you're trying to optimize, like, where do where do you even start? What's like the best way to sort of build that base, I guess, so you can sort of limit your downside right from

Dan Austin: [19:38] the get go? Yeah. That's, a great question because we all have to start somewhere.

Mike DeHaan: [19:42] Mhmm.

Dan Austin: [19:43] You look at kind of a lot of people talk about which contractors and which subs you need to be on-site. And and really, as a new person, you're gonna wanna try to get somebody that has more of a general contractor background and that is running their own crew. Because generally, they will be able to do a lot of things for you and have their own set of subs. You get to pay a little bit more right up front. But that that's what that's what you get for that. And, and especially in a time like right now, where the subs are really hard to find and contracts are really hard to find, those people have those relationships. You just can bring them in quicker than you can, which shortens the time of your project, which is huge. Budget is one thing. Time on target time on project is another huge element. People don't talk about it. It has nothing to do with carry costs. Just has everything to do with bad things happen the longer you own properties. Mhmm. Bottom line. Especially if they're just in inventory, having anything taken, they're not being taken care of. But anyways, you look at like, you might have a need an electrician, you might need a plumber, maybe you need a painter, like, typically like for exterior, you might hire a painter, but for us, for interior, we just use our, our, our crew. A roofer, you may need that. Your general contractor could do that. Their crew could do that. Many, many, there's many jack of all trades.

Dan Austin: [20:56] There's some things where, you kind of need electrician legally, you kind of need a plumber legally, but for smaller stuff, your contractor general is gonna just handle those. But again, starting out, you probably want that person. But then the question is is like, how do

Mike DeHaan: [21:09] you find that person and how do you manage that relationship is probably the really complicated part that most people, including us, have messed up. For sure. And and I think the biggest mistake that people make right off the get go is they find someone that claims to have that experience or does have and or is cheap. Yeah. And then they just like kind of like, okay, cool. This is what I need. And they just let them run with it. Right. Like, you know, I've been bitten on that. You you've been on that together because like those people are in the business of, you know, they're trying to make money. Right. So I think that's a big thing that sort of bites people. And I think another big thing that bites people is trying to bring in a contractor right away who's a partner on the deal and basically saying, like, you are going to get paid on the, you know, upside of the sale. K? Which sounds good in theory. You're not having to pay them anything, and you're like, yeah. I'm just gonna do that. But if the deal starts to get shitty, they're gonna be running the numbers in their head. And all of a sudden, they're gonna be cutting corners. They're gonna be trying to make stuff as cheap as they possibly can, which will hurt your bottom line and your reputation as a flipper.

Mike DeHaan: [22:15] Yep.

Dan Austin: [22:16] Yeah. It's gotta be advantageous to them because part of it is, is they, a lot of times, especially in the lower end of things, which let's be honest, as investors, we're not hiring premium contractors. We're not. It's just, there's great contractors in our trade, at our level, but they're not usually the best. They're not running massive companies because otherwise they wouldn't be doing flips with you. Correct. Anyhow

Mike DeHaan: [22:37] And I'm I'm quick on that, though. What I wanna say is, you know, we're not hiring premium contracts. We're hiring good people. And when it goes back to that partnering comment I made, something I thought about, a lot of people I've heard people say this several times. They will get super weird, and they will say, like, man, my contract, I made more money on that deal than I did. Mhmm. Right? And honestly, it doesn't matter because they did do all the freaking work. Like, And you're and you're and you're upset that they made, you know, $35,000 on that flip that you made 25,000, but you just kinda sat there and waited for it to be done and took some phone calls for eight weeks.

Dan Austin: [23:09] Right.

Mike DeHaan: [23:10] You did pretty damn for

Dan Austin: [23:12] your app. That was going be a point I was going to make that I was building up to was that, your contractor at some point is going to be looking at things as an hourly wage, because that's what they're used to working in. And that's where my comment about them not being the premium contractor where they're running a business, but they're really just looking at it as trading hours for time or hours for money. And so they're going to start doing the math in their heads. So if the deal sucks, they're gonna be like, well, if I would've just charged per hour, I'd be way more further ahead. And they're never going want to do a deal with you again. Yeah. I think you do need to build that relationship before you bring them in as a partner, because they're a partner. Yeah. They're not just like an employee at that point. So anyhow, a big thing to do is interview these guys though. And I've found myself many, many times not in the position to interview them. And I don't mean by sitting down with them, I mean, have them show you some of their projects. Every good contractor that I've worked with, they pull up their phone and they get super excited, like check out this tile project I just did, check out this bathroom, this kitchen I just did, and they have pictures in their phone. If they don't have pictures in their phone, I don't really want to work with them anyways, because that means it's going be a headache for me.

Dan Austin: [24:09] Cause they don't know how to use a cell phone or they don't use it, you know how to use a smartphone or a computer. So I, I'm okay with giving up some of the old crusty guys that are really good at work for a guy that knows how to manage his technology and works with me, because we are fundamentally a remote covenant that's based on technology. But yes, look at their previous projects and get that information from them, ask them questions about how they work. Like what is your scheduling? How do you do this? What elements of the project are you gonna sub out? Because that'll tell you about cost. Because if he's like, you know what, I don't touch anything electrical. That means to change a bulb, this guy's gonna call an electrician, which is gonna cost you probably $200 an hour instead of just paying him to do it, which we've ran into. I've had contractors where, in the middle of the day, they're like, Hey, can you come down here? We broke a pipe and it's leaking, or we broke a valve of a pipe and it's leaking. I'm like, what? Like, not just one time on the project, three times on the same project, because they couldn't figure it out and they weren't, and the GC wasn't willing to get off his ass to go down to Lowe's and buy, you know, a new valve or something to shut the water off.

Mike DeHaan: [25:13] Yeah. What? Yeah. Right. But I He's not a plumber.

Dan Austin: [25:16] I'm not a plumber. I I was like, okay. But I gotta figure

Mike DeHaan: [25:19] out how to shut the water off. I would say the contrary opinion to that though is, I mean, if they're willing to touch everything, you need to make sure actually know what the hell they're doing.

Dan Austin: [25:28] No. Yeah. No. That's a great point. You don't necessarily want them to touch everything.

Mike DeHaan: [25:31] Yes.

Dan Austin: [25:31] You definitely don't want them to touch everything. What I mean by that though is, is there's simple things like installing a faucet. That's gonna be more efficient for your crew, your contractor to do than waiting for a sub like a plumber to do. But some will do that. And so that's where I ask them what tasks they will be subbing out. And then that dovetails to why you're asking about the scheduling. Because like, how do you schedule? Like, what are you building the schedule? How are you going to do this? And if they can logically talk through that, well, first we're obviously gonna spend a couple of, we'd spend a couple of days on demo, then we would bring in our drywallers to fix the drywall, do this, that, and the other, and that should be X amount of days. Like they're having a logical thought process, then that's also, that's a big win in my mind. Because some folks don't know how to do that. And the fact that they know who they're gonna call is a big thing as far as the subs, who they're gonna sub out. Like if they're like, no, we do drywall here. We're gonna do drywall paint. We'll do everything. We'll have a carpet installer come in for this part. You just learn about it because there's a fine balance between a GC that's doing 100% of everything. We're not subbing any of it out. And they try to do everything themselves, where it's like time, it's not time efficient, versus the guy who won't do anything.

Dan Austin: [26:42] And he's just there to collect 10%, 20% of your, of your total cost. Cause they're just going sub everything out. That's a totally different model. You need to be somewhere in the middle, I believe. For sure.

Mike DeHaan: [26:51] Yeah. And I I think especially with renovating old houses because there's a lot of weird stuff that'll come up. So so what about organizing, materials and things like that? I know that a lot of renovators, they will kinda just have their typical flooring they use, their cabinets they use, their vendors they use. How do you organize all that stuff to make sure that it gets delivered on time and there's not really any question about what they should be getting? I mean, I mean, talking about having like a book. I don't even know if we do. I haven't been far away from renovations for a while.

Dan Austin: [27:23] Yeah. One step back right to that point that will help solve that issue. Once you've interviewed a few guys and you talk to them, then, and you've picked a person, that's when you're gonna get into the actual statement of work. Like you might walk guys through your project during your interview and ask them to show similar projects and all that sort of stuff. And they say, hey, okay, I got you. I wanna use you. Then you go through the statement of work and I like to draft that up. Some contractors will give you their contract and say, this is what I'm doing, which is generally fine. But sometimes I don't love it because then they basically, it's always a one way So I'd rather be the one way contract because I'm the one taking the risk in the fact that they could screw up my house. They waste a month of their time, who cares? They don't care. Right? If they screw up my house, that's a big loss. So anyhow, the statement of worksheet, and I would go room by room of exactly what you want and what materials and things you wanna do. And within that, you can outline who gets the materials, who's picking up the materials. What we do is we order 99% of our materials through materials houses, whether that's home Depot or other local suppliers here in town and schedule those for delivery because the delivery truck that's gonna charge $79 $99 a delivery is way cheaper than sending the contractor, shutting down a crew to go and pick up materials and deal with that. They'll waste a half a day just grabbing materials. And that's never a good thing for anybody. And so outlining that in the statement of work, which is essentially your contract, who's going to get those materials. The reason why we do our own is because I got tired of contractors asking for a deposit for materials.

Dan Austin: [28:59] Yeah. No, I don't do deposits. I don't do labor deposits and I don't do material deposits. What I will do is I will do payouts on a schedule based on work performed, and you can outline that if you want, we don't get that detailed with ours. It'll be like, I know that I personally know the percentage of a project and I never give away the final third of that payout does not even get paid out until walked final property. So they can get, you know, up to two thirds say on an eight week project up to two thirds payout for labor. And then that final big chunk, that third is not done until we have the keys back. And with our, the way we're set up now is I don't pay until the end of it.

Mike DeHaan: [29:39] Nothing. Well, with the guy we have a current relationship with, yeah. But most people won't have that option at

Dan Austin: [29:44] the same We have a trusting relationship and you shouldn't expect a contractor to trust you right off the bat if it's the first time you're using them, but that's the relationship we're at. It's easier for him, it's easier for us. And I order all the materials. And generally speaking, have the probably 75% materials package ordered before we get the keys to the house and set for delivery. And then there will be another 20% of materials that need to be ordered once we start getting into things. And then there's 5% that the contractor picks up because it's just as needed. You know, sometimes he runs out of caulk, sometimes he needs to get a different faucet or some different valves or something like that for the plumbing. And that's just that little bit that we reimburse them for.

Mike DeHaan: [30:23] Yeah. So I guess how does a new person though deal with that when you have a contractor that does want to deposit upfront? Because I mean, they don't know you if you're new, right? They don't wanna be taken advantage of either. How do you find that happening?

Dan Austin: [30:35] Yeah. I would I would continue to refuse to pay a deposit. I don't care what anybody what I would say is, how about this? I I can either pay you based on phases or I can pay you weekly based on what you, what, when we can agree to that. And so if they show up on Monday and they work Monday through Friday, be happy to give them a percentage payout for the, but don't ever, don't ever pay more than the percentage of the work they're getting done because I've had it happen. Yep. Something happens. They go to jail. They get hooked on drugs, whatever between your project and you've paid for more work than they've actually done. Now you're negative. At least if you paid for the work they've done, you're not negative on labor. Right? So I would generally speaking, unless you negotiate where they get the materials and they're going to order the materials package, that's like the only time I'd be like, with giving them deposit, but you better trust that they're not gonna take your money and run. Yeah. That happens. Or even

Mike DeHaan: [31:28] even worse, one of our old employees, they're doing a flip and they paid their contractor up front and the contractor started squatting in the property and refused to leave for.

Dan Austin: [31:41] That sucks. Yeah. Then guy just smoking cigarettes eating

Mike DeHaan: [31:45] fast food and sleeping in there as opposed to doing work and he wouldn't leave.

Dan Austin: [31:49] Which is really the, like, kind of the next point to make though, is how do you manage the contractor? So you've interviewed him, you pick the guy you want, you've written a statement of work and a contract, he knows exactly what he's going to be doing and what he's required to do. Then it's how do you manage that piece? And what I like to say is weekly check ins and put that upfront and be like, Hey, I plan to walk the property with you every Friday or every Monday or whatever day you want. Say that's, that's going to be either a way we're going to disperse funds based on inspection, or it's just a good way for me to answer all the questions you have for that week or for the upcoming week, and just do that. And then as you build a relationship with your contractor, it maybe is not a walk, it's maybe a phone call. But for us, it was, for me up until not too long ago, it was a weekly walk through of the property and I can itemize any materials that were missed on the initial materials package as we're going and have them delivered ahead of time. And I can talk to the contractor and see where they're fighting things within the building and kind of understand what where the schedule is gonna be at. And also just being present so they know you're watching.

Mike DeHaan: [32:54] Yeah. For sure. And if you're doing this virtually, think that even goes that goes or even even not even virtually, because don't feel like driving all way across town. This is why it's good to have a contractor who's good with technology like you mentioned, because you can do this via a Zoom call. You know, you can have them send photos. Like there's so many ways that you can do this digitally now, but your contractor has to be able to deal with that. And surprisingly frequently, there's a lot of guys out there that do great work. They came, read a fricking email. So they're not gonna be able to Absolutely. Figure out to feed, you

Dan Austin: [33:24] And use technology to your advantage. There's a couple different systems and apps out there you can use. One thing I do like is generally either daily or on a couple times a week is photos of work getting done. One thing that we used to do exclusively is install security systems. So we knew when people were coming and going, and then they do have cameras you can set up now. And so you can see, and if your contractor is not showing up, it's right there. You have it in like your app that, you know, whether you're using Ring or you're using SimpliSafe or whatever, when was the door last engaged? When it look at the camera, see who's there, what's going on. And if, and here's my, my one rule of thumb. If a, if a contractor says they're going to be there and they don't show up when they say they're going to be, and there's like, not like a good excuse, like a real reason, not like, oh, my grandma died. Like that is not an excuse. Trust me. You have my whole life. But if they do that to you one time, they're gone. They're off the job. That is the one rule I have, because I've had it burned so many times where I'm like, you know what, that's fine. I don't really wanna go out and find another contractor right now in the middle of a project, because what happens is they tend to come in, they'll demo, they'll start doing work, and they'll go get another job, get that one halfway through, come back to yours, go get a third job, get that one halfway through. They'll have five to 10 clients on the hook, and they'll just be bouncing back and forth between projects, and whoever's the nicest guy gets their project done last. And so that's my rule, and I say that up front, it's like, hey, if you ever lie to me and tell me you're gonna do something or be somewhere when you're not, and you don't pre organize in advance, you're done. Your tools will be locked out of the house, No access.

Dan Austin: [35:05] That's just my, that's my one, like, I don't budge on that rule.

Mike DeHaan: [35:08] Yeah. Good stuff. And, you know, if you can't take it by Dan's tone, Dan likes to be a hard ass with these people. And to be honest, you kind of have to be because, this is also why I have Dan to run this part of our business because I'm not that person.

Dan Austin: [35:22] Right? Wow. And it I've

Mike DeHaan: [35:24] been burned.

Dan Austin: [35:25] I've been burned by every single contractor at some point. Right? And it's because poor poor management on my end. And then you you will lose if you don't do these things. I've done one, but not all of these. I've done none of them in lost. You know, you find, you'll just, you figure it out slowly but surely, and it stinks, and it puts you in a bad mood. So I just have these hard and fast rules that I do not waver from anymore.

Mike DeHaan: [35:47] Yeah. Perfect. I love it, man. It's awesome. Cool. Well, we'll call that a wrap.

Dan Austin: [35:52] It's a

Mike DeHaan: [35:53] good time there. If you guys want to learn how we have bought properties the last couple of years, how and how we're continuing to do so going into this recessionary period and buying them at huge discounts. You should go check us out at the instantinvestorprogram.com. It is our group mastermind program. If you guys have been sort of thinking about that, but you're not into the group thing, we actually just started a new version of it where along with being a part of the group and having access to our our course and all that, you will get a monthly one on one call with one of us. It'd be your direct coach where we will actually sit down with you individually once a month and go over your entire business and help make sure that you're on the right way. So if that interests you at all, go to instantinvestorprogram.com and book a call with me. Love to see if you'd be a good fit for the program. Besides that, please subscribe to this podcast, share with anyone that you know. There is, 7,000,000,000 people in the world. And if you if you like to look at the rounding error with our current listeners, there's 7,000,000,000 people who still don't listen to this podcast. So I think maybe you need to make a dent in that 7,000,000,000. So share share it with all your friends. Tell them that, you know, anybody knows interesting real estate. Check us out.

Mike DeHaan: [37:06] Besides that, you can follow us on Instagram. I'm at Mike underscore invest. Dan is at invest investor man Dan. Sorry. Say that again. Dan is at investor man Dan. Go and send us Dan on there. We love to chat with people. And then besides that, Dan, send us home. Send it off.

Dan Austin: [37:21] Alright. Yeah. See you all next week. It's hot out here in Spokane. So, wear your sunscreen? Wear your sunscreen. Skin cancer kills people. That's the real thing that you got. Try to be like I try to be like the the news anchor who are like, it's hot, drink plenty of water, wear your sunscreen, and stay indoors if possible.

Mike DeHaan: [37:41] Yeah. Right. I know I saw this thing in, it was in Texas that it was like the city of Austin sent out an alert for how to how to survive in the heat wave they were having. And literally, said, stay indoors, especially if you have AC and drink water. It's like, thank you very much for for helping us understand

Dan Austin: [37:59] what you should do every other day,

Mike DeHaan: [38:01] which is drink water. Exactly. So fuck people, man. Anyways, alright, everybody. Talk to you next week. See y'all.

Speaker 3: [38:08] Thanks for listening. Please leave us a review on iTunes or wherever you get your podcasts, and check us out at collectingkeyspodcast.com for tips and guides on starting your own real estate investment and wholesaling business.