Early in my real estate investment career, we did a rehab project using a contractor that we had not used before. We had been spoiled with the contractors we had used, but we realized that we needed to work with more than just the couple of contractors that we had been using of we wanted to scale our business the way we wanted to.
While speaking at a conference in Phoenix, I was approached by a national contracting company that had been chasing us for some time to work with them. We had a project coming up that was a relatively minor rehab, so I thought I would give them a shot. They had one of their project managers meet one of my guys at the site to provide a bid for the project. It seemed to be reasonable, so we gave the green light to them to start the work.
I have a habit of popping in unannounced on job sites to make sure the work is going as expected, particularly with contractors that we have not worked with much. I was horrified at what I found. In each job, there is a specific “Scope of Work” that is part of the bid. If you have ever watched a flip show on HGTV, the hosts meet with a contractor and it 30 seconds from walking into the room, they blurt out something like “this will run $10,000.” The problem with that is that there is no definition of the work that will be done for that amount. A Scope of Work defines exactly what will be done in the room, the specific finishes and cabinets that will be going in, the materials that will be used, etc. Flippers often make the mistake of not clearly defining the scope with a contractor only to be disappointed later. In our case on that particular job, the contractor was using scrap-heap materials because we made the mistake of not clearly defining the exact finishes that needed to be used in the work.
That job was a definite lesson for us and let it be a lesson for you. I hope that by sharing our past mistakes that it will save you from making similar mistakes in the future.