Live-in Flip: Lessons Learned

12:41 AM James 0 Comments

We're done renovating the live-in flip! From your perspective, dear reader, that may have happened in a flash. But for your truly, it was quite a process. Here's a rundown by the numbers:
  • Duration: almost 5 months. Why so long? I'll tell you.
  • Cost: $140k down payment. About $80k in renovation costs. We're in for $220k. Why so much? I'll tell you.
  • Number of contractors: about 20. Why so many? I'll tell you.
  • Number of stressful moments: a lot. Why so many? I'll tell you.
  • Number of lessons learned: many many lessons about home repair and managing a renovation.
  • Value-add: $200k in home value. 
  • Expected ROI: If we sell next year, we'll pull out $330k after all expenses. That's a 50% return on our $220k investment.
Why did it take so long?

We closed in March. We finished in August. We originally estimated this would take 2-3 months. Instead, it took twice that long. From my engineering project management experience, I've learned that all project estimates will be wrong, but the less you know about the tasks and resources, the more wrong you'll be. And this was our first time doing this kind of project. We'd done tiny things like replacing shutters, lights, and installing a door peephole (and I thought that was tough), but with this project, we had no idea what we were in for.

The first lesson I learned is that this blue-collar project management bore little resemblance to the white-collar variety I perform in my day job. This may sound classist, but it's not: you're working with people who are themselves managing other jobs (and come and go as they wish), who are selling themselves to you (over-promising), who have widely varying professional and ethical standards. Here are some unexpected personnel problems we had to deal with:
Image result for fast cheap quality triangle
  • A high-priced plumbing company who told us they also did tile, but made big mistakes on everything, wouldn't fix their work without additional fees, were unable to reach for days, and charged exorbitant rates. (Not cheap, not fast, not good)
  • A high-drama flooring contractor with serious cash-flow problems stemming from serious personal problems, who hit us up for cash before he'd finished his jobs, who disappeared for days working other people's projects, and who also wouldn't show up unless we promised to pay him. (Cheap, not fast, fairly good)
  • A day laborer who threatened to shoot said flooring contractor, who we had to meet and pay because said flooring contractor stiffed him on his pay. (Cheap, somewhat fast, not good)
  • A day laborer who we fired because he came to work smelling like he just got out of Cheech & Chong's van.
  • An electrician with fragile masculine ego who wouldn't take direction from my wife, only me...
  • Kitchen remodeler who was super helpful on the pre-install, but wouldn't fix anything post-install.
  • Typical run-of-the-mill mess-ups and do-overs. 
  • Every variation of the Cheap/Fast/Good triangle.
We learned some important lessons on the hiring and managing side:
  • The more you're there in person, the better results you'll get. You can remind people of what you want, fix mistakes earlier rather than later, make sure people show up, and call them on BS.
  • Make the effort to get trusted referrals for every resource you hire. Good Yelp reviews don't cut it. We had much better luck with Nextdoor referrals from our neighborhood, and personal referrals from friends.
  • Get everything in writing, even when it's inconvenient, especially when it's inconvenient. Know who's getting paid, when, how, and for what tasks. Stay on track.
  • If a job is going to be expensive or if a mistake would be costly, try to use a licensed, bonded, insured company, or a company that has a track record of responsibility. If and when someone goes wrong, it's easier to work with a legitimate company to fix it. Our HVAC company made a mistake during the job, but owned up to it and fixed it. We ended up using them again for a different property, despite the mistake, because we know we can trust them to make it right.
  • Money is power. Hold it over people to get them to do the right thing. Once an unethical person gets your money, they have no reason to care about you or what they promised you. 
  • Similarly, employment is power: if someone's doing shoddy work or not showing up, tell them they'll lose the job if they don't straighten up. If you have to threaten them, don't give them more than one second chance. Fire them and get someone new. It's less stress for everyone involved, and it keeps them from taking advantage of you.
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Why did it cost so much?

Well, we had to do a TON of work on the place. For a full look, check out the remodel before & after photos on Houzz. This included asbestos abatement, full HVAC replacement (replace furnace, new A/C, repalce ductwork), demolition (kitchen, 3 bathrooms, flooring), walls (resurfacing, sealing, priming, and painting), doors, windows, plumbing (water and gas), electrical, hardwood flooring, complete room remodels (kitchen, bathroom, laundry room), framing (opening up the kitchen entryway, creating new cabinets and closets), city permits, hauling, trims and baseboards, roof repair...

Like I said, we spent about $80k total. The heavy hitters are what you'd expect: kitchens and bathrooms rank high. But we paid probably thousands more for plumbing that we should've, because we trusted a Yelp review instead of doing our homework. We also paid a couple thousand for city permits and fees. As the project wore on, we also paid a couple thousand too much for the flooring and general contracting, because we didn't address schedule slips and performance problems early on. 

Why did we use so many contractors?

When contractors quote you, they give you a time estimate, and for better or worse, they believe it, no matter how optimistic. Trouble is, they're also working and bidding other jobs at the same time. If a job drags on, like ours did, they want to move on to new jobs so they can get paid more. It's understandable from their perspective, but it incentivizes them to slack off after a while, and that's why you hear about contractors falling off the earth and never coming back to their jobs. That happened with our flooring / general contractor before he finished up, so we had to finish the project with a patchwork of handymen.

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Why did this stress us out so much?

I didn't make this process sound stressful enough for you already? Well, besides being in the hole for that much money, here are a few reasons:
  • We were both working full-time, raising our first child, an infant who grew from 9 to 14 months during this project. This alone is enough to strain a relationship without a major home remodel
  • We were living with my in-laws all the while. My in-laws are wonderful, but our living situation had gotten old for everyone by the middle of the project.
  • We ran into some problems with our homeowners' association. Certain people didn't like living next to a remodel, hearing construction noises day in and day out, seeing the occasional mess, etc. Unfortunately, some of them became harsh with our contractors and even broke into our unit before we changed the locks. When I pushed back, they tried to make our remodel more difficult than it had to be: calling the city, levying fines, inventing unwritten rules that only applied to us. This made us expend energy on workarounds that shouldn't have been necessary in the first place.
What did we learn from this?
  • Maaaaybe don't take on a big project like this until we have more stability. We've taken steps to simplify our life since the remodel, prioritize our relationships, and not stretch ourselves too thin. It feels great not to have a project hanging over our heads when we get home from work! I love being able to focus more on my wife and baby girl after a long day at the office.
  • Tread lightly with neighbors. Even though I tried to be respectful, I had a couple flashes of self-righteousness that antagonized them more than necessary, which made the rest of the project harder than it had to be. Being right isn't the most important thing (and that's hard for my engineer mind to accept sometimes), getting along is often more important.
  • Change your locks the day you close escrow! I cannot stress this highly enough.

So... would I do this again?

Man... yeah, probably. We're going to come out fine financially, and the education was priceless. My wife and I are both grateful to have learned so much in such a short amount of time. Despite the problems, I'm so impressed and proud that my wife handled such a large and complex project so well, and that she really carried her vision through from beginning to end. If and when we do another renovation, I'll be happy to let her take the reins and help where I can. Not that either of us are in a big hurry for that to happen. Now that the house is livable, it's time to just LIVE for a while.