Scope of Work: The Foundation of a Successful Rehab
“The scope of work is bigger than anybody understands, If you don’t get it right, your project will go off the rails.”
A detailed, clear scope of work ensures that contractors know exactly what needs to be done and eliminates any “I thought it would look better this way” surprises. Here’s what Ray emphasizes when creating a scope of work:
✔ List Everything: Every task, material, and finish should be outlined in detail. “If you don’t specify the grout color, don’t be surprised when your contractor picks something crazy.”
✔ Time Estimates: Define how long each part of the project should take. If a job should take 45 minutes, and your contractor thinks it’s a full-day job, that’s a red flag.
✔ Material Costs: Have a rough estimate of what things should cost. This keeps contractors from overcharging or underbidding and bailing out halfway through.
“Every hour of planning saves five to ten hours of labor and cost,” Ray stresses. “Figure things out before they become problems.”
Qualifying Your Contractor: Ask the Right Questions
Not all contractors are created equal and hiring the wrong one can lead to nightmare scenarios. Ray shared his go-to questions when vetting contractors:
- How many jobs have you done? “If a guy says he’s cut down three trees in his life, he’s not your tree guy.”
- How do you determine how to install a product? The correct answer? “By code and manufacturer instructions.”
- Do you have references? Past work speaks volumes. A good contractor should have proof of quality projects.
- Are you licensed and insured? If the answer is no, move on. “One bad accident can wipe you out.”
Make sure to run background checks. “IDI Core is great for this. I found out too late that a guy who took my money had been charged twice before for the same thing.”
The Right Way to Pay Contractors
One of the biggest mistakes investors make is paying contractors too much upfront. Lay out a strict payment process:
✔ No Big Down Payments: “Never give a contractor a huge down payment. If they disappear, good luck getting that money back.”
✔ Progress Payments Only: “I pay for work that’s been completed, not work that’s promised.”
✔ Set a Payment Schedule: Pay on Fridays. “If they want to get paid, they turn in their invoices by Wednesday. No exceptions.”
✔ Watch for ‘Banking on the Next Job’ Contractors: Many contractors use your deposit to finish their last job. “If they’re desperate for money upfront, that’s a bad sign.
Knowing Your Product and Exit Strategy
Contractors shouldn’t dictate the finishes or scope of your rehab. “I do the comps. I know what my buyers want. The contractor is there to execute, not decide.”
Understanding the value of your property and knowing when to stop spending. “Sometimes, you don’t need to take it down to the studs. Sometimes, cleaning and minor updates bring the best ROI.”
With the right planning and strategies, you can take control of your rehab projects, keep contractors accountable, and ensure a profitable outcome. Learning these lessons before you make the mistakes will save you thousands!