Rehabbing Course Video Transcriptions

INTRODUCTION: 7 Stage Rehab System Overview

Introduction to the 7 Stages of a Rehab (JD ON CAMERA)

So, you’ve completed your in-person analysis and now have the property under contract. Congratulations! Now let’s go into detail in this course about Rehabbing. Rehabbing is typically an area of real estate investing that requires the most time to master. If you have ever completed any renovations on your own home, then you may know what we’re talking about. Learning how to renovate properties and manage contractors takes more than just reading a book and watching a few home improvement shows. This is an area of investing that demands dedication, time, and intensely focused hands-on experience. This process can be painful, or it can be profitable. But if you’re willing to dedicate the time to learn this segment of investing, it will most likely prove to be one of your biggest revenue generators.

If you’re a new rehabber, we highly recommend that you start with a very small and simple renovation, unless you have prior construction experience. As your experience grows, you can take on larger, more complicated projects.

The most important action in growing your rehab business is breaking the entire rehab process down into stages, so you’re not spending all your time on the jobsite. Throughout the process, you will also start to develop relationships with contractors and subcontractors; never underestimate the support of a good contractor! Start small and build your experience gradually, so you don’t get in over your head. The more rehabs you do, the more experienced you will become. However, until you have developed your own process, following our Seven Stages of a Rehab system will help you to avoid costly mistakes and pitfalls. As your knowledge and confidence grow, so will the scope of your projects.

This course picks up after you’ve already had the initial meeting with the seller. Be sure you have a solid working knowledge of how to perform a desktop analysis, including running comps, determining your ARV, and how to estimate repairs.

CHAPTER 1: STAGE 1 - Preparing For Your Rehab

Introduction to Preparing for Your Rehab (JD ON CAMERA)

Preparation is KEY to staying on schedule and within budget for a rehab. You need a clear idea of what renovations and improvements you want to undertake prior to getting a contractor involved. You should also have a clear idea of your budget so that you can develop a scope of work that is realistic.

The first step in preparing for your rehab is to visit the property and take pictures, measure everything, and decide what repairs need to be done. Often times, this is done during your initial walkthrough of the property, which usually takes place during the in-person analysis. It’s also important to keep in mind that you’re taking pictures to refer to later, so you won’t have to make a trip back to the property when you move to the second stage of the Seven Stages of a Rehab System (which we will cover in the next chapter).

Preparing for Your Rehab Walkthrough (DICTATED BY CHRISTIAN)

This first stage of the 7 Stage Rehab System, “Preparing for Your Rehab,” involves discovering the types of repairs that are needed on your property by utilizing the repair estimate sheet and determining your budget, which, in turn, will help you build your Scope of Work (which we will cover later), as well as securing the property, and taking immediate steps to prepare your property for sale. As JD mentioned in the previous video, estimating repairs is often performed during your initial walkthrough of the property which frequently takes place during your first meeting with the seller. Many seasoned investors take this approach to save time, and we recommend you do the same. When you’re first starting out, however, it may take some time to become proficient. Regardless of WHEN you’re performing this step, it’s important you are thorough in your approach. If you are unfamiliar with this process, you can revisit the “Estimating Repairs” course on the Mastery site to gain an in-depth understanding of how to conduct repair estimates.

Estimating repairs achieves two main goals: The first, as stated earlier is to find out what needs to be repaired, and the second is establishing a budget. Your budget for the project is your repair costs plus additional costs like insurance, holding costs, and other fees that go along with the purchase and/or sale of property. The most common fees, including any real estate agent fees, are all accounted for within the “Deal Analyzer.” If you’re taking this training, you should already have a good idea of how to use it. You can find the “Deal Analyzer” itself, and training on how to use it and why by searching “Deal Analyzer” on the mastery site.

Estimating repairs and determining your budget, is part of the preparation for creating a detailed Scope of Work, but also involves taking detailed pictures, and measuring the property to create a to-scale sketch. As stated earlier this is often performed during your initial meeting with the seller. Ultimately, you should understand that the reason behind taking these steps is to provide you with all the tools you will need to eventually create your Scope of Work, and help ensure a successful rehab from start to finish.

Be sure to take a lockbox and a spare key with you to secure the property, and to eliminate the need to meet your contractor there to grant access. You will also be able to send contractors to the property to prepare their bids. Additionally, bring marketing materials to put in the front of the property! Consider a "We Buy Houses" bandit sign, or a "For Sale" sign to build your buyers list. Keep in mind, if you put up a "For Sale" sign, don't let potential buyers view the house until renovations are complete.

CHAPTER 2: STAGE 2 – Developing a Detailed Scope of Work

Introduction to Developing a Detailed Scope of Work (JD ON CAMERA)

[What:] The Scope of Work (SOW) is the foundation of your rehab; think of it as a “to-do list.” It's where you’ll add detailed job descriptions, and it serves as an agreement between you and your contractor regarding the extent of work and materials used. Every detail down to paint color, faucet fixtures and door knobs will be accounted for here. The Scope of Work will be part of a bid package which you will give to all contractors that you are considering to have work with you to complete the rehab.

[Why:] Having a detailed Scope of Work is important because you need to have a clear idea of what the rehab will entail for yourself and the contractor. Contractors will need it in order to give you an accurate bid on the project. Without a clearly-defined and well-thought-out SOW, it is very easy for project costs to spiral out of control and break your budget. Developing a detailed Scope of Work is the most important job as a Residential Redeveloper!

[How:] To get started on your SOW, identify the "big picture" items as "Essential," "Desirable," or "Optional" and estimate each cost. You can save time by keeping these “big picture” items in mind and taking pictures during your initial walkthrough of the property to estimate repairs, and taking accurate measurements during that time to create a to-scale sketch. After determining the big pictures items you should then compare this rough SOW with your budget. You may need to eliminate optional items at this time to accommodate essential items and maximize the effectiveness of your rehab.

Creating a Detailed Scope of Work Walkthrough (DICTATED BY CHRISTIAN)

To develop a detailed Scope of Work, you will be utilizing five tools: your “Repair Estimate Sheet,” “Detailed Pictures” you have taken of the property, “The Scope of Work Directory and Library,” a “Base Scope of Work Template,” and a “Sub-Scope of Work Template.”

1. (Repair Estimate Sheet) Your Repair Estimate Sheet and2. (Detailed Pictures) the detailed pictures you have taken from the property should be

referenced constantly when building your Scope of Work, so that you can efficiently identify what work needs to be done throughout the property.

3. (Scope of Work Directory & Library) The Scope of Work Directory and Scope of Work Library is home to a wide variety of Base Scopes of Work and Sub-Scopes of Work Templates.

4. (Base Scope of Work Template) A Base Scope of Work Template is a complete and comprehensive Scope of Work of a specific property already renovated that you can customize to build your own detailed Scope of Work for your subject property. These will be referred to as “Base Templates” for this training.

5. (Sub-Scope of Work Template) The Sub-Scopes of Work Templates are Scopes of Work that each details a specific room, or area of a property such as a single kitchen, a roof, a specific landscaping design, a living room, a garage, and more. These will be referred to as “Sub Templates” for this training.

USING YOUR REPAIR ESTIMATE SHEET & PICTURES IN CONJUNCTION WITH THE SCOPE OF WORK TEMPLATES

As you will discover further into this training, your Scope of Work should detail what work needs to be done throughout your subject property. In order for you to accurately communicate to your contractor everything that should be accomplished, you will need to refer to your Repair Estimate Sheet and the detailed pictures you have taken when deciding what should be called out for in the “General Descriptions of Work” sections within these Scope of Work Templates, which you will gain more insight on moving forward.

ACCESSING THE SCOPE OF WORK DIRECTORY & SCOPE OF WORK LIBRARY

To begin building your Scope of Work for your subject property, navigate to the Resources tab on the Mastery site, and select “Scope of Work Directory.” A separate tab or window will populate, depending on your browser settings. This is the Scope of Work Library, where all the Sub Templates are located. If you scroll down the page, you will find the Scope of Work Directory, where all of the Base Templates can be found.

CHOOSING SUB TEMPLATES & BASE TEMPLATES

Sub Templates: Notice that located under where it says “Select a Room to Build a Scope of Work” is a collection of individual pictures of rooms, labeled accordingly. Each of these contains several Sub-Templates for rooms specific to their corresponding labels. For example, if you select, “Kitchen,” you will be taken to a page that is home to a variety of Scopes of Work specific to several types of kitchens. You will ultimately be utilizing these Sub Templates to further customize your Base Template.

Base Templates: Continue building your Scope of Work by finding a base template that most closely resembles your subject property. If you took plenty of pictures, this should be an easy task. Search either by scrolling through the list of properties, or by utilizing the parameters in the search filter, located to the right of this list. By clicking on the picture, you will be able to view other pictures of the property, whereas by clicking the title, a separate tab or window will populate with more in-depth information about the property. By choosing the right Base Template, most of the ‘heavy lifting’ will be done for you, and you should have a detailed Scope of Work for your subject property that is about fifty to eighty percent complete before any adjustments are made.

Select Your Base Template: Let’s imagine, for example, that your subject property is a 3 bed 2 ½ bath home that’s roughly 1,800 square feet; and judging by the pictures and property details, you’ve selected the Kelly Street property’s Scope of Work as a suitable Base Template. First, download template by selecting the spreadsheet icon. Once the download has finished, rename it with the address of your subject property so you’ll be able to easily identify it later, then open the document.

CUSTOMIZING YOUR BASE TEMPLATE

OVERVIEW

Now it’s time to customize this Base Template to create a detailed Scope of Work for your subject property, “123 Main Street.” As you navigate through each tab, note which areas and rooms you may need to add, remove, or change out for a Sub Template. On the Base Template, there are two main sides on each tab. The left (from column “A” to column “E”) is the printable area that will be given to your contractor, while the right (from “F” and beyond) contains information for your reference. Each tab on the spreadsheet below represents one area, room or step as it pertains to the complete rehab process of the property for which the Scope of Work was created; each tab is laid out in an order from the exterior to the interior, relatively consistent with the general flow of the Seven Stage Rehab System.

BREAKDOWN

(Tab 01) Job Summary: This first tab is the Job Summary, which you’ll notice right away has a CT Homes logo you’ll want replace with your own, and directly to the right of this logo, the “Kelly Street” property information should also be changed. Below the logo is a brief overview of some general expectations of how contractors should conduct themselves, and what to expect as it pertains to the pick-up, delivery, and installation of materials, both in general, and as it relates to the Scope of Work. We suggest you maintain the general integrity of these instructions, but feel free to amend them to align with your company’s needs. At the bottom left of the Job Summary tab is where you’ll want to list the different subcontractors that will be working on your jobsite. You should include every subcontractor’s information so that it is available to everyone who will be working on the job. This will ensure that lines of communication are always open, and all parties can be contacted in the event of any emergency.

(Tab 02) Demo – Exterior: The next tab is the “Demo – Exterior” tab, where you will identify items that need to be demoed around the exterior of the property; it also specifies who is in charge of completing the demo work, where it says, “Contractor Perform Work.” This will be listed on every tab, accordingly. The information below “EXTERIOR General Description of Work” is where you will catalog each of these items. Refer to your Repair Estimate Sheet and the pictures you have taken to do this. Remove any items that are not relevant to your subject property, and add additional items that will need to be demoed. It’s always a good idea to call out for the removal of any remaining trash and debris in the yard,” so this is one line item you should consider leaving in place. But if, for example, your subject property doesn’t have a shed in the backyard, then, “Demo the shed in the backyard,” here, will of course need to be deleted. When adding an item to be demoed, simply type it in the list. For example, if there is an old, beat up hot tub in the backyard that you want removed, simply enter in “Demo the hot tub in the backyard.” Add any additional items in the same way.

(Tab 03) Exterior-Fence-Deck: The third and next tab is the “Exterior – Fence – Deck” tab. Below the title “EXTERIOR,” you will list out all the work that needs to be done as it relates to any general exterior work, repairs for, or the construction of fences, and repairs to be made to, or the new construction of a deck. This can be anything from building a new pergola at the back of the house, painting the exterior, pouring concrete, installing new exterior doors and hardware, as well as new light fixtures, and more. For example, the first thing detailed here is to “Complete all recommended termite damaged wood repairs.” This is a general line item you should always consider including, unless you live in an area that doesn’t generally necessitate termite repairs.

The obvious differences here from the previous tab, are the additions of a chart on both the left and right sides of this Scope of Work section, and the addition of the “Cost Calculator,” which

totals material and labor costs automatically. The chart on the left catalogs the specific items in detail that you want your contractor to use when performing the work described above, and breaks down the material costs for those items, their model or item numbers, and where they can be purchased, and totals the cost for all items called out for, “here.” So when the contractor sees, “Install new entry door,” and “Install new entry door hardware,” there will be no question in his or her mind as to what door they should install, or what hardware will accompany it, because you have gone to every possible length to identify the exact materials that should be used. For your reference, a legend for the store abbreviations are located below the chart on the right-hand side, under the title, “Store Key.” This same space also includes some general information that is helpful for you to know when building your Scope of Work.

The chart on the right hand side is in place for your reference, and lists information about the items used in the Scope of Work to the left, including a link to each item on the store’s website. It also provides you with alternatives, when available, which closely match the item called out for in the Scope of Work. This is especially helpful, because CT Homes buys some materials from local providers, so some items listed may not be available in your area. Additionally, this can be helpful if the cost of a particular item used is not within your rehab budget. For every item used by CT Homes, a similar, lower-cost alternative may not be available within the Scope of Work. However, if we have identified a lower cost material option that looks like the more expensive product used, it will be listed here. For example, the “Exterior Front Door” called out for “here” is $274.00. If you decide you would like the same style at a lower price, you can elect to include the alternative item in your Scope of Work, which is listed “here,” under “Home Depot Alternative Items.”

(Tab 04) Landscaping, (Tab 05) Roof & Gutters, (Tab 06) Windows & Siding: Next is the “Landscaping” tab. You will want to edit this tab in the same way as the previous one, the “Exterior-Fence-Deck” tab. Continue with the same level of scrutiny when addressing the “Roof and Gutters,” and the “Windows & Siding” tabs.

(Tab 07) Demo – Interior: The “Demo – Interior” tab should be edited in the same way was the “Exterior – Demo” tab.

(Tab 08) Painting: Within the “Painting” tab, you will identify the type of paint you want your contractor to use, both within the interior, and on the exterior of the property. This is the tab that he or she will reference when painting is called out for within other sections of the Scope of Work. Just like the previous tabs, this chart contains the specific types of paints that should be used in each area of the house. Under the “Fixture/Item” column, you will enter the location where the paint should be applied. Your material costs are totaled, “here,” and just as in the other tabs, your total costs for material and labor are calculated, below which you are given alternatives to the materials called out for on the left. To help estimate your costs for paint, you

can refer to the last tab labeled “Calculators.” This will provide you with an easy way to estimate costs for both your interior and exterior paint based on square footage. This tab will be discussed in further detail in its order within this Scope of Work.

(Tab 09) Kitchen, (Tab 10) Master Bath, (Tab 11) Hall Bath: The “Kitchen,” “Master Bath,” and “Hall Bath” tabs should also be addressed in the same manor as other previous, similar tabs; whereby, you will want to identify what work should be performed within the “General Descriptions of Work” sections, and adjust the materials you want to use accordingly.

(Tab 12) Flooring: The tab “Flooring” will be the central hub for all item numbers, brands, descriptions, colors, quantities and costs as it pertains to the various types of flooring you installed throughout the entire property. It’s likely that you will have noted, for example, to “Install new tile flooring throughout the entire kitchen,” but there’s no harm in mentioning that here as well. As you can see under the title labeled “Flooring,” “Install new tile in bathrooms and kitchen” is called out for; and just as in the “Painting” tab, areas requiring various types of flooring that differ from others are noted in the “Fixture/Item” column. When a contractor sees “Install new tile in bathrooms and kitchen,” they will be able to reference this tab to find out the exact type of tile you want in each of the bathrooms, which both may differ, versus the type of tile you want installed “…throughout the entire kitchen.” You may notice that within this Scope of Work, the type of tile is detailed in each chart on the individual bathroom and master bedroom tabs. We’ve written each of the Base Templates and Sub Templates in this way, so that if you need to use a Sub Template for any room that doesn’t fit your subject property, that Sub Template Scope of Work will already have the exact type of flooring detailed.

(Tab 13) Doors: The “Doors” tab should spell out what doors should be installed where. From bedroom doors, to sliders, exterior doors to cabinet doors and the hardware that should be coupled with them.

(Tab 14) Plumbing, (Tab 15) HVAC: The “Plumbing” and “HVAC” tabs will identify the extent of what needs to be done concerning the plumbing, heating, ventilation and air conditioning. In this Scope of Work, there are no materials listed, but you may, for example want to install a specific water heater, air conditioning unit, or a heater and should note this accordingly. However, the general descriptions of work to be completed should suffice for a lot of your plumbing and HVAC needs.

(Tab 16) Electrical: For the “Electrical” tab, in the same fashion you will be calling out specific materials in the previous tabs, do so here as it pertains to various electrical components that you want installed throughout the property, such as different types of lights, ceiling fans and other fixtures. Additionally, be sure to specify what should be accomplished in the “General Description of Work,” as you have done in every tab, accordingly.

(Tab 17) Garage: Repeat the same process for the garage tab, as needed.

(Tab 18) Layout: The “Layout” tab should specify the major changes being made to the property. This is also a place for you to insert current and post-rehab floor plans. This will give your contractor a visual reference directly in your Scope of Work.

(Tab 19) Calculators: As briefly stated earlier, this “Calculators” tab will provide specific figures to determine how much paint you will need for your interior and exterior. There are automatic calculations that will tell you how many gallons of paint you will need based on the dimensions you input into the calculator. To utilize this tool, enter the dimensions of the exterior of the property “here,” include the number of windows and doors, “here.” The square footage of the windows and doors will be subtracted from the total square footage of the property, giving you a fairly solid estimate of how many gallons of paint you will need for the exterior. To determine how much paint you need for the interior, measure the height and width of each room you are going to paint, and enter the information in the appropriate cells, “here.” Again, you will want to subtract the number of windows and doors in any room you’re measure to ensure a more accurate estimate. It’s a good idea to round up one gallon for both the interior and exterior to ensure you have enough paint. One gallon of paint will cover one coat of approximately 400 square feet.

UTILIZING SUB TEMPLATES

Now that you have sufficiently edited each of the details for the areas and rooms of your Scope of Work Base Template that align with the flow of your subject property based on all the work you have specified in your Repair Estimate Sheet in conjunction with the detailed pictures you have taken, it’s time to replace the rooms or areas which you noted do not align appropriately with your subject property, by leveraging the Sub Templates.

Choosing a Sub Template: To choose a Sub Template, navigate back to the Scope of Work Library and select the type of room or area you would like to swap out within your Base Template. Let’s say, for example, that the kitchen in your Base Template doesn’t really fit your subject property. Click on the Kitchen category within the Scope of Work Library; here you will see examples of various styles of kitchens you can utilize as a Sub Template. To the right of the title “Kitchen templates,” directly under the title, “Scope of Work Library,” you have the option to search the templates using a filter, similar to the filter on the main page of the Scope of Work Directory. You can search by Kitchen Shape, or by Total Rehab Cost, or both. The Kitchen Shapes available include Galley, L-Shape, L-Shape with Island, and U Shape. The Total Rehab Cost search function allows you to identify kitchens that have been remodeled by budget. These rehab costs won’t necessarily reflect your exact rehab estimates, but rather, will serve as a general guide as you pinpoint a kitchen that is most similar to yours. Additionally, the

numbers reflect the general level of a renovated kitchen from a lower-end to higher-end remodel.

Let’s say for example that you will need an L-Shape kitchen, and that as a mid to higher-end remodel, your total rehab cost lands somewhere on the higher end of the $15,001 to $25,000 range. Kitchen Template 6 will likely be the best option to align with your subject property.

Click on the picture “here” to view details about this kitchen template. To the left under the title, “Kitchen Template 6,” you can view additional pictures from various angles by clicking on each preview button below. To the right you will see the general description of work that has been called out for in the actual Scope of Work for this kitchen, and the material and labor costs. Again, these numbers will most likely not reflect your exact costs. Keep in mind that there are alternative materials you can use within the Sub Template itself. You can examine the materials list below, as well to help you better determine if this Sub Template will work. If you scroll down further, floor plans are available with exact dimensions for this kitchen. Even if these dimensions aren’t exact, you can still make adjustments to the materials and if need be, draft new plans for your kitchen. Let’s say, for example, that this this L-Shape kitchen fits wonderfully, but that you don’t need the breakfast bar, or have room for it in your subject property’s kitchen. The first step is to download the document by selecting the orange button, “here,” labeled “Download Scope of Work”

MOVING THE SUB TEMPLATE INTO YOUR BASE TEMPLATE

Moving this Sub Template into your Base template is easy. After you open the spreadsheet, right click on the tab, “here,” select the “move or copy” option. You’ll be able to choose where this tab should be moved, based on the spreadsheets you already have open, by clicking on the drop-down menu, “here.” Select your Scope of Work, “123 Main Street.” You’ll notice now that you have the option to move it between the tabs of your choice. Choose where you want it to go, select “create a copy,” and hit ok.

The Sub-Template has now been moved to your Base Template; you can see that you will have two different kitchens. Because you don’t need both kitchens, remove the original Base Template kitchen by right clicking on the tab and selecting “Delete.” Now your kitchen is much more customized to fit your needs.

Now, because your kitchen is 10 ft. x 15 ft., and this one is 12 ft. x 19 ft., you’ll want to customize it further to account for the disparity in size. Do this by adjusting the quantities in the “Material List” chart. You might want to be pinpoint accurate on every square foot and inch of this Scope of Work, but the truth is that you don’t need to be at this point. You want to make

adjustments so you can get close enough to move forward with the rehab. You can, however get exact measurements if you choose, by speaking with a kitchen layout professional or kitchen consultant at Home Depot, for example, and have them draw up exactly how many cabinets you’ll need. This will take a little more time, but will be more accurate. Services such as these are also offered in other specialty stores.

Adjusting the quantities yourself can be accomplished with relative accuracy by subtracting the amount of cabinets that would otherwise be installed in the width and length of the existing Kitchen that your Kitchen does not have. For example, entered here for order are 165 cabinets. The difference in linear feet of the two kitchens is about 6 feet in total. A good safe estimate to make would be to order about 160, instead of 165. The other area that this will have a significant impact on is the countertops. If you’re using 6 less linear feet of countertops, you will need to account for the same adjustments. The alternative to estimating for the counter tops is to call the supply house, and tell them you will need to do a kitchen counter top based on a 10 x 15 countertop, and ask them how many square feet you will need. However, keeping in mind that speed and efficiency is key, and that you don’t need to be pin point accurate on these measurements, estimating yourself should suffice. For the other items in this “Material List,” with the exception of the back-splash, no adjustments need to be made, unless you want any alternative materials.

PRINTING YOUR SCOPE OF WORK

Now that you’ve reviewed each and every tab on the Base Template, made any micro adjustments needed, leveraged any Sub Templates needed, and made adjustments, you should review the entire document once more to ensure accuracy before printing. To print this document, simply navigate to “File,” select “Print,” and save the file as a PDF for a Mac, and select “Print to PDF” for a PC. Review the entire document to ensure there are no formatting issues. For example, “here” you will notice that two lines printed on a single page. To fix this, revisit this tab, and adjust it by deleting these blank rows. Print your completed Scope of Work.

CHAPTER 3: STAGE 3 – Hiring Contractors:

Introduction Video (JD ON CAMERA)

Hiring a good, dependable contractor is crucial and will have a significant effect on the outcome of your rehab project. Put a good contractor into a rehab project without a system in place, and you will have problems, but put a good contractor into a fantastic system and you will end up with a great contractor. Locating and hiring quality contractors isn’t as intimidating as it may seem - if you approach it systematically. You have to first cast your net wide. You want to get comprehensive pictures of contractors working in your area on rehab projects. Then narrow it down by talking to supply houses, real estate investing groups, other contractors, and online research. Narrow your list down even further by pre-screening contractors to make sure that they will fit into your system and follow your standards. After that, getting contractors to bid a project and selecting the most qualified one is easy! In this system, we will show you where to start your search, what questions to ask, and what information to provide to make sure you are hiring the best possible contractor for your rehab job.

Hiring Contractors Walkthrough (DICTATED BY CHRISTIAN)

STEP 1: FINDING QUALITY CONTRACTORS

Finding, hiring, and working with a quality contractor isn’t as intimidating as it may seem, if you approach it systematically. Our system for hiring quality contractors has four main steps. The first of which is to locate potential quality contractors. But, first let’s define what a QUALITY contractor is:

Essentially, a quality contractor is a person who is professional, confident, and competent, licensed and insured who has the skills and inclination to work within your system to do the best and most efficient job possible.

You want to find someone who has at least three to five years of industry experience. The contractor you want to hire should also own his or her own equipment, and have a good balance of crew to number of projects. A quality contractor will also be licensed and insured, in good financial standing, have good referrals and be willing and happy to show you past projects they’ve completed. Additionally, if they use subcontractors, you want to make sure they are upfront about this from the beginning.

So, where can you find quality contractors?

WEBSITES

A great place to start is the internet. There are several websites with contractor databases that you can search. We recommend four websites you can use either to start your search or to get more information on contractors you have found through other methods mentioned here.

All of the sites require that you register to be able to search for contractors. Angie’s List, however, is the only site of the four listed that charges to use it services. Bid Clerk works a little

differently from the other three sites, acting more like a marketplace where you can post a job for a contractor to bid on.

JOB SITES

Job sites are a great place to look. Look around your area for contractors doing renovation projects. Stop by and introduce yourself, and be ready with your elevator pitch – which we will go over in step 2. Visiting a contractor’s jobsite lets you learn a lot about that contractor without even exchanging words. Look at the organization of the site and the workers’ attitudes toward the work. If the contractor is there, you have an opportunity to watch him or her in action. Ask the property owners if they are happy with the work the contractor is doing – you’ll definitely get an opinion.

SUPPLY HOUSES

Supply houses are usually familiar with their regular customers. They know who pays their bills on time, and who hasn’t been in for a while. They know the customers who are easy to deal with and those who cause problems. Aside from asking at the pro desk, you may also be able to strike up a conversation with contractors who are in buying supplies. Look for contractors who are there early in the morning – this indicates organization and eagerness to work.

REIA’S

Networking is an extremely useful tool when it comes to finding a contractor who specializes in rehabs. Connect with your local REIA’s and talk to members about contractors working in the area. If they may not want to share for fear that you will make their contractor less accessible to them with the work you provide, simply ask if their contractor can recommend a different contractor who isn’t quite so busy.

BUILDING DEPARTEMENT

Your local building department sees a lot of contractors, and as such can be a great resource if handled correctly. Finding contractors this way can help ensure you are dealing with someone who is familiar with permits, and actually pulling them. As a municipal department, nobody here can show preference for one contractor over another. However, you can introduce yourself and let them know you are looking for contractors to work on your projects. That will give them an opening to share with you contractors they work with on a regular basis without showing prejudice.

CONCTRACTOR REFERRALS

Lastly, other contractors are a great source for referrals. Once you find one you like, ask him or her which contractors and trades he likes working with. Contractors who do the same quality of work tend to stick together.

STEP 2: CONTRACTOR MEETING & PRE-SCREENING INVTERVIEW

After you have searched for and found potential quality contractors, it’s time to pre-screen them. This is the second step in the four step process of Hiring Quality Contractors: Pre-Screen & Interview, and in this system we’ll show you what we’ve found to be the best way to communicate with them to find out if they are, in fact, QUALITY contractors.

An important resource available to you that you should utilize when Pre-Screening Contractors is the Contractor Credibility Packet:

The Contractor Credibility Packet is an in-depth, comprehensive analysis of your entire business showcased perfectly for a contractor’s eyes, outlining the benefits of working with you in your business. You can learn more about how to best utilize this tool and download the document to customize it for your business by searching “Contractor Credibility Packet” on the Mastery site. You will also learn about one way you can utilize this valuable tool a little further into this chapter.

The pre-screen and interview process consists of three main steps:

1. The One Minute Introductory Pitch2. The Follow-Up3. The Pre-Screening Interview

THE ONE MINTUE INTRODUCTORY PITCH

When you first meet a contractor, whether it is in person or over the phone, utilizing the five key components of this detailed pitch is crucial in discovering whether or not the person you’re speaking with is a good fit to work with. This pre-screening process is also your opportunity to illustrate to a contractor that you will be a serious, repeat, profitable client, and to ensure that they are a good fit to work within your system.

If your initial impression with the contractor you’ve met is that they might be a good fit to work within your system, you want to pre-screen them with a one-minute introductory pitch. This is the first step, and will help you determine whether your initial impression was accurate and make sure that they will respect you and the job. This pitch covers five main points about you and your business:

1. I am not a retail clientStart by sharing that you are doing a one-time kitchen remodel, and that you have a systematized business. This will let the contractor know you expect wholesale pricing.

2. I work with a network of investorsExplain how you can keep a contractor busy because you work with a network of investors and will have a steady stream of projects for the right contractor.

3. I use a proven system with a pre-determined scope of workShare with contractors that you have a detailed scope of work itemized down to the materials and item numbers, so they can focus on their craft.

4. I LOVE to pay contractors when work is completedLet potential contractors know that you don’t make any money or gain any benefit until the job is complete, so you have no issue with paying promptly and willingly for completed work. Most contractors are not used to hearing the two words “love” and “pay” in the same sentence from clients, so this is a huge motivator for them to work with you.

5. Ask: Would you like to make money in my system?

Leave the contractor with an enrolling question giving him no choice but to say yes. This will leave you in a positive space to share the next steps on how he can move forward with you.

Take a look at this scenario of JD and Paul illustrating this one minute pitch:

[REHABBING BOOTCAMP VIDEO TRANSCRIPTION]

JD: Hello, Mr. Contractor, my name is JD Esajian with ABC Homes, LLC. I’m a local residential redeveloper. My goal this year is to do 15 projects, and what that means is I’m looking for a small select group of contractors that can give me very competitive pricing. And when I say competitive pricing, I mean wholesale pricing, not retail pricing; which means, in case you’re not familiar with wholesaling pricing, that I need the best pricing out there. But I’ll tell you that in exchange for that, I have a very detailed system that’s going to make your job easier, and help you save time and make you more money on my jobs. Do you like to save time and make more money, Mr. Contractor? Awesome! Well then let me just tell you a little bit about the system. We have a very very very detailed Scope of Work with everything we want done to the house: layouts, item numbers of materials, where to get the materials, and the best thing about the Scope of Work – and you’re going to love this – is that it correlates with the Payment Schedule. And the Payment Schedule is a document that you and I create together at the start of the job, should I decide to hire you for that job, that’ll spell out everything you need to do to get a check. And let me tell you that I love to pay contractors when work gets done. I love to pay contractors, because in our system that you’ll be working in, if we’re paying you – the jobs getting done, and that means that I can get that house to market, sell it, and put money back in my business to potentially - to buy the next job that you can potentially work on. Ok, now, there’s a certain – we have to meet a certain level of quality, and you’ll see that when I walk you through the home and show you the Scope of Work. We pull permits on everything that we do. But, would you like to make money in my system? Would you like to make money in my system?

AUDIENCE: Yes!

JD: Ok! So, thank you! Thank you!

PAUL: Very good. Very good. Touché!

JD: So, you know, notice that I used a lot of things that Paul shared as well, but I didn’t say – I said very specifically when I started out that my goal this year… so I shared my goals. I didn’t say... I would’ve also put in that I’m part of a national network of investors, which I didn’t mention in that one – that’s a great thing you should use regardless of your level of experience, because you are part of a national network of investors. But, I didn’t come from a position of credibility meaning I had done dozens of deals, because I said I wasn’t going to do that. I came from a position of credibility of the amount that I was going to be able to potentially give that contractor if they could work within my system. I also told the contractor who I was to them, that I’m a wholesale customer and what that meant. Meaning I need the best pricing. But immediately after I told them what I needed, I told them what I was going to do in exchange for that. And that was going to be put them in a very detailed system with an itemized Scope of Work, and I told them how they were going to get paid. And I told them - not only did I tell them how they are going to get paid, but I told them that I love to pay. And I didn’t say it once, but I said it two times. Because most contractors probably haven’t heard those two words together in the same sentence. And in our system we do love to pay contractors, and I want them to know that. Because if we’re paying them, that means the works getting done, just like I said. And that means I get the house sold – get it on the market and get the house sold then move them to the next job. Ok, so, very specific things – it’s important that you understand. You know, we know this – that the first impression is one of the most important, and when you’re dealing with contractors, it’s no different. You just have to know how to say it and what to say. And when you feel confident about it, you’ll communicate it better. When you feel confident about it, you’ll look them in the eye more. When you feel confident about it, you won’t stumble over your words, and you’ll actually get the words out there that you want to communicate. Now of course, in a conversation, they may interject, and they may ask additional questions – and that’s okay, you’re just going to get back on track and continue to communicate. And then, at the end – both Paul and myself – and you’ll do the same, we finish with an enrolling question. An enrolling question that’s very hard to say no to: “Would you like to make money in my system?” Well, they may not like something about you when they’re talking to you, but it’s hard for someone to say ‘no’ to, “…do you like to make money?” Ok, now that’s the first conversation, and it’s the start of the relationship.

PAUL: Is there a lot of what we call ‘hooks,’ to where a contractor is paying attention to you as you’re talking to them? What are they? Love to pay. Continued and repeated work, national network of investors, Systems, Save time, make more money.

JD: Scope of Work, Payment Schedule.

PAUL: …So that’s what this elevator pitch is all about. We only have so much time to get someone to pay attention to us, and more than that – and I missed it, but JD said it – we want to let them know on our first conversation – again, we’re not ‘Sally-the-homeowner.’ We’re not a retail client – we need wholesale pricing. You’re not going to make your money with me on one house. You’re going to make your money with me on a series of jobs – a volume of jobs – with me and my network of investors. Right? And then, right out of the gate, this contractor knows we’re different than their retail clients, so they need to be more competitive and give us wholesale pricing.

If the contractor’s answer to “Would you like to make money in my system” is yes, then you’ll want to exchange information so you can follow up with them. Remember to develop and practice this one minute introductory pitch so you’ll be prepared when you meet contractors.

FOLLOW UP

The second step in the pre-screening process is the follow-up. If the first step went well and you feel like they would be a good fit to work within your system, you’ll want to follow up by emailing them the Contractor Application. Keep in mind, depending on where you meet a contractor and how you found them will vary, and so will the timeline of this process. For instance, imagine that you receive a phone call from a contractor you found on Angie’s List. It’s very possible that you could be delivering your introductory pitch over the phone, and you have an interview right away. In this instance you might have them fill the contractor application and proceed immediately to the interview process. , which is the third step.

THE PRE-SCREENING INTERVIEW

There are some very important questions you’ll want to ask every contractor that you interview. These questions are also on the Contractor Application, so by the time you have them in for an interview you should have these questions answered:

1. How many years have you been on the job?a. You’re looking for someone who has a minimum of 3 years of trade

experience. Everybody has to start somewhere, but for your system, you should not work with a contractor who is just getting started, or who has only completed a few projects.

2. Do you own the proper tools for the job?a. For the most part, someone who is an established contractor should own all

the tools for the job. You don’t want to run into a situation where a project gets held up because the contractor is unable to rent or borrow a tool to

move forward with the project, or a scenario where the contractor needs you to pay for a common tool before they can begin or continue work. In some cases, you may find a contractor in need of a job-specific tool that is less common. In this instance, it may be acceptable for you as the investor to purchase the tool for them. However, it’s important to ask this question

3. Are you licensed, insured and permitted?4. Do you use sub-contractors?5. Are you in good financial standing?6. How many workers are on your crew, and how many jobs are you currently working

on?7. Can you provide referrals from previous clients or access to previous jobs you’ve

completed?8. Can you provide me with any additional references?

It’s important to remember that the contractor will also be interviewing you, so you need to sell them on why you are great to work with. Contractors are in the business to make money, and first and foremost they’ll want to know how you can help them do that.

When interviewing contractors, you want convey professionalism. Knowing what to say next instead of just winging it is part of doing just that. An additional resource available to you as a Mastery student is the Introductory Contractor Meeting Outline (you can find this document by searching the term “Contractor Meeting Outline” on the Mastery site) – We recommend that you structure your interviews with contractors in the way we have outlined in this document. So download it, and customize it to fit your business. This will help you structure your interviews with contractors so that your expectations are set up front to ensure there will be no surprises.

The contractor meeting outline covers 7 main points for interviewing contractors.1. And introduction to your company as a residential redevelopment company,

including goals, the areas you invest in, and average price-points2. The benefits to their company such as consistent work for the head contractor,

and building their business3. Benefits of working with your company as a developer – for example, your goal is

to make the construction as hassle free as possible.4. You want to show examples of scopes of work for past projects – if you don’t

have any because you haven’t done a rehab yet, you can still provide them with other examples.

5. How you expect to conduct business – outline the process of the project from start to finish.

6. How your company handles problems, or avoids them with consistent communication

7. The seventh main point covered in the contractor meeting outline entails providing your contractor with the opportunity to bid on jobs. The bidding process is the next step in the four steps of hiring quality contractors.

Remember this outline was created because it’s effective, and should be customized to fit your business so you are as professional as can be when approaching the contractor interview.

Let’s watch Craig from CT Homes in this real life contractor interview. Keep in mind, this is not staged, and pay close attention to the flow of the interview and the 7 main points of the contractor meeting outline.

[CRAIG’S CONTRACTOR INTERVIEW VIDEO TRANSCRIPTION]

CRAIG: I’d like to start off with you telling me a little bit about your company and how you got started, and what your vision for the business is. It looks like your niche is working with Investors?

CONTRACTOR 1: Correct, that’s what it is now, but in the beginning it was very different

CRAIG: So as far as systems, we’re very systemized and systems oriented. We have a detailed process we go through to analyze the house and get the Scopes of Work put together. And my job, really, is to make your job as easy as possible so that you have a detailed Scope of Work, a detailed set of plans, and a vacant house on a lock box so you can just get up and go.

CONTRACTOR 1: That sounds awesome, because right now I just had to shut down three jobs. We’re actually looking for investors and being more critical with our investors rather than the other way around. We’re hoping that they can be critical with us; because, we want to refine our machine as well.

CRAIG: And that’s great, and what I’m looking for as well. And really at the end of the day I’m looking for a partnership. I mean, we can sit back and say I’m paying you for a service but we’re doing 40 deals this year, and next year we’re doing between 70 – 100 deals. So I’m looking for a few good crews, probably about five good crews that value what they do and take pride in what they do but look at our relationship as a partnership and not just a paycheck for providing a service. I need guys that are going to be there and are going to say, “Hey, Craig, you called out for us to build it this way, but we can save time and money if we tweak it like this.” Or, “We have this problem that came up, but don’t worry because we’re going to take care of it.” I want them to value the relationship that we have. And as far as work, there’s not ever going to be a problem with work for you guys. I mean, I’m not going to give you guys every single job, I’m not going to ever lie to you guys and say “You guys are my ACE, and I’m going to give you every single job.” I want to give you about 2 to 3 jobs, which is where I’ve seen a lot of contractors at their breaking point. And it’s not because they can’t handle more, it’s just that they have other business too, and other jobs going. I could give you six jobs today, but what’s that going to do for the rest of your business, right? So I’m looking for contractors that look at this as being part of our investment team and take pride in their work.

We do things a little above board. We pull permits on jobs that you might say, “Craig, why are you pulling permits on this? There’s no need to.” Well we provide the permits we pull to our buyers every time. It’s just another liability issue for us. And I need guys that aren’t going to sweep things under the table, either. You know if you’re in there and you’re working and you see some rotted wood behind a wall, not to just put drywall on it and turn the other way, I need you guys to be on my team and take care of that.

CONTRACTOR 1: We refuse to do that, and sometimes that gets us in trouble. So I’m happy to hear you say that, because we just refuse to do that kind of work.

CRAIG: So a couple ways that we work that are a little different than other investors – I just want to give you a snapshot of the process. We’re going to get a house under contract, then I’m going to go out and walk the property to confirm all of our repair numbers and give you guys a Scope of Work. I’ll give you guys a call and say, hey, Jason, here’s this house, here’s how you get access, here’s our Scope of Work, and if I have an improved set of plans – let’s say we’re moving walls around and adding a bathroom I’ll give you the set of plans, and I’ll give you the budget. On bigger jobs I’m probably going to get multiple quotes. On smaller jobs – 40, 50, 60 thousand dollar jobs where it’s cosmetic stuff, I might just say, “Here’s the budget. If you can hit it, it’s yours!” You guys walk the property and say, “Yes we can.” The, I’ll say, “Bam! Let’s get going.” My objective is to start that job the day after we close escrow. Now sometimes that doesn’t happen because of permitting issues and things of that nature, but that’s my objective. Now, if you can hit my budget, then we’re going to sign our documentation. We call them the Six Critical Documents. They are contracts we have with every single contractor. The first document is the Independent Contractor Agreement which breaks down basically the standards in which we require you guys to work. It breaks down the project address, start date, completion date, contract price, who the contractor is, and we do have liquidated damages if you guys go long which is typically about $100.00 per day. You know we’re fair with that. I mean if you tell me, “Craig I need 30 days to do this job,” then I’m going to give you 35. So, there should be no issues with the liquidated damages because I’m giving you an extra week in case any issues come up. You know, we’ve done a lot of deals, and we know that the stars don’t always align perfectly.

CONTRACTOR 1: Right and I know that like you said earlier if there’s a change order, we submit our change order with our effective schedule change attached to it. So that’s how we handle that.

CRAIG: Yeah, and then I’m going to have you guys sign the Scope of Work, and we’re going to do an Insurance Indemnification form so you guys release us of being liable at the property. I need to get your insurance certs with us named as additionally insured. Every year we’ll do a brand new W-9, and then we do a Payment Schedule. So we never pay for work until work has been completed. You know, this is my opportunity to air out all the laundry, and you guys say you’re either good with it or you’re not good with it. I don’t want any surprises. So I always want to have a little more work done than money out because if I have to fire you guys I have to make sure I can finish that job within my budget. If I ever find myself in a position where I have

more money out then work done, that’s not a good position for me to be in. So the way it works is I’ll break down the Payment Schedule and we’ll hit benchmarks. I’ll set up benchmarks. Typically the first one is something like “complete demo and pass inspection for rough plumbing, framing, and electrical.” When you hit your benchmark, then you get paid. We’ll break down a payment. I’ll email that to you guys. And I’m not going to dictate, “This is what you’re going to get paid. This is when you’re going to get paid. This is what you have to do.” I want you guys to look at it, and I want us to work together: “Get we get a little more [money] here, or can we add this or do that.” We should work together to get the payment schedule completed, because maybe getting the rough framing, plumbing and electrical by this time might be unrealistic so you might say, “Can we push that back here...” So we’ll go over it together on that and once you approve it and say, “Alright, that looks good,” all the checks are cut at that point for the entire project. And that’s it. The checks are done. I typically pay on Friday’s. We’ll meet at the property on Fridays and walk through the benchmarks. If they work is done, you get the check. You never have to worry about getting paid or worry about the checks not clearing. Our checks always clear every single time. You don’t have to worry about hunting us down and looking for us. You have my cell phone. You know where our office is. We love to pay contractors. We love to pay contractors because that means that work is getting done. So you will never have any issues with us getting paid. If you hit your benchmarks early, you’ll get paid early. If you hit your benchmarks late, then we’ll figure out what’s going on. Why are you late? There will be no partial payments. For instance if you got 90% of it done, I’ve heard, “instead of $10K can we get $8K?” The answer will be no, because all the checks are cut up-front. Also, I set aside a pretty large portion for the final payment, and that’s typically around 20% or so. Because what I’ve seen is a lot of contractors will sprint through getting the job done, but my final payment is after signing lien waivers, getting final inspections and completing our final punch list. And what I’ve seen it usually takes a week or ten days to get that punch list done. And a lot of times, I don’t put the house on the market until the punch list is done, and that just cost me a week of hold time. So I want you guys to sprint through the punch list. So that’s why I hold off a little bit larger portion for the final payment.

So let’s say you guys come to me on a Friday and say, “Craig, the house is done.” I’m going to give you a check for that payment; I’m going to do the punch list. Then if you guys are done on Monday with the punch list, you call me up, we walk through the property, if it’s done, your check’s there. So it’s 24/48 hours. It takes longer only if you guys take longer to finish the punch list.

CONTRACTOR 2: How do you handle buyer request for repairs after the sale?

CRAIG: Just because you signed the final lien waiver to get the final check doesn’t mean our project is done, right? I need to sell that house so I can get the money out so I can go buy another house and get you guys another job. So what happens is we will have the house under contract, then the buyer requested repairs come in, we’re going to negotiate. We don’t just blindly say ‘yes’ to everything. If it’s something that you guys worked on that was done improperly or not to code or got called out, I expect you guys to take care of it. If it’s something that you guys missed, I missed, or something that was not on the Scope of Work or maybe we

rolled the dice and thought maybe they’ll call it out or maybe they won’t, I’d expect us to sit down and work together to get it done. Maybe I’ll take care the cost of materials and you take care of the labor – whatever the case may be. Because the objective is to get that done, close escrow, get our money out and get another house, right? It’s not worth any of our time to go back and forth.

CONTRACTOR 1: With our investors, we’re the same way. If it’s not in the Scope of Work, we have a set rate. We send a guy out to do it, and we have two guys that are set and all they do is request for repairs.

CRAIG: Yeah, and honestly that’s all part of it. I mean, in sports they say, “You’re only as good as your last performance,” right? Everything is constantly judged. You might have done a good job getting the house done, but what if it sits for four months and then we get it under contract… if I have a hard time getting you guys out there, I don’t care what you just did. So that’s just kind of how we handle buyer request for repairs. How I want to handle change orders is: One – I don’t like change orders. Every investor, I’m sure, tells you that, too. I typically try to write as detailed of a Scope of Work as I can to try to eliminate as many opportunities for changes orders as possible. I don’t typically go under a house, in an attic, or on a roof. So when I send you guys to a job to bid it out, being part of our team, you guys need to look at all the areas. Don’t have blinders on the Scope of Work, because, you might not go under the house and then the home inspector goes under the house and sees that there’s five post and piers knocked down and need to be redone – well guess what we’re doing? We’re doing new post and piers. So basically what I tell them is like, “Look, you go through the entire house, top to bottom. Give me a bid for my scope. If you see something that’s not on my scope that’s structurally wrong, write a separate bid. Like, “Hey we saw some posts and piers that are definitely going to be called out,” or, “we saw ‘this’ in the attic,” or “we saw ‘that,’” or whatever the case may be: Here’s a separate quote for that so we can handle all that stuff. Because it’s a ‘pay now or pay later’ situation for me – it’s going to get called out. But if you’re working on the job and something comes up, if it’s a few hundred bucks and you’re there, I expect you guys to just take care of it. If it’s a major issue, then I expect you to call me and we’ll work together to figure out the best solution.

CONTRACTOR 1: We document everything with photos. So if it is that few hundred dollar repair, we don’t want you to think we’re just blowing through it. We always document it with photos. And the guys will call either one of the project managers, if not myself, and they always get approval.

CRAIG: Ok. And a couple things that we do differently than a lot of investors, at the beginning of the job as soon as we buy the house, I’m going to send out my guy. He’s going to put up our banner. We put up security cameras. They’re ‘dummy cameras,’ but we put them up on every house - two to three cameras, strictly for security. Then we put a lockbox on, put a banner on, [and] put the cameras on. When you guys paint the house, you’re going to have to take those things down. I would expect you guys to put them back, right? Take the banner down, paint it, [and] put the banner back. We start marketing the house – I have my ‘For Sale’ sign out – day

one. So we have a separate company that goes and puts our ‘For Sale’ sign out. If you have to move it to do landscaping, or build a wall, or whatever the case may be, put it back. Put it back right. Don’t put it back hanging out to the side.

And then, I always want my contractors to start form the street curb and work their way back. So we start from the street curb and work our way back because we start marketing to sell that house day one. That’s why we have our banners out, our ‘For Sale’ sign out; we’re generating a buyers list. So let’s get the curb appeal looking good. Let’s get the house painted. Let’s get the landscaping in place, and then let’s move our way into the interior, and then into the backyard.

CONTRACTOR 2: So you like to have everything sodded and irrigated in the beginning of the project?

CRAIG: Yes. I want the curb appeal looking dialed in as fast as possible.

CONTRACTOR 1: Most of our projects are pretty quick, but do you take care of the maintenance after that?

CRAIG: Yeah, I have a maintenance guy. My guy that goes out and puts all the signs up, he does all my landscape maintenance. And actually he does a lot of landscape work for me. So I mean I would prefer to not use him because it’s just one more thing that I have to manage. You know I mean, if you guys are good; but if that’s an area where we can save some money because you guys are higher than we can use him, because he’s good. So start from the street curb and work your way back. When the house is done, I expect it to be ‘Molly-Maid Clean.’ You know every single thing clean: Windows clean inside and out, the whole house ready to go, so that when you guys walk out, I can walk right back in with the buyer – I don’t have to get a separate company in there to clean the house. That’s just kind of how we work. You’re not going to find anybody easier to work with. We’re very fair as long as you’re meeting our budget and meeting our times – I’ll just keep feeding you properties. It takes a long time to build up a good relationship, but it can be damaged like that. You know, the moment we have any issues – I’m really big with communication – if you guys don’t communicate with me, you know, that relationship could be over, and I’ll never use you again, you know, if there’s an issue. Don’t ever think you’re bothering me by calling me all the time. I go to the jobsite at random times every week, several times a week.

CONTRACTOR 1: Well, we’re notorious for keeping our jobsite clean at all times – even during demo. I have them sweep up, because we know you guys are selling it from day one. We always try to make it safe for any homeowner to walk through.

CRAIG: That leads me to two other issues that are one of my biggest pet-peeves. One: the job site has to be clean every single day, day in, day out – I don’t care what stage it’s at, because we have a lot of people – I could be bringing over a private lender. We don’t use any of our own money. We borrow money. We pay a large interest rate, so we might be bringing over a new private lender. Imagine we were sitting there talking to a brand new private lender who’s going

to lend us $500K, and we tell them how professional we are; then we take them over to one of our houses and it’s torn up. We just discredited ourselves, right? So the job site has to be cleaned every day. I’ll warn you once; after that – no more. And then the second thing is that the job site has to be secured every day. I’ve had contractors where we are replacing the windows – they take the windows out one day knowing the windows are coming in tomorrow, and we have holes in the house because they didn’t put in any plywood. You know, at the end of the day, I’m going to get sued, not you guys. Someone’s going to crawl in there, break their ankle, and guess who owns the house? So, those are two very large items.

CONTRACTOR 1: You know when we’re doing a teardown, basically, what we do is we make it as secure as possible with the permits and plans…

CRAIG: You know, those are things that we do that a lot of investors don’t do. And we’re going to put higher-end materials in there we’re going to have custom tile jobs that we’re going to do, all the tile is – it’s very important to us – that all the tile is laid out, how to install it, where to install it, where to buy it, how much it should be… You know we’re not only building relationships with you guys but we’re building relationships with suppliers. You know, so I might say, “Hey, go here and buy my tile and say it’s for CT Homes. Just tell them it’s a CT Homes project and put it under our name and they will pass the cost onto you guys.” I have about 60 real estate investors here in San Diego that are students all over San Diego County that contact me all the time for contractor referrals. And I don’t typically refer out a lot of contractors because I don’t, frankly, have a lot of great contractors that I can trust sending out. But I do refer contractors out. And, you know if the relationship progresses and you guys are doing everything that you said you could do, and everything is going well, I could expose you guys to another 30, 40, 50 investors here in San Diego. And I got tons – I don’t even know if you guys go up to Orange County, but I got tons up in Orange County.

CONTRACTOR 1: We were talking about it, so…

CRAIG: So I mean it’s not just… You got to look at – a lot of contractors, I find, look at like the smaller picture: Here’s the job, I got to get the job done. With us, there’s so much more that can be open to you guys, if you guys work hard and do a good job working with us, we can help you guys take your business to the next level.

CONTRACTOR 1: That’s where we’re aiming.

CRAIG: Any questions for me?

The entire interview took about 30 minutes in total. You may have noticed a few things Craig seemed to have missed that were listed on the Contractor Meeting Outline. Actually, Craig followed an adaption of it that works for him, but he did hit all the 7 main points, and you should also adapt this to fit your business. Craig had previously given an introduction

to the company before the camera started rolling, as well as examples of scopes of work. Additionally, after the camera stopped rolling, the interview ended with Craig presenting the next few jobs to bid on. Job bidding and selecting a contractor is the third and next step.

Now let’s take a look at the third step in Hiring Quality Contractors.

THE BIDDING PROCESS

Once your pre-screening has helped you identify several potential quality contractors, it’s time to put your project out to bid using a “Bid Packet.” A Bid Packet includes:

1. A SCOPE OF WORK,

2. A QUOTE ITEMIZATION FORM

3. BIDDING INSTRUCTIONS

The quote itemization form tells the contractor how you want to see items broken out in the bids. Your bidding instructions should be personalized – letting them know when the bids will be due and how you want them delivered, either by email, fax, or drop-off.

4. We also recommend that you include a Contractor Credibility packet in each of your Bid Packets.

Make several copies of the bid packet and leave them at the property. Ensure you leave a key in a lockbox then, call three to five contractors that you have already pre-screened and interviewed, give them the address and lockbox code, and ask them to bid on the job.

Having bid packets at the site will help ensure that the contractor actually visits the job site before bidding on the project. Also, you want all of the bids to contain the same information, hence the Scope of Work and the Quote Itemization Form; if each contractor gets the same information via the bid packet, no one can claim preferential treatment. Additionally, you want to see how well a potential contractor can follow directions. If a contractor can’t even comply with your bidding instructions, they definitely won’t be able to follow the Scope of Work.

EVALUATING BIDS

Once you have received the bids from your contractor, you need to evaluate them.

Make a list of essential characteristics that each bid will need to have. Put the list into a matrix and assign points to each item.

You can find a sample Bid Evaluation Matrix in the 7 Stages of a Rehab system, available on the Mastery site. Check off and score each item as you evaluate the bids. At a minimum, you want to make sure that the contractor followed your bidding instructions, the contractor’s quantities are reasonably close to what you estimated, the contractor neither added nor subtracted items from the quote itemization form without explanation, license and insurance information is up to date, and professional references have been provided. Narrow the bids down to your top two choices and contact their references. Once you have verified the references, make your decision and notify all bidders of their status.

Your last two steps in Hiring Your Contractor are meeting him or her at the job site for a final walkthrough and executing the Six Critical Documents. To protect yourself, do not sign any documents with a contractor until you have closed on the property and do not start any work until the contractor has signed the documents. You will want to discuss each document with the contractor before signing. Make sure that you go over your penalty clause with the contractor to create a level of seriousness and set standards for professionalism from the very beginning. The penalty clause states the consequences the contractor will face for not meeting the project schedule. There isn’t a set standard for a penalty clause, but you want to keep a balance between a slap on the wrist that has no effect at all and a business-destroying unrealistic amount. The penalty amount should be set in line with the total project amount. A penalty of $100/day for every day over schedule is a reasonable amount for the scale of most rehab projects.

CHAPTER 4: STAGE 4 – Executing the Six Critical Documents:

Introduction Video (JD ON CAMERA)

To protect yourself and your contractor in a rehab project, there are six critical documents that you will need to execute:

1. Independent Contractor’s Agreement2. Final Scope of Work3. Payment Schedule4. Insurance Indemnification Agreement5. W-96. Final and Unconditional Lien Waiver

We will go over the function and importance of each of these documents in this system. Even though samples of these documents are provided on our Mastery site, you will need to make your own adjustments to them and have them reviewed by an attorney who is familiar with construction law in your area. Please do not treat this as an optional component of your rehab project. These six documents are your only legal protection should a project go wrong. The timing of these documents is also critical. The first five documents will need to be signed before you start construction, but after you have closed on the property. The last document, the Final and Unconditional Waiver of Lien, should not be signed under any circumstances until the contractor has finished work on the project.

Six Critical Documents Walkthrough (DICTATED BY CHRISTIAN)

OVERVIEW

Let’s get into the functions of each of these six critical documents. These Six Critical Documents will need to be filled out for every contractor, including sub-contractors such as a roofer, plumber, or pool specialist. Keep in mind that for each of these documents, you’ll want to have your attorney review the revised documents for inconsistencies, omissions, and legality in your state prior to use:

(DOCUMENT 1) INDEPENDENT CONTRACTOR AGREEMENT

The first document is the Independent Contractor Agreement. This is the main binding contract that will need to be agreed upon which sets the rules of the relationship between you and your contractor. It details several important areas that must be addressed to ensure each party understands their individual roles and responsibilities, including (1) Permits, (2) Materials, (3) Insurance, (4) the use of Subcontractors, (5) the Work Schedule, (6) Completion Schedule, (7) an agreement for Arbitration, (8) and specific Responsibilities for you and the contractor.

a. Permits: The Independent Contractor Agreement states that the contractor is responsible for pulling permits and scheduling building department inspections

b. Materials: For materials used, it specifies that you as the investor are responsible for selecting the materials to be used and that the contractor will purchase those materials.

c. Insurance: It sets forth the specific insurance and workers compensation requirements that the contractor will need to have in place for the project.

d. Subcontractors: And if your contractor uses subs, that none are to be hired without your approval, and specifies that subcontractors will always be paid by you and that each subcontractor will also have to sign a lien waiver as applicable.

e. Work Schedule: The Independent Contractor Agreement also gives the times that the contractor is allowed to work on the property.

f. Completion Schedule: And states that there are specific milestone completion dates as well as a final project completion date, and the penalty for not completing the work on time.

g. Arbitration: The arbitration clause of the Independent Contractor Agreement details how any disputes will be handled.

h. Responsibilities: Additionally, this document lets the contractor know your expectations for their behavior on the project site, and specifically states that the contractor is responsible for cleaning up the job site at the end of every day.

Read this form in its entirety and become very familiar with it. The first section you’ll notice is the date which this agreement is entered into. Write down the date you’re scheduled to close escrow here. It’s between the contractor, which will be entered here, and the name of your company here. Where you see “for services rendered at” enter in the address the property.[Contractor will commence work on or before] enter in the date that has been agreed upon here, and when the work needs to be completed by [this work shall be completed on or before] here. On line item 3, you want to enter in the repair costs here both ‘written out,’ and numerically.

On line item 11, enter in the agreed upon completion date here. This spells out the penalty for finishing after this time. They will be fined $100 each day for every day they are late.

The very last entry where it says “Total cost for services contained in this agreement including labor and materials is:” is where you will re-enter the total repair costs from line item 3.

Below, see where it states “Exhibit A, B and C.” Exhibit “A,” is the Final Scope of Work, “B” is the payment schedule, and “C” is the insurance indemnification agreement. You will need to attach these documents to the Independent Contractor Agreement before giving it to your contractor to sign.

(DOCUMENT 2) FINAL SCOPE OF WORK

A well-executed Scope of Work will go a long way in establishing your credibility as an investor and a rehabber. An in-depth, comprehensive walkthrough of how to develop a Scope of Work can be found earlier in this course in the chapter titled, “STAGE 2: Creating a Detailed Scope of Work.” As prat of the Six Critical Documents, this is “Exhibit A” on your Independent Contractor Agreement. Although, most of this document will be filled out by your contractor, let’s take a brief look at what information you should include in the contract walkthrough.

(DOCUMENT 3) THE PAYMENT SCHEDULE

The Payment Schedule is “Exhibit B” from the Independent Contractor Agreement, and it’s one of the most important documents, because it dictates how the contractor will be paid throughout the process of the project. Never pay for any work until work’s been completed. In order for a contractor to get paid, they need to hit certain benchmarks. You will set the benchmarks for your contractor, and send them this document. The contractor will need to agree to this payment schedule before the project gets started. We’ll continue using the Kelly Street property as an example.

The first thing to fill out is the property address and the contractor’s name. Beside “PROJECT ADDRESS,” the subject property’s address will be entered, here. Then the contractor’s name next to “contractor,” here.

Next, enter the dates for each payment. Reference the start and end dates of the project on the Independent Contractor Agreement. Typically, contractors should be paid on a Friday, so reference a calendar and enter in each Friday’s date within the time period for the project. For example, we see that this project will take 6 weeks to complete, so there will be 7 payments. The seventh and Final Payment is made only after the completion of the Final Punch List items. The first 6 payments will be made every Friday from 09/13 to 10/18; so, the first payment in this example will be the 09/13/13. The next one will be the 09/20/13. The third payment will be 09/27/13. The fourth 10/4/13 and the fifth will be 10/11/13. By the time the sixth payment is made, the renovation should be complete. At this point, a walkthrough and inspect the property will be performed to create the Final Punch List of items that aren’t done to company standards – whether it’s touch-up-paint, or an anti-tip device on a stove, or making sure the hot water is running.

Because rehabs can vary in the time they take to complete and the scopes of work, there is no rule of thumb for breaking up payments, except that the final payment should be larger than the last one or two. This is so the contractor is more motivated to “sprint through” the Final Punch List and complete the project quickly. Deciding how much to pay the contractor each time, depends on the benchmarks that have been set, and the total cost of the project. Each payment should correspond with a certain amount of work, and the passing of inspections. Fill

the payment schedule out roughly at first to map out the job’s major items listed on your Scope of Work. These will be the Milestones and Benchmarks, then adjust the payments, and milestones and benchmarks as needed.

For Example:

This project starts on a Monday. The first week is a full week and we can expect a lot of work to be completed. Generally, benchmarks for the first payment include all the Demo & Cleanout. There’s a lot of demo needed for this project, so let’s enter this information here. * Complete all interior and exterior demo* As far the amount of payment, $4K is a reasonable amount. Keep in mind, the rule of thumb when filling out the Payment Schedule, is to never overpay. You want to have a little more work completed than money out, and this $4K is right around that threshold for the work that will be completed.

For payment 2, we can include framing, and part of the “rough-in” phase. “Rough In” means putting in the plumbing, electrical, HV/AC, and items such as these that are outlined in your Scope of Work. So, let’s enter the benchmarks: *Complete all rough framing and underground plumbing, pass underground inspection, complete exterior paint, and submit electrical panel report.* For payment 2, because there’s a good amount of work set for the benchmarks, $8K is a reasonable amount, keeping the money out slightly less than the work completed.

For payment 3: We’ll want to finish the “rough in” phase here, and move on to the insulation, and drywall. So let’s set the benchmarks: *Complete all rough electrical and plumbing, pass rough inspection, complete drywall.* Now, the amount to be paid: $6K.

For payment 4: Now that all the Demo, Framing, and “Rough-In” will be completed, it’s time to move to the “Finishing” phase. This includes the items in your Scope of Work such as closing up the walls with sheetrock, dropping doors, trims, fixtures, cabinets, paint, flooring and more. There’s three more weeks left in this project and a lot left to do, so we’ll spread this work out. So let’s set the benchmarks: *Complete interior paint, install windows, start bath tile, have all cabinets delivered and installed* For the payment amount, we can go with another $6K.

Now, let’s set the benchmarks For Payment 5: *Complete bath tile, have granite installed, start kitchen back splash, start electrical and plumbing trim out.* Keeping the same rule of thumb for payment, we can set this payment amount at another $6K.

By now the rehab should be nearly complete, there are only a few other things in the “Finishing” phase that we have on our Scope of Work left. Let’s enter in the benchmarks here for payment 6: *install flooring, install appliances, pass final inspection, complete house, clean house.*

Now, after the items on the Final Punch List are completed, it will be time to make the final payment. So far, we will have paid out $33K of the total $41K agreed upon. The final payment will be $8K – which is much larger than the last to give the contractor more incentive to finish quickly.

Final Payment: $8K

For this project the repairs total $41,000.

[INSERT in Articulate the existing “5 milestones” slide as a recap after video]

There’s a lot more detail to a job then what is called out for in the payment schedule. These are intended to serve as the big items. This is to set benchmarks to qualify the contractor for receiving a payment. But remember to never be over-extended whereby you have more money out then work done on the property. You’ll want your contractor to review the payment schedule and let you know if the terms outlined are agreed upon.

(DOCUMENT 4) INSURANCE INDEMNIFICATION AGREEMENT

The Insurance Indemnification Agreement is a stand-alone document that clearly states the insurance requirements needed by the contractor. Even though this is also spelled out in the Independent Contractor Agreement, it is prudent to have the contractor acknowledge multiple times in writing that they will meet your insurance requirements current for the duration of the project. On your end, you will need to make sure that the requirements in both documents match identically. Any contractor that you hire should carry a minimum of $1M in liability insurance. To support the Insurance Indemnification Agreement, the contractor will also need to supply three additional documents:

i. Proof of Liability Insurancej. Proof of Worker’s Compensation Insurancek. And a certificate of insurance from their carrier adding you as additionally

insured – with the property address of the project included.

HOW TO FILL OUT THE INSURANCE INDEMNIFICATION AGREEMENT

Read this form in its entirety and become very familiar with it. Enter in the contractor’s company name where it says, “To the fullest extent permitted by law,” here, and your company name after, “…agrees to defend, indemnify and hold harmless, here. This will protect your company from being held harmless from any potential insurance claims or lawsuits in the event someone working for your contractor gets hurt on the project site. In other words, they will not be able to go after you or your insurance. Specify the full address of subject property, where the project will be taking place, here. Lastly, enter in the contractor name here.

(DOCUMENT 5) W-9

It’s absolutely necessary to get your contractor’s information, and this document signed before starting work. As real estate investors and business owners, the IRS requires us to issue a 1099 form to every contractor we pay more than $600 in a calendar year. To be able to issue the 1099, you need to have the contractor fill out and sign a new W-9 form each year. Be sure to have the contractor complete this form before the project starts so you don’t have to track them down later; this is especially important in cases where you may end up on bad terms with the contractor. In cases like this, it would be virtually impossible to obtain the contractor’s social security or tax ID number to issue them a 1099 reporting income that they would need to pay taxes on. You don’t want to be left paying taxes on money you spent.

Insert your company information into the header; fill in the box labeled “Requester’s name and address (optional).” Then, provide this document to your contractor by attaching it as Exhibit C to your Independent Contractor Agreement, and emphasize that you will not be able to start work on the project until he or she has competed the form and returned it to you.

(DOCUMENT 6) FINAL AND UNCONDITIONAL WAIVER OF LIEN

Never, under any circumstances, make a final payment before all of the work has been completed and the Final Lien Waiver has been signed; you should have the check in hand to make the final payment to them when the Final and Unconditional Waiver of Lien is signed by your contractor.

Have your attorney review the revised document for inconsistencies, omissions, and legality in your state prior to use.

HOW TO FILL OUT THE FINAL AND UNCONDITIONAL WAIVER OF LIEN

Beside where it says, “to the fullest extent permitted by law,” enter in the contractor’s name, here. Then, after “agrees to defend, indemnify and hold harmless,” enter in your company name, here. Include the property address next to “Project Location/Address” here, and enter the contractor’s information again, here.

WHEN AND HOW TO POSTURE THE SIX CRITICAL DOCUMENTS

The last thing you want to do is email all of these documents except the Final and Unconditional Waiver of Lien to your contractor. You’ll also want to ask them for additional insurance information. The body of the email should read something like this:

“Hey “Contractor,”

Here is the contract for “123 Main Street.” Please fill it out and return it to me this week; we are expecting to close on this property on the first,” and are looking to start work on “the third.” Please sign the independent contractor agreement, and indemnification form, and initial the scope of work on every page. Also, please review the payment schedule and let me know if it’s ok for you. Please get me the insurance certs showing “MY COMPANY” as additionally insured. I want to start work on “the third,” but need these back before then“

Once the payment schedule is reviewed and signed off, you should cut all the checks for each payment. Any contractor that’s going to be paid over $1K such as a roofer or a pool guy should always be given each of these six critical documents. This is vitally important.

Change Orders

Your contractor is likely to run into a few surprises that will require limited time, materials and money to fix, in addition to larger problems from time to time when change orders are needed that you will need to address throughout the process of managing the rehab. It’s important to communicate in the initial interview that there are a certain amount of change order that should not be brought to our attention, and that you and your contractor come to the agreement that he or she will handle minor changes needed outside of the Scope of Work without invoicing you. When change orders are needed you should negotiate labor costs before the additional work takes place. Distinguishing between major and minor repairs should be determined by your rehab budget. For example, if you are under doing a $25K renovation, you should consider anything below or around an amount of $500 as a minor repair, and anything above or around $1000 as a major repair. Continuing this example, with any repairs above or around $1000, the contractor should write up a change order form and present it to you to be agreed upon.

The contractor will present the change order form to you. WE have a specific change order form that’s very simple to fill out if this scenario were to happen. When it’s needed you will provide it.

Additional Insurance

In addition to the Six Critical Documents, we highly recommend that you also acquire Builder’s Risk and Vacant Dwelling Insurance, and General Liability Insurance

Builder’s Risk and Vacant Dwelling Insurance

Builder’s Risk and Vacant Dwelling: Insures against the property and its replacement cost should anything happen to it, such as the electrician accidentally starting a fire and burning the house down. With this type of policy in place, you would be compensated for the replacement cost of the structure.

General Liability Insurance

General Liability Insurance: This will protect you against lawsuits filed by someone who gets hurt on the property; for example, a curious neighbor who trips over a pile of lumber and sprains their ankle while peeking in the window. Even though you will require your contractors to also carry insurance, you need to have a back-up plan in place.

Since both of these types of insurance pose a higher risk to the insuring agency, you will need to purchase them through an insurance broker rather than your agent down the street. These policies are typically paid for upfront with a minimum coverage period. Depending on the policy, a portion of the purchase may be refundable if you sell the house before the term of the insurance has expired. For instance, if you bought a six-month Builder’s Risk and vacant Dwelling Policy for $1200 that has a 50% minimum earned stipulation, the most you could get refunded would be $600 (3 months), regardless of how soon you sold the property.

We have only found one insurance carrier that issues these types of insurance on a month-to-month basis. It took us many years to track them down, so you don’t have to: visit www.fbrealestateinsurance.com

CHAPTER 6: STAGE 5 – Managing the Rehab:

Introduction Video (JD ON CAMERA)

Whether you are using a lead contractor, a general contractor or managing the project yourself, communication is key. If you are working with a general contractor, you need to establish at the kick-off meeting once again what everyone is responsible for based on your system. Now is a good time to remind the contractor that he or she is responsible for action items such as pulling permits, scheduling subcontractors, and purchasing materials.

Managing the Rehab Walkthrough (DICTATED BY CHRISTIAN)

The process of Managing the Rehab consists of three main responsibilities: Permits, Inspections and Milestones

Permits & Inspections

PERMITS

This is a good time to remind your contractor that they are responsible for pulling permits. Every state, county, and municipality can differ when it comes to the permitting process; so, you’ll want to check with your local municipality to learn what permits you will need for the course of your rehab and familiarize yourself with the process. Generally, the city will require a building permit for constructing, enlarging, moving, demolishing, or changing the occupancy of a structure, as well as major changes to the electrical, gas, mechanical, or plumbing systems. In some areas, a permit will also be required for re-roofing. A permit is usually not required for typical rehab work such as painting, papering, tiling, carpeting, and similar finish work.

INSPECTIONS

Concerning inspections, in general, there are five major inspections you will have to pass during the process of a rehab: The “Underground” inspection, “Rough Combo” inspection, “Drywall Screw,” “Exterior Lath,” and “Final Inspection.”

1. (Underground) During the “Underground” inspection, the foundation and all utilities that will be buried will need to pass inspection.

2. (Rough Combo) The “Rough Combo” inspection includes inspections concerning the framing, plumbing, electrical, and HVAC.

3. (Drywall Screw) The “Drywall Screw” inspection will happen once the walls are closed up and drywall has been hung. The building inspector will inspect the drywall to determine that is has been installed properly.

4. (Exterior Lath) During the “Exterior Lath” inspection, the water proofing for stucco will be examined.

5. (Final Inspection) The last inspection is will be “Final Inspection,” when the house has been completely renovated.

Milestones of the Rehab

We have broken the process of managing a rehab down into 5 main phases or “milestones” your contractor will need to hit:

1. Demo & Cleanout 2. Frame Out3. Rough Out also referred to as Rough In4. Insulation5. Finishing

These milestones coincide with the permits that will need to be pulled for work that needs to be done, and inspections you will need to pass for completed work, which will vary slightly by area. The majority of your involvement in this stage is to make sure these milestones are being completed by walking through the property to perform your own inspections. In other words, you will be managing the rehab.

Every rehab project is different. You will decide with your contractor when these milestones need to be hit by establishing benchmarks using the payment schedule. Experience is the best way to truly understand what to look for when deciding if a milestone has been completed. In general, though, there are some key identifiers to look for when inspecting the property after your contractor has completed each milestone. Utilize your Scope of Work while examining a milestone’s completion; this will make it easier for you to ensure all work has been completed.

Milestone #1 – Demo & CleanoutMilestone 1 – Demo & Cleanout: In many rehab projects, when the demo and cleanout milestone is complete, you’ll see the spaces starting to take shape, and you’ll be able to better determine if your decision to move or remove a wall looks and feels as good as it did on paper when you’re physically standing there. This will give you a great opportunity to make any changes before new framing is constructed during the next milestone phase. And, if you decide to make any changes to the layout and your original Scope of Work, now is the best time to do so.

There are three key identifiers that mark the Demo & Cleanout milestone’s completion: “What is Gone,” and “What Remains” based on your Scope of Work. It’s also a good idea to conduct a “Pre-Rough Out Preparation” inspection.

1. (What is Gone) make sure that, one, everything called out for to be demoed was demoed, and

2. (What Remains) two, everything that was specifically stated to be left intact, has not been demoed. For instance, if your Scope of Work called out for all the carpet to be demoed, you’ll want to make sure that it was removed, and if, for example, there is a fire place that was not supposed to be demoed, you’ll want to make sure it’s still there.

3. (Pre-Rough Out Prep) In this phase of the rehab, it’s also a good idea to identify where drains and gas lines are, and make sure that they are “stubbed out.” “Stubbed out” means potential flow of water or gas has been stopped with the addition a copper cap, an angle stop, or a clamp at the end of the water or gas line.

EXTERIORIt’s likely that you’ll have some demo done around the exterior of the property; this can be anything from removing an unsightly old shed, or a brick pathway, or even removing a few unwelcomed shrubs growing along the outside of the house. Walk around the outside of the property and make sure that everything called out for in your Scope of Work has been completed.

INTERIORInside you may have a lot of specific demo work called out for such as scraping popcorn ceilings, demoing an entire kitchen, or removing a fireplace. Pay close attention to everything in your Scope of Work regarding this milestone, and be very diligent when inspecting the kitchen and bathrooms.

KITCHENWhen inspecting the kitchen after the Demo & Cleanout milestone has been completed, you want to again, make sure that everything called out for in your Scope of Work has been done. If you completely gutted the kitchen, make sure everything is removed. Be sure to check your major stove, sink, dishwasher, cabinets and lighting areas, and of course, make sure the flooring was either maintained or removed, accordingly.

Stove: Although the “Pre-Rough Out Preparation” is not specifically part of the Demo & Cleanout phase, making a note of some of these items can help lighten the load later on in the process of the rehab. You can make sure that where your stove will be placed has an outlet available, and that a gas line is present and stubbed out, and that they’re both in the proper location. You may also want to make sure the duct work for a vent or hood is located above where your stove will placed, and that the vent itself also has an outlet. If neither of these exist during this phase, make sure your contractor knows where these items need to be placed and that there, is or will be room for them when the “Rough Out” phase begins.

Sink: For the sink area, it’s important to check that, first, it’s in the right place based on your Scope of Work, and that there are hot and cold water lines, and that those lines are stubbed out. Ensure that switches for what will be the garbage disposal and power for the garbage disposal are present, and be sure that there is a drain for the sink and dishwasher. In some instances where none of these items exist, be clear with your contractor on where they should be.

Dishwasher: You’ll also want to check to make sure that there is or will be accessible power for the dishwasher. Typically, a dishwasher’s power comes directly from an unterminated wire into the machine itself, not from an outlet; so note whether or not you have one placed in the proper location and that it is “pig-tailed,” or rather, is capped on both ends.

Cabinets: Examine the area where you will be installing cabinets, or the area where you have kept existing cabinets, to ensure you have space for convenience outlets to power appliances.

Lighting: If you’re adding lighting, make sure the spaces are there where the lighting will be placed.

BATHROOMWhen inspecting any bathroom after the demo and cleanout milestone, you want to, again, make sure everything called out for in your Scope of Work has been done, from flooring, cabinets, bathroom countertops, and vanities, to all the plumbing, or wet areas, such as sinks, showers, tubs, and toilets, and other areas such as vents and outlets, determining that everything that should be demoed has been removed, and everything that should not have been demoed is still in place. If you are doing a “Pre-Rough Out Prep” inspection, you’ll ultimately be inspecting some areas of a bathroom in a similar way as a kitchen, with respect to outlets and vents, and water lines and drains, making sure that there are independent hot and cold water supply lines that are stubbed out for each sink and that for each sink there’s a drain. Note that a water line for a toilet doesn’t need hot water, so just make sure that there’s a supply line available, and that it’s properly stubbed out, and in the location it should be. It’s also good to know that sometimes, contractors will want to keep one functioning toilet beyond the Demo & Cleanout phase. Although this is common and usually acceptable, be sure that it is removed on your timeline.

The shower area is generally referred to as the “water closet.” In this area of the bathroom, you’ll want to ensure water lines in the shower or tub area are present, and in the proper location based on your Scope of Work.

WHEN FINISHEDWhen the Demo & Cleanout milestone is complete, you’ll want to have the landscaping, exterior paint and siding, and roof work all started. Some of these items may not be finished by the end of the next milestone; it’s up to you and your contractor to decide when they should be completed based on the extent of the rehab. This should all be spelled out in the Payment Schedule.

Milestone #2 – Frame OutMilestone 2 – Frame Out: When the Frame Out milestone has been completed, the skeletal structures of the spaces are easier to see. Your team will be framing any new spaces like bathrooms, kitchens, and other additions.

There are five key identifiers that mark the Frame Out milestone’s completion: Check to see if the “Framing is in Place,” that the “Framing Creates Enough Space,” check the “Integrity of the Framing,” and if the appropriate “Hardware is in Place.” If you have completed framing, you may also have “Spaces Marked,” to indicate where utilities and appliances will be placed, where needed.

1. (Framing is in Place) Make sure the framing is place where it should be. In other words, the layout should be consistent with your original plans.

2. (Framing Creates Enough Space) As you walk through the property, you’ll want to look for any minor changes you might want to make with the framing. Feel out the size of the room both visually and spatially, to decide if the framing creates a room that’s big enough. If it’s too tight, you might need to ask your contractor to move it slightly. To help you come to this decision, imagine the room you’re in as though the property has been completed and all the utilities and appliances are present.

3. (Integrity of the Framing) You’ll also want to look for signs of damaged wood surrounding your new framing and throughout the house, and get the damaged wood replaced.

4. (Hardware is Present) It’s also important to make sure all hardware is in place, such as joist hangers used when installing new beams.

5. (Space is Marked) Depending on the timeline of your rehab as outlined in the Payment Schedule, you may also have locations of new utilities, and appliances marked. This will also help you better visualize if there is enough space in the room.

EXTERIORBy the end of the Frame Out phase, because you will have started work on the landscaping, exterior paint and siding, and roof, some of this work may have already been completed based on the extent of the rehab in conjunction with the timeline agreed upon by you and your contractor, which will be noted in the Payment Schedule.

LANDSCAPINGWith that, although this is not part of the Frame Out milestone, if the landscaping has been scheduled to be installed around this time, you should inspect it to make sure that everything called out for in your Scope of Work has been done. Depending on the timeline in your Payment Schedule, you should have green grass with no dead spots in place, and have a working irrigation system that has been installed properly with no exposed piping. If your Scope of Work calls out for planter boxes, make sure that they are all in place at the appropriate time based on your Payment Schedule, and ensure that proper drip line irrigation systems have been installed, and that each planter box is filled with bark (if your Scope of Work calls for this), showing no exposed dirt. You’ll also want to ensure that each planter box is sectioned off in a professional manner. Additionally, make sure there is no trash in the yard and that everything is clean.

EXTERIOR PAINT & SIDINGPainting the exterior of the house and fixing any problems with the siding is also something you want to have finished early on in the rehab. Referring back to your Scope of Work, you want to confirm that the proper paint has been used, and that the paint and siding look professional.

ROOFFixing an existing roof, or erecting a new one, should also be done as early on in the rehab as possible to protect what’s happening inside from inclement weather. Ensure there is a drip edge around the perimeter of the house that extends beyond the fascia. Depending on your Payment Schedule, you may also have rain gutters installed at this time, and, if so, will want to make sure they have been placed properly. Additionally, if sheeting has been placed, you’ll want to make sure it is done properly.

WHEN FINISHEDOnce the Frame Out milestone has been completed, other trades can come in and get started on the Rough Out phase.

Milestone #3 – Rough Out:Milestone 3 – Rough Out: When the Rough Out milestone has been completed, the electrical, plumbing, and HVAC (heating, ventilation, and air conditioning) that is needed will be in place.

There are three key identifiers that mark the Rough Out milestone’s completion. You’ll want to make sure everything is in place for the Electrical, Plumbing, and HVAC in each room of the house in order to pass the required building inspections before work for the next milestone can begin.

1. (Electrical) Canvas every room in the house to make sure the Electrician has installed all the wiring in the walls, and that the wires are connected to the appropriate light and switch boxes and that appropriate wiring is in place for various appliances.

2. (Plumbing) As you walk through the property, verify that the proper plumbing such as pipes, water lines and valves, are in place in the kitchen and bathrooms, and other areas such as a laundry room or garage. Drain lines will lead to larger pipes called “clean-outs” that allow easy access to drains without requiring removal of plumbing fixtures. Clean-outs should be placed in accessible locations at regular intervals, usually near shower, or “water closet.”

3. (HVAC) In addition to plumbing, inspect that the HVAC contractor has installed all the appropriate vents and duct work, and the heating and cooling registers.

EXTERIORTo ensure the Rough Out milestone’s completion throughout the exterior of the property, you’ll want to examine the new electrical panel. All wiring throughout the house should end at its location, and each wire will be tied into the panel, and into breakers.

INTERIOR(Electrical) As you walk through each room of property to check the completion of the electrical, pay close attention to the location of switch and light boxes to make sure they are all in a logical place to allow the future homeowner to turn on the lights without having to walk through a room in the dark to access a light switch on the other side, and that the light boxes are spaced out nicely and that they are all wired. A good licensed electrician will mark studs beside each switch box to indicate which switches will operate which lights.

(HVAC) To check the completion of the HVAC in each room, ensure vents for heating and cooling are in place, and that they aren’t a focal point of the room.

Check the plumbing in the kitchen and bathrooms. A good plumber will mark out in studs where drain lines and supply lines will go.

KITCHENWhen inspecting the kitchen after the Rough Out milestone has been completed, you want to again, make sure that everything called out for in your Scope of Work has been done. Examine the areas where major appliances will be paced.

Stove: Make sure there is an outlet where your stove will be placed, and that a gas line is present and stubbed out, and that they’re both in the proper location. Identify that there is a vent or hood located above your stove, and that the vent itself has an outlet. Sink: For the sink area, it’s important to check that it’s in the right place, and that there are hot and cold water lines. Ensure switches for what will be the garbage disposal and power for the garbage disposal are present, and be sure that there is a drain for the sink…

Dishwasher: and dishwasher, and that the there is an unterminated wire to power the dishwasher. You’ll also want to ensure the space for the dishwasher is in the right location.

Cabinets: Check under where you will be installing cabinets, or the area where you have kept existing cabinets, to ensure you have convenience outlets to power appliances,

Lighting: and that there are light boxes for any under or over cabinet lighting, wired, and in place.

BATHROOMWhen inspecting any bathroom after the Rough Out milestone is complete, make sure that there are independent hot and cold water supply lines for each sink, and that for each sink there’s a drain. Confirm that there’s a supply line for the toilet and a drain with hardware in place to connect the toilet. Hot and cold water supply lines and valves for the type of shower or tub called out for in your Scope of Work should also be present. Additionally, you’ll want to make sure there is a vent stack in place. Examine the proper placement of all the electrical components in each bathroom as well, ensuring there is a junction box or outlet for a light, and that each light has the appropriate wires leading to each switch box. Also remember to be sure the switch box is in a logical place.

GARAGEYour water heater may or may not be present, but be sure that there is a place for it. Often times, the water heater is placed in the garage. Additionally, you’ll want to confirm the presence and logical placement of hot and cold water lines for washer and dryer hookups. Be sure there is a proper vent system for a dryer as well.

WHEN FINISHEDWhen the Rough Out phase is complete, the building inspector will look at the each component of the electrical plumbing and HVAC, and will sign off on it. You can then begin to insulate the walls.

Milestone #4 – Insulation

Milestone 3 – Insulation: In some states, after insulation has been installed, you will need to pass inspection. How much insulation a house should have depends on the design of the house, the local climate, and other factors that will vary greatly by region. Because of these differences in regulations, you’ll want to lean on your contractor’s knowledge to install the insulation up to code to pass inspection. This is partly why it’s so important to make sure you hire quality contractors.

Ultimately, the Insulation milestone is complete when you have passed inspection, or when it’s been installed correctly, and in the proper locations. For your own edification of the insulation process in your area, consider asking your contractor what the standards for your area are.

Although it’s not usually required, you may consider insulating interior walls; this won’t make the house more energy efficient, but it will create more sound proofing for each separate room.

WHEN FINISHEDOnce the insulation is complete, it’s time to close up the walls.

Milestone #5 – Finishing:Milestone 5 – Finishing: When the Finishing milestone has been completed, if you are doing major work and have opened up a lot of spaces, drywall and mudding and taping will take the most time at this stage; then upon completion, the door trim, window trim, baseboards and crown molding should be installed. After all the trim work is up, then the painting should commence. At this point, it’s a race to the finish. The electrician will be installing electrical fixtures, light switches, plugs and plates. The plumber will be installing fixtures, faucets, toilets, and shower trim. The HVAC contractor will be installing the heating registers, thermostat, and all the final cosmetic touches will commence. Lastly, the carpenter will be completing all big and small finishes such as cabinets, counter installation, tile work, touch up painting, and flooring.

There are twelve key identifiers that mark the Finishing milestone’s completion which you will need to examine at different times, based on the Payment Schedule: You’ll want to check “Exterior Paint,” “Exterior Doors & Windows,” the “Roof” and “Landscaping,” all the “Drywall” inside the house, the “Interior Paint,” “Trim & Molding,” “Flooring,” “Tile,” “Interior Doors & Windows,” “Cabinets & Counters,” and “Appliances.”

1. (Exterior Paint) 2. (Exterior Doors & Windows)3. (Roof)4. (Landscaping)5. (Drywall)6. (Interior Paint)7. (Trim & Molding)8. (Flooring)9. (Tile)10. (Interior Doors & Windows)11. (Cabinets & Counters)12. (Appliances)

EXTERIOREXTERIOR PAINTIf your Scope of Work calls out for a pergola or deck, make sure it has been painted per your color scheme, from top to bottom. When the doors and windows have been set in place, you’ll want to make sure the trim work around the windows has been painted per the color scheme called out for in your Scope of Work.

EXTERIOR OF WINDOWS & DOORSThe inspector will check the underlayment to see how the water-proofing is tied in with the windows. Examine the windows’ and doors’ seams to ensure they’re all properly sealed. When a window goes in it will be wrapped with the prep material for stucco; you should make sure that it’s water-proofed correctly. After it is inspected, then the stucco can go on, so gaps should be closed with caulking and trimmed properly, so the frames of windows and doors look professionally set. Make sure that there are no cracks in any of the windows, and no rips or damage to the screens or the aluminum frame around the screens. When stucco has been installed, make sure it has been done correctly.

ROOFOn the roof, the nailing pattern on the sheeting that’s installed before the finish material has been laid will be inspected, so you’ll want to make sure this has been done correctly. Ensure there is a drip edge around the perimeter of the house that extends beyond the fascia, and that rain gutters have all been installed. Check to make sure that all vents on the roof have good flashing and are sealed properly. You’ll also want to get each of these penetrations painted so that they blend in with the roof.

INTERIORAs you walk through the interior of the property checking the completion of the Finishing milestone, you’ll want to make sure all of the drywall has been properly installed.

DRYWALLDrywall will be installed after insulation has been put in place and you have passed inspection; after which, it will be taped, mudded and textured, and finally primed and painted, or tiled in some areas. You will generally want to check each step of this process to ensure it is being done to your company standards.General Drywall: In general, you want to make sure the drywall in every room is screwed in properly to the studs, with screws in place every twelve inches from the start of each drywall board to their ends; this is what the building inspector will look for, and you must pass inspection before the drywall can be tapped and mudded. After which, make sure that all of the drywall has been properly tapped and mudded. Make sure corner beads are also present to protect the intersecting sheets of drywall at all the corners of walls. When it comes time to texture the drywall, you’ll want to make sure the texture has been applied evenly before the walls are primed and painted. If there’s a combination of old drywall beside newer drywall, be sure that the old and new drywall is blended together well. Ceiling Drywall: Be sure to examine where the walls meet the ceilings, and scrutinize the drywall on the ceilings themselves.Bathroom Drywall: HardieBacker Board or Dense Board drywall is used in wet areas such as a water closet also referred to as a shower surround. It’s important to know this, so you can be sure your contractor has used the appropriate type of drywall in these areas. Make sure that in the bathrooms, this drywall is over the lip of the tub, and that the HardieBacker Board or Dense Board drywall extends beyond the area of the shower or tub surround, which some contractors will refer to as the tile having “legs.”The seams of the HardieBacker Board or Dense Board drywall here will be covered with a substance called Thinset, which will adhere the tile to the board; consequently, you don’t need to worry about the seams of this drywall being taped and mudded in the shower or tub area. Kitchen Drywall: Additionally, you don’t actually need HardieBacker board used for drywall in the sink areas of the bathrooms or kitchen, but you’ll still want to ensure that screws on the drywall are twelve inches apart on all the studs, and corner beads are in place. That’s what the building inspector will look for. Make sure there are no cracks and seams in the tape and mudding around the kitchen. However, the tapping and mudding on the drywall around areas of the kitchen that will house cabinets, countertops and tile, won’t need to look as good as in other rooms, because those areas of the drywall will be covered.

INTERIOR PAINTOnce the drywall inspection has been passed and all the drywall has been tapped, mudded and textured properly, the walls will then be primed and painted. Reference your Scope of Work to verify that the proper paint has been used in the proper locations from the walls, to the ceilings, to all the trim, and that the proper finish has been used, accordingly. For example, your Scope of Work might have called out for the trim work, such as your baseboards and door casings, to have a different finish than your walls, doors and ceilings. If so, you’ll want to make sure this has been accomplished.

TRIM & MOLDINGIn addition to inspecting the paint on all the trim, you will also want to make sure it’s all properly caulked where the seams of the trim meet the walls, and make sure there are no cracks. Baseboards: Pay close attention to the seams on the baseboards in corners of each room, and in areas where the baseboards have ran short and an additional piece was cut, and installed. The seam between the two pieces of trim should not be visible. Also make sure that where sliding doors are, such as closets, that the baseboards are cut to allow the closet door to slide closed properly, but also ensure the drywall exposed by the missing baseboard is painted nicely, and in good condition. Along both the baseboards and door casings alike, nail holes should be filled with caulking and should not be seen. Door Casing: Examine the corners of door casings to ensure there is a professionally caulked seam between each length of trim, that is lined up evenly and free of cracks, and all nail holes are filled properly.

FLOORINGBefore carpet and flooring is installed, you want to make sure that all the colors and styles you picked when you created your Scope of Work look just as good now, when you have sample swatches in front of you. Once all the flooring has been installed within the property, perform a thorough walkthrough to make sure that all flooring has been placed professionally, and in the proper locations.

Carpet Flooring: When inspecting carpet, check the corners to make sure the carpet is down and tucked under the baseboards in each room. Check the transition areas where the carpet ends and another type of flooring begins to make sure it’s tucked down and trimmed appropriately; you shouldn’t see any “runners” or strings of carpet, which will occur from an improper cut. Wood Flooring: If you have existing wood flooring, be sure that it’s been sanded, refinished properly, and cleaned. With new wood floor, see that it’s been installed properly and is where it should be, and ensure that no glue is seeping up through the seams of the wood. Check points at transition pieces such as where wood meets a brick fireplace; you’ll want to make sure there are good joint-cuts and that the T-bar transition is not coming up. Tile Flooring: When inspecting tile floors, make sure you have the right type of tile installed in the right places and that the tile has all been grouted, and laid out according to your Scope of Work. For example, if your Scope of Work calls out for your tile to be installed “Subway Style,” make sure it’s been placed correctly.

TILEBathroom Tile: When looking at tiled walls in the bathrooms and kitchens, make sure the right materials were used based on your Scope of Work. In the water closet of all your bathrooms, make sure that your accent and field tiles are where they should be, and that the tile extends outside of the bathtub or shower, and the tile is placed all the way down to the floor. Some contractors will refer to this as the tile having “legs.” When inspecting glass tile, check for

visible chips and breaks, and ensure all of the tile installed is cut clean to form a straight line. Note that if some chipping is present along the legs of the tile, your contractor can apply grout to give it a better look. Also, if there is no grout, the tile installation is not complete. Kitchen Tile: Reference your Scope of Work and verify that the proper tile has been used in the kitchen, and that it has been installed properly, ensure that all tile has been properly grouted, and is free from damage.

INTERIOR OF WINDOWS & DOORSWindows: Depending on the type of windows you’ve installed based on your Scope of Work, the extent of your inspection process will vary. “Insert” or “Retrofit Windows” are self-contained windows that don’t require flashing like new construction windows, and won’t damage the interior walls or the stucco on the exterior, so there will be less work involved that will need to be inspected. Retrofit windows may have some gaps that you’ll want to be sure are sealed and trimmed out well. But make sure it’s level (or plum) and there are no cracked windows and that it’s installed properly. When walking inside the property checking windows, you’ll want to make sure they operate properly, and that they each have a locking mechanism. For windows that are single hung windows whereby it slides upward, make sure it will stay up at various heights. Home inspectors will call out windows without screens, so ensure each window has a screen and that is not damaged. As a word of advice, make sure you order any windows you will need day one, as it generally takes three to six weeks for them arrive. Doors: When inspecting the interior doors, make sure they are installed properly and they move freely, and painted correctly, according to your color scheme. Once the door handles and knobs have been installed, you’ll want to verify that they are all operational.

CABINETS & COUTNERSCabinets: Inspect the cabinets before they are installed to make sure they are the same ones called out for in your Scope of Work. Once they are installed, make sure they are done so correctly, and that they are finished and painted properly and are free from damage.Counters: Confirm that your contractor has ordered the correct countertops. They should be inspected to ensure they are level, and installed properly.

APPLICANCESOnce the appliances are installed they should be operational. Check each appliance and make sure they are not damaged. Observe them from every angle you can and look inside to verify all packaging material has been removed from every appliance. Inspect the refrigerator, stove, microwave and dishwasher, and any other appliances you may have installed.Fridge: Make sure the ice box or freezer and refrigerator are both working, and that all the shelves have been properly installed, and is cleanStove: Turn on the burners on the range, and the oven to make sure the stove is working and make sure it works. Also ensure the anti-tip device works and is installed, and make sure the unit is clean.Microwave: Verify that the microwave is operational, and that if it has a revolving tray that has been installed, and the unit is clean.

Dishwasher: Check the dishwasher and verify that all the racks have been placed properly inside. Turn it on to make sure it works, and be sure that it’s clean.Lastly, ensure that each appliance has its own paperwork, such as warranty information, and operation instructions, and leave them in a kitchen drawer.

WHEN FINISHEDAt the end of the Finishing milestone, you will have a complete and finished rehab. Once completed, you’ll want to make sure there is no trash anywhere inside the house and that the yard is free of debris.

CHAPTER 7: STAGE 6 – Contract Closeout & Final Payment:

Introduction Video (JD ON CAMERA)

When the last milestone has been completed, you are ready to start closing out the project. It’s inevitable, no matter how good your contractor is, there will be little things that are typically overlooked. You should do a thorough walkthrough of the project with the contractor and develop a punch list of items that need to be addressed before you will sign off on the work. Walk through the project a second time after the contractor has completed the punch list work to make sure all items have been addressed. Now is also the time to schedule any final inspections required to close out your building permits. Once the permits have been signed off on and you are happy with the completed project, have the contractor sign the Final & Unconditional Waiver of Lien before issuing the final payment for the job. This waiver indicates that both you and the contractor agree that the project is complete per the contract and that the contractor does not have any grounds to make a claim or file a lien against the project. The amount of the final payment is typically included with the waiver of lien and is acknowledged as payment in full.

Contract Closeout & Final Payment Walkthrough (DICTATED BY CHRISTIAN)

The “Contract Closeout & Final Payment” stage of the 7 Stage Rehab System consists of six main responsibilities: Receiving The Final Certificate of Occupancy from the Building Department once everything is up to code, conducting the Final Walkthrough to create the Final Punch List of items that aren’t done to company standards, then walking through the property a second time after the contractor has completed the punch list work to make sure all items detailed in the Final Punch have been completed, which is the Final Checklist Completion; after which, you’ll want to make sure that all final inspections are scheduled required to close out your building permits. Finally, once the permits have been signed off on by the building department in lieu of the final inspection, and you're happy with the completed project, have the contractor sign the Final & Unconditional Waiver of Lien before issuing the final payment for the job.

A great tip for conducting your final walkthrough of the property to create the final punch list is to use blue painter's tape to mark areas in the property that need to be fixed, then writing a number on that piece of tape which corresponds to the details specified in the punch list. You’ll want to pay close attention to many of the same items you inspected when you were walking through the property at the end of the Finishing milestone to check for minor things that may needed fixing.

CHAPTER 8: STAGE 7 – Final Touches & Staging:

Introduction Video (JD ON CAMERA)

You’ve put a lot of work into rehabbing your property, so go the extra mile and put some effort into preparing it for sale. After you have the property cleaned, you will want to hire a couple of professionals – a stager and a photographer – to make it look its best. Staging the property doesn’t mean you need to fully furnish the house. The goal of staging is to give potential buyers an idea of how the space can be utilized and to give the space a lived-in feel. In general, staging the main living area, the kitchen, the dining area, the master bedroom, and a bathroom will be enough. If the house has any unusual features, those should be staged also so that their purpose is evident. When you’ve staged the house, bring in a professional photographer to take pictures. Don’t use a smart phone – you want the house to shine! Houses with well-lit, professional photographers are more likely to sell more quickly and for a higher price than houses with bad or no photographs.

Once the house has been staged, the exterior landscaping is spot on, and the interior cleaning has occurred, do a “buyer’s eye” walkthrough before you list the house. This means you need to take off your “investor” hat and put on your “potential buyer” hat. From the minute you pull up to the property, think like a buyer and ask yourself: Is the landscaping perfect? Does the front door stick? Is the house clean inside? When you go into the kitchen and open the cupboards under the kitchen sink, is it spotless? When you walk through the bathroom, does it smell like a typical bathroom or does it smell like potpourri? The goal of this final stage is to put your absolute best foot forward as of day one. If you list the property and it’s not clean, the lawn is over grown, and the bathrooms smell like they have been used, you are simply shooting yourself in the foot. When a new property is listed on the MLS with a Realtor, the serious and qualified buyers are the first to walk through - so you have to bring your A-game as well.

Final Touches & Staging Walkthrough (DICTATED BY CHRISTIAN)

The “Final Touches & Staging” stage is the 8th and final stage of this 7 Stage Rehab System, and requires attention to four main categories: Curb Appeal, Landscaping, Staging, and Cleaning. These are responsibilities that you should always perform for every rehab.

To give your property great curb appeal – apart from the Landscaping, you’ll want to ensure that if there are stains on the cement, budget to have the cement power washed.

All landscaping should be well kempt, including shrubs, trees, planter boxes, and fresh cut grass.

Regarding staging, it’s all about furnishings and accessorizing, and plants also make a nice addition. Hire a professional staging company – one half of a percent of the sale price of the home will be about what you should spend on staging. For example, if the property is selling for $300K, you should spend approximately $1.5K on staging.

The inside of the property should be “Molly Maid Clean,” or rather, should basically be professionally cleaned from top to bottom – if you need to hire a cleaning service to achieve this level of cleanliness, don’t hesitate to do so. The expense is worth it because with a clean house, coupled with a professionally staged house, you will entice more buyers to submit offers more quickly.