Renovations 101: Estimating Costs, Working with Contractors, & Managing Rehabs

Summary

Real Estate Rookie Podcast Summary Episode: Renovations 101: Estimating Costs, Working with Contractors, & Managing Rehabs
Release Date: January 8, 2025
Hosts: Ashley Kehr and Tony J Robinson
Guest: Serena Norris

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Introduction

In this episode of Real Estate Rookie, hosts Ashley Kehr and Tony J Robinson welcome seasoned real estate investor Serena Norris to discuss the intricacies of managing renovation projects. Serena brings a decade of experience, having been involved in over 130 flips and approximately 200 transactions, including both traditional flips and BRRRR (Buy, Rehab, Rent, Refinance, Repeat) strategies.

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Guest Background and Experience

Serena Norris shares her extensive background in real estate investing, highlighting her transition from assisting her mentor to taking on roles such as design, quality control, project management, and underwriting. Her experience spans various property types, including single-family homes, commercial retail spaces, and short-term rentals like Airbnbs.

Notable Quote:

"[...] I became the glue between going from acquisitions into rehab and then to disposition." [02:32]

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The Rehab Management Process

Serena outlines her team's workflow, starting from acquisition to project completion. She emphasizes the importance of a seamless transition between acquiring a property and managing its renovation to ensure profitability and efficiency.

Key Steps:

1. Acquisition Analysis: Evaluating properties against a predefined "buy box" to ensure they meet investment criteria.
2. Information Gathering: Collecting comprehensive data, including photos, floor plans, and preliminary comps.
3. Scope of Work and Budgeting: Developing detailed scopes of work alongside budgeting to align renovation costs with projected ARVs (After Repair Values).

Notable Quote:

"When we're going to say yes to a deal, there's still some closing time. And so in that time then we even start the planning process." [04:05]

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Estimating Costs and Building a Scope of Work

Serena delves into the critical aspects of estimating renovation costs and creating a comprehensive scope of work. She emphasizes the importance of:

• Networking: Building relationships with local contractors to obtain accurate and competitive estimates.
• Market Research: Understanding local market rates by analyzing comparable properties and obtaining multiple contractor quotes.
• Templates and Systemization: Utilizing detailed templates to ensure all potential renovation tasks are accounted for, reducing the risk of overlooking essential elements.

Notable Quote:

"I have a dozen long-term rentals right now between single-family and commercial retail and I have one Airbnb." [01:35]

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Working with Contractors

Effective collaboration with contractors is pivotal to successful rehab projects. Serena shares strategies for:

• Clear Communication: Providing contractors with detailed, line-item scopes of work to ensure mutual understanding and minimize misinterpretations.
• Estimates: Encouraging contractors to fill in standardized templates to facilitate fair comparisons and transparent negotiations.
• Incentives and Penalties: Implementing bonus structures for early completions and penalties for delays to keep projects on track.

Notable Quote:

"By giving them some structure to work off of, it's typically not their strong suit. They really appreciate it." [34:52]

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Handling Confrontations on Job Sites

Serena discusses her approach to managing conflicts and ensuring quality control without damaging contractor relationships. Her tactics include:

• Assuming Good Intentions: Approaching issues with the belief that contractors have the project's best interests at heart.
• Seeking Understanding: Asking questions to clarify misunderstandings before addressing shortcomings.
• Documentation: Utilizing photos and detailed scopes of work to support discussions and resolve discrepancies calmly.

Notable Quote:

"I can be such a perfectionist with things. And when it was one of our higher-end houses, they just needed to be perfect and they understood." [37:27]

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Common Mistakes by New Investors

Serena identifies a prevalent mistake among novice real estate investors:

• Lack of Planning: Jumping into renovations without adequate planning, leading to inefficiencies and increased costs.

She advises new investors to invest time upfront in developing detailed scopes of work and budgets to avoid costly oversights and ensure projects align with financial goals.

Notable Quote:

"A lot of them is like, they get the keys and they just press go right away. And they don't do a lot of planning on the onset." [38:34]

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Importance of Documentation and Quality Control

Maintaining thorough documentation through regular photo updates and detailed reports is crucial for:

• Tracking Progress: Ensuring renovations are on schedule and meeting quality standards.
• Liability Management: Providing evidence in case of insurance claims or disputes.
• Accountability: Keeping all parties aligned and informed about the project's status.

Notable Quote:

"Taking full pictures of property, even if nothing changed... helps you have all the information you need right at your fingertips." [43:09]

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Final Thoughts and Resources

Serena emphasizes the significance of systematizing rehab processes and building robust networks to streamline project management. She encourages new investors to take on multiple roles initially to understand each facet of the rehab process thoroughly.

Notable Quote:

"When you set up your processes correctly from beginning to end, things just run smoother." [06:05]

For those interested in connecting with Serena and accessing her resources, she can be found on Instagram under the handle @arena_claire.

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Conclusion

This episode of Real Estate Rookie offers invaluable insights into managing renovation projects effectively. Serena Norris's expertise provides a roadmap for new investors to estimate costs accurately, work harmoniously with contractors, and implement robust systems to ensure successful rehabs. By following her structured approach, rookies can avoid common pitfalls and enhance the profitability of their real estate investments.

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Connect with Serena Norris:

• Instagram: @arena_claire

Subscribe to Real Estate Rookie:

• YouTube: youtube.com/realestaterookie

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This summary encapsulates the essential points and actionable advice shared during the episode, providing a comprehensive guide for aspiring real estate investors looking to master the renovation process.

Transcript

[Ashley Kerr]

Ever wonder what the process is to run a rehab, how to manage contractors? Well, today we are going to get into it. My name is Ashley Kerr and I'm here with Tony J. Robinson. This is the Real Estate Rookie Podcast.

[Tony J. Robinson]

And welcome to the podcast where every week, three times a week, we bring you the inspiration, motivation and stories you need to hear to kickstart your investing journey. And today we are joined by the wonderful Serena Norris. Thank you for joining us today.

[Serena Norris]

Thanks for having me guys.

[Ashley Kerr]

And we are live in LA in the studio here with Serena. So thank you so much for driving through the LA traffic. I know here today.

[Serena Norris]

I'm an LA resident again. So happy you're here.

[Tony J. Robinson]

So Serena, I think just really quick for the listeners, you've been on the RIKI podcast before, but for those who maybe don't know your story, how many flips do you think you've been involved in over the last several years?

[Serena Norris]

Yeah, so I've been, I've done around like 130, 135 flips and been a part of definitely a lot more transactions, probably up to 200 transactions. So. And for the last 10 years, will.

[Ashley Kerr]

Be 10 years in April and also burrs too. You've done rehabs on rentals?

[Serena Norris]

Yeah, so about probably 30 to 40% of those ended up being brrrrs. Um, and so I have a, about a dozen long term rentals right now between single family and commercial retail and I have one Airbnb short term slash midterm.

[Ashley Kerr]

So to make Tony proud. There you go. So with this partnership, what was your primarily your primary role taking on these projects?

[Serena Norris]

Yeah, so in the beginning like 10 years ago, I just started assisting with everything with my mentor and then after a few years really took on um, all the design aspects of it, quality control and then, and helping with systemization. And then over time I grew up, grew into just app project management role and then being more close to numbers. Then I became underwriting as well for acquisitions and just kind of the, the glue between going from acquisitions into rehab and then to disposition. Also was our real estate broker of the team. So I listed all of our flips on the back end if they weren't already attached to an acquisitions company. And, and so yeah, design, project management, managing the contractors, systemizing and basically the operations.

[Ashley Kerr]

So do you think we can use this episode to like completely break down that process of when that property is handed off to you? So is it when it's under contract, is it when they close on the property, when does it actually transfer to you? And what are the first steps you have to take?

[Serena Norris]

Yeah, so our process with our team, we had a main acquisitions person and they were the ones that were analyzing a bunch of the deals, making the connections with either wholesalers or direct to seller themselves once a property passed what we call the sniff test. So you know, they're like, hey, we think we have a deal here. We can.

[Ashley Kerr]

It meets like your buy box.

[Serena Norris]

Yes, it meets our buy box. And what the the numbers are looking at that they're going to margin. It could be a deal that we want to take down. Then they start collecting all of the information that I say, hey, I need this information A to Z in order to make a decision, yes or no. And so, and usually in that checklist there would be a ton of pictures, as much as possible, a preliminary kind of quick floor plan just, just drawn even on the back of a napkin, just so because remotely I could understand then the flow and kind of see, hey, we have to add a bathroom here. And I'm like this, I don't think this is right. So then comps, preliminary comps, what the purchase price would be, how much they're thinking the rehab would be all of that information component. And then pretty much remotely, I wouldn't even need to visit the property. I'd visit virtually and then be able to make a decision, yes or no. So even though I was main project manager and operation like post purchase, I definitely had a hand in the acquisition. Where we some where at a certain point where we failed as a team was that acquisitions part and the post acquisitions part were very segregated and we didn't communicate. And so when construction prices ended up increasing by like 20, 30% percent and that just their rehab numbers were not matching mine. And I inherited a couple properties to manage. Where I go, this doesn't work. This doesn't pencil. This is going to be one where we hope that we can make it back on the back end. And and so that's where I said, okay, we need to be more like a Venn diagram and work together. And so creating those processes, I made like acquisitions checklist for them. Also acquisitions like preliminary scope of work and budget, where they could just go in and quickly type in, you know, how many number windows, doors do you. Will it need a separate repair? Will it need this? And, and then price per square footage, they'll just put in the price per square foot and within five minutes they'd be able to give a ballpark rehab estimate that I was comfortable with that could translate to post acquisition. So that's really where it started beginning when I'm going to be like, okay, we're going to say yes to a deal. There's still some closing time. And so in that time then we even start the planning process. We know we're gonna close. And so to get ahead of our holding costs, that's when we'd get in. See if we can get in someone to take the floor plan. A lot of hoarder houses. Sometimes we can't always do that. We have to wait for trash out. But yeah, that's where we'd really begin it. Yep.

[Ashley Kerr]

I just wanna mention one thing. Serena's talking about her team and the different roles. But this is literally things that you can do. Like don't get focused on having team members focus on the actual roles and responsibilities that she's pointing out. Because you can do all of these things, but it's just the process that we got. We want you to take away from this that you can follow to actually do your own rehab.

[Serena Norris]

Absolutely. When you first get started, you're going to wear all of those hats, what we call it. You're going to be in all of those different positions and understanding get familiar with what that role looks separately and maybe even if it helps you physically. Okay, now I'm in my acquisition hat. Now I'm in my construction management have. Now I'm in my disposition hat. If you are also licensed. So that way when you do want to scale or build a team, those transitions are more fluid with the processes.

[Ashley Kerr]

Tony, you did that in the very beginning of your business. You did your org chart.

[Tony J. Robinson]

Yeah. We found that to be a super helpful exercise. But. And I tell the story many times. And the reason that we kind of had this realization, it's because in our short term rental business, there was a day Sarah and I weren't together. My wife and we both replied to the same guest who's asking a question, but we gave them different answers.

[Serena Norris]

Yeah.

[Tony J. Robinson]

So they get like two answers at the same time. But like are saying totally different things. Like okay, we got to pause here. Yeah, but, but what you're saying, Serene is I think a really important point, that good rehab management actually starts at the acquisition phase. Right. Because you have to know, hey, what are my costs going into this for, for my labor, for the different finishes that we're going to use all these different things. So let me ask you a question. Say that, say I dropped you in a brand new market. You're actually kind of doing this right now. Right.

[Serena Norris]

Because you're going through this Right now. Exactly.

[Tony J. Robinson]

Say, say I drop you in a brand new market. What steps are you taking to start building out your, your labor costs for all these different trades? Like if I'm a complete rookie, I've never done this before. What is the first step I need to take to start building out that pricing sheet?

[Serena Norris]

Absolutely, it goes, it goes back to your network. You know right away when I knew I was going to be here and that I was going to start building a business in here and actively looking for flips in L. A I knew right away this is a different market. I've only flipped in Seattle, Tacoma and Portland. And, and my last flip, I'd been moving around a little bit. My, my last flip was over a year ago. So even the numbers have changed then. So I want to get close to what is happening in the now. I reached out to all of my connections here in LA and found the people that are, they're doing deals, they're close to the construction. I mean by that they're actually looking at invoices, they're looking, they're getting estimates, they're flipping houses, they understand what the, the current market costs are. And I actually analyzed a couple deals for a friend here and I said hey, can I do a scope of work and budget for this deal? Even if you don't buy it, you mind taking a minute and looking to see if what my estimates are they correct? Where am I too high, where am I too low for this market? And he came back and he gave me great feedback. He said you can probably get roofing less here. You know, countertops are going to be more. And so with all of this is just getting information, putting it down. When I get my first deal here in L. A I'm going to get as many estimates as possible from contractors right away. Like even if the first estimate that comes back to me is what I want and I'm going to hire them, I'm still going to get more estimates because I'm just collecting that information to, to be able to understand what the current market rates are.

[Ashley Kerr]

We are trying to get to 100,000 subscribers on YouTube. So go to YouTube.comealestate rookie and make sure you are subscribed to our channel.

[Unknown]

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[Ashley Kerr]

Okay, let's jump back into it.

[Tony J. Robinson]

So the network is one piece getting multiple estimates. But let's say that because again think, you know, if so you're in a unique situation because you have this network of people you can go reach out to. But if there's a Ricky who maybe hasn't built that network yet and they want to get those estimates, where have you found is the best place to go to actually source potential contractors, subcontractors for these different.

[Serena Norris]

Yeah, so I would look at networking groups so events that you can go to. And then I also look at Facebook groups and get tied into those and see if you can to shadow someone in their project. If they're actively flipping, say, hey, you know, I want to give you value in the way. Would. Would I be able to drive your property once or twice a week? I'll give you 150 photos in an organized way. And just what, you know, would that help you in their business? And they're like, sure, someone checking on my project. Okay, you know, or sending me a report, hey, for that, you know, could maybe a trademark time. Where could you send me some of the invoices from the job there? You don't actually have a property for the go look but you can actually look off of someone else's information. I mean who's not going to send you invoice? Like, you know, hopefully they're organized enough where they have like a Dropbox link they can send you over and they're not just in their emails but off the cuff. I feel like that's what I would do. Right. And I think even if you just.

[Ashley Kerr]

Post on the biggerpockets forums, like here's my scope of work, here's my budget. This is for this market, this neighborhood. Does anybody have any feedback on my pricing? And I think there would be tons of investors who invest in that market that would dive in responding and giving their advice because it's not like you're going and asking the investor, can you do this estimate for me? Can you build this budget for me? You've already gone and done the work. You're just asking for feedback on it now. And it's so easy. You know, if someone posted in Buffalo and they said, you know, I think this kitchen would be X amount to remodel, doing these things myself, my contractor, all on bigger pockets could easily just respond like, oh no, actually I think this would be more something like that too.

[Serena Norris]

Yeah, I think also relying on Google as well. Like I, you know last week when I was going through this, I, I an AI now, right. And at least give you ranges because as an investor you're going to get better rate. Right. You're going to be looking, you're not going to be looking for like high at the high end or the, or the contractor that has like you know, the pimped out truck with the wrap and whatever, you know, you're looking for like the unmarked vehicle guys. Okay. That look like, you know, it's kind of shady but in the dark bands. Yeah, but at least you can get a range from there. And if that's all you do, you're like, hey, I don't know anyone yet. I haven't even been to a networking group. I'm just gonna Google everything. What are the ranges in this in LA county and start, and just start plugging that into the scope of work. And there you have, you're beginning a framework that you can always change.

[Tony J. Robinson]

I think you'd be surprised at like how easy it is just to pick up the phone and call people, you know, especially, especially subs. Right. I feel like GCs are a little bit harder. But like, like for example, one of the first flips that we did where we had to install new mini splits, we had never done that before and we just called all the local H Vac company and said hey, here's the size of the property, you know, give me a ballpark range on what you think it'll cost to install it. Like probably three to five thousand bucks per mini split you need to install. So okay, cool. Now I've got a sense of what that costs.

[Serena Norris]

That literally was what I googled because in Washington like I've google, I've asked my H Vac guy in Washington but when I'm analyzing this deal last week and they had this archaic LA heating and Washington heating are totally different and we don't really put AC in our homes. But you, you know, obviously in a flip where our ARV was going to be like 900 plus, we want AC. And I was like, I don't know how to even bid for this. And so I just googled it. Like how much in LA county does like installing a mini split? And they were like 5 to 7k and I was like okay, well let's put 7k then. Because the higher amount, yeah, there's also.

[Ashley Kerr]

Like going on Lowe's or Home Depot or whatever. Even walking through the store you see the signs that say like get your carpet installed for $1.99 per square foot, too. And that just like gives you a range or an idea of what it could cost is by looking at your hardware stores and what they have their contractors charged.

[Serena Norris]

Yeah. I mean, the material costs are so easy to look at, right? I mean, going and going on Home Depot and saying, okay, what would the product be that I would choose for this house? And maybe think of a house where. Find a house on Zillow where you're like, this looks like kind of what a product, you know, arv, Post rehabilitation flip. The, the finished product, Right. Okay. It's got LVP flooring. Not the, the least expensive, but maybe mid range. Okay, what is that on Home Depot as. As a flip? That's what we're doing. We're looking. We're going shopping at a Home depot. Okay. It's $2.50 a square foot. Then call up flooring installation companies and say, hey, what do you charge per square foot to install LVP? And they're like, we charge 350. So just collecting that information. The other thing that I thought about the other day is, hey, is there a simple way I could maybe call a few electricians and say, you know, is, how do you create your estimates? Do you go off price per square foot? Do you have to see the house? Do you count all the circuit? And just trying to understand better how they estimate. And then they're like, oh, by square foot. And you're like, okay, well then could you give me a ballpark range? If I had, you know, all the drywall removed down to the studs, how much would it be then, square foot for you to install? And they're like 10, I don't know, $10 square foot.

[Ashley Kerr]

Yeah.

[Serena Norris]

And I'm like, okay, that's information again, going back into my framework and then collecting it from there and, and having that information just makes you so much more confident that you're going to know the costs post purchase when you're sourcing.

[Tony J. Robinson]

So you masterclass breakdown on how to start building that pricing sheet for potential work you need done. But I guess that that next step of actually building out your scope of work and your budget, which one comes first? Do you set your budget first and then build the scope work based on that? Or do you try and say, hey, what are the comps? What's the scope? And then what budget do I need to get there?

[Serena Norris]

Yeah, great question. So I actually have my scope of work and budget together on one sheet. I found that that works the best for our system. So we didn't have to do two separate things. They. They go hand in hand. Um, and so I have a template. I have probably like a 400 line item scope of work template where I'd rather have all the items there and then go through and delete the ones I don't need for the project. Then sitting at a blank paper and creating a scope of work. I mean, we used to do that in the beginning and we'd always miss certain things. Like I can't tell you how many times we missed a dryer venture installation and. And Charl would be like so mad. And I'm like, because I. When you make a mistake more than once, I mean it's or twice, three times, four times. I mean. And that ended up costing us money. Right on the back end. I was like, the dryer vent is in the template. If we don't need it, we delete it. Right. And so just.

[Tony J. Robinson]

That was us with P traps. Yeah, we like we had a property that we had rehabbed and turned into a short term rental. And we're like, what is going on? Like why, why is this happening in the restroom? Turns out the peach traps weren't installed. So now every rehab, like we need to make sure the peach traps are in there.

[Serena Norris]

Yeah.

[Tony J. Robinson]

It's like a joke now with us in our, in our, in our crew, it's. Did you put the peach.

[Serena Norris]

Are you sure the peach trap is in there? Yeah. And like the thing about the dryer van is we typically didn't put laundry machines in our flips. We just had the hookups available. And. But once, like the dry vent needs to be installed at rough in and not at the end of the property. So we'd end up having to break into drywall. And anyway, so building the scope of work template, I would start from there. You know, even if you're just getting started is like write out anything you'd even need. We do it in the order of construction and then.

[Tony J. Robinson]

What do you mean by order of construction?

[Serena Norris]

Order of construction. Well, so actually break it out first into three different sections. So we have initial services. So that's going to be like trash out demo. Those are the stuff that we can take care of in the beginning before we even plan the rest of the scope of workout. Like we just, we know that we're going to trash out. There's an RV on site we need to remove or car boat, we need to remove or rekey sewer scope. And so we have those initial services. Then we have our exterior and Then we have our interior, and then we have our pre listing. So about like four different stages. And then in each of those we have an order of construction. So let's just start with exterior. Actually, interior is probably easier to explain. So interior, you have your, your demo, and then you're going to be doing your framing. Then you have your H Vac, your plumbing, then your electrical, then your, your insulation, then you have your drywall, and then you have the rest of the finishes, right? So as if a contractor was going to go in and start doing all of that work, that's the order of construction that they would do it at. So that way the contractors can kind of go in and follow it, kind of like going down a list.

[Tony J. Robinson]

And I want to ask Ash, do you do yours the same way, like in that order of construction, or how do you kind of build out your scopes? Because mine's slightly different.

[Ashley Kerr]

I go by room.

[Tony J. Robinson]

I also go room by room.

[Ashley Kerr]

It's just like, easier for me to comprehend. And I physically walk through every room as to like, okay, I'm in the mud room. Here's everything that needs to be done. Then I give it to my contractor, then he puts it by trade.

[Tony J. Robinson]

By trade.

[Ashley Kerr]

Yeah.

[Tony J. Robinson]

So I do it the same way. I go room by room and I just point out everything. But then I tag each thing by the trade. So I'll say like, hey, we need to swap out, you know, eight outlets and the outlet covers, and I'll tag that electrical. I need, you know, six recessed lights. I'll tag that electrical. Or you know, hey, we need to reframe this room or whatever it may be. But for me, just like, visually, maybe it's so much easier for me to do it by the room as well.

[Serena Norris]

That does make sense. I mean, when I going through, you know, how I've set it up where I have my. My whole list, right? When I am just going through, I've got it set up where I have like the unit price for each, and then I'll just go in and put quantities and then I'll add it up at the top and then that's my projected costs, right? But when I'm at the plumbing section, I have to think, okay, how many toilets? And I'm like, how many bathrooms and how many of that? Instead of doing it by bathroom. But either way. And that's like, so cool to hear you guys do it differently, right? It's.

[Ashley Kerr]

You can do it either way.

[Serena Norris]

Yeah, we see their way.

[Ashley Kerr]

We're gonna take one more short break and then we'll be back with Serena.

[Mindy]

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[Ashley Kerr]

Okay, let's jump back in.

[Tony J. Robinson]

So you're building out your scope of work and your budget at the same time. But how do you make sure? Because there's a balance there, right, because you, you have a budget you need to hit, but you also have to make sure that your scope of work is good enough to get you to the after repair value that you're looking for. So how do you strike that balance between scope and budget to get to the actual ARV that you need?

[Serena Norris]

Yeah, so it goes back to the comps. I'm looking at what the original product is. I call houses, products, flips products, what the original product look like, looks like. And then I look at the comps that are achievable and I decide, okay, what's that level of finish then that we need to get into? Right. Are we more high end? Can we do more mid level finishes, lower end finishes? And then that will help me decide what then the scope of work is. And there's still probably going to be, you know, about 80% where I'm sure of and then another 20% where we're like give or take, you know, is it, is that a must have to reach our ARV or would like to have. Does it help with saleability, selling it fast, or can we leave a couple of things that aren't so great and expect it to sit a couple more weeks on the market? That's kind of where just experience comes in. But you have your before product, you have your after product. That's what's going to determine my scope of work. And this is where it kind of goes back to the deal analysis, pre acquisition and going, hey, is this just going to be a cosmetic flip where we could do a full gut rehab and fix everything up but those numbers don't work. Can we make numbers work where we just do a cosmetic flip? The electrical is fine, it's not per, you know, perfect. We can fix a couple things and achieve a less ARV and the deal actually pencils better that way. So two different options we typically went to because of our market. We had to do full renovations. I mean down to the studs, all new electrical, all new plumbing and. And so to go back to your question is I have that scope of work template that's really there. If I'll go through and I will write in all the quantities and have that add up and if it ends up being a lot more than what it needs to, I go, okay, is there anything I can take off here in my initial. And then. But once it's good solidified, I'll delete all of the other line items that I don't need from that template. And then there you go, there's my scope of work. There's my budget. The biggest thing in the beginning, when we started was our scope of works were just bullet points on Word on a Word document. And there's so much interpretation there, especially with contractors. And we found each other, found times that we would send the, you know, PDF Word document to the contractor, they would write us an estimate, and their estimate would be, you know, pages long, especially if it was a gc. I'm talking about a general contractor here, pages long. And they're writing out all of the line items in their own verbiage. And. And maybe they're even not line items. Right. They're all bulk together. And then during the project, we'd have all of these certain arguments, because I thought drywall repairs meant this, they thought the drywall repairs meant that. And because it wasn't clear enough in writing, we had two different interpretations of how to fix the same thing. Then we ended up with these, you know, I don't want to say arguments, but those become stress points where he then wants more money because it has a different expectation. And then we're also delaying the job. And so why I created the template is, you know, I'll have okay for all of drywall. Then I have a description of drywall repairs. This assist, this level of finish. And I'm specific. I treat it like it's going to be a contract. Like, would this hold up in court? And. And that has worked so well. And it takes the pressure off of my relationship with my contractors. Anytime they would be confused about something on the job, I go, well, what does the scope of work say? And we'd pull it up. And I go, oh, right here. You know, it says this and this. And they're like, oh, okay, okay, okay, right. And I'm safe. Then I'm not getting a change order. I don't have to spend more money. Or I'm like, oh, you're right. I only said six of this, and there's seven. And I'm like, well, that's an extra cost. I missed it.

[Ashley Kerr]

Yeah.

[Serena Norris]

But there was no conflict between us. And it saved a lot of relationships with contractors.

[Ashley Kerr]

So once you've built that scope of work, you're obviously taking your numbers out of it. You're giving them those line items, and then they take that to build their estimate that they're giving back to you.

[Serena Norris]

Yeah.

[Ashley Kerr]

What is your expectation for an estimate? So you had mentioned, you said you get some that are just like, here's the bulk price. You know, what do you expect back from a contractor. And what should our rookies be looking for when they're given an estimate?

[Serena Norris]

Yeah, so back in the day, they used to send us an estimate all in their own words, in their own light, in their own format. And one that takes so much of their time to do. They have to, outside of actually being on the, on the job and either working physically themselves or being like a superintendent managing their crew, they have to go home and spend late nights away from their family to write those estimates. And so a lot of times I would approach them and say, hey, if I just give you the scope of work line item, the descriptions, fill in the number, does that work for you? They're like, hell yeah. Right? And so I would literally export my template into an Excel, take away the numbers, you know what I had thing, give them into it, and I'd label like next to them. This is what I, you know, want you to. I'd put like GC next to all of the items I wanted them to estimate. And then they'd come back. And then that way when we're talking on the phone and negotiating or talking about why something this line items this much and why that's that much. And go, Shane. Then we're comparing apples to apples instead of their interpretation what they. How. How they bid it. And that just worked so much smoother for us then there were other times where I worked with GCs that weren't good at estimating. And honestly, listeners, you will find this, especially when as a flip and you're trying to find affordable contractors, a lot of them might not be as savvy for estimating. And so I had one of my GCs where he was like, just tell me what you think it's going to be. Because he trusted me that I knew the numbers. And eventually you might get there. Where it's like or you will get there is I would say, hey, I think that this is really reasonable for the job if you and I would send him my numbers. And then he'd be like, okay, it's a little low on this. And then I can't do it. So much time and figuring, especially if they are disorganized on their back end to like I call contract, like, I think contractors are more like artists than they are engineers. And so by giving them some structure to work off of, it's typically not their strong suit. They really appreciate it.

[Ashley Kerr]

Let's go into confrontation.

[Tony J. Robinson]

Ashley's favorite word.

[Ashley Kerr]

How do you handle that confrontation besides avoiding it?

[Serena Norris]

I used to be such an avoider of confrontation. And then I worked in construction for 10 years. Yeah.

[Ashley Kerr]

So let's do, like, give us a little example or role play of like, something's going wrong on the job site and you have to confront the contractor. What is a great way to start this conversation and to have it with them where it doesn't feel like you're attacking them or saying they don't know what they're doing?

[Serena Norris]

Yeah, I'm probably better at confrontation with contractors than I probably in my personal relationships. But I, you know, I can get when, you know, when, say, you walk in and, like, the quality is not there. Right. I never assume anything. You know, you never know if the GC has already talked about the quality with his guys. I don't want to assume that bad intentions. I also, I always want to go in with good intentions or assume they have the best of intelligent intentions. And so I'll just. I'll be curious and seek to understand. I'll ask a lot of questions and I'll say, hey, you know, this looks. Do you guys have a plan for this? That was probably what I said, like, at least 10 times on the job. Like, do you guys have a plan for this? And they're like, say it was done and this looks really bad. They're like, no, it's good. And I go, okay, I think it needs to be cleaned up a little bit, you might feel. And so then. And I would try. Try to be, you know, tactful and say, actually, I was thinking of this way. And, you know, sometimes when it comes to, like, interpretation of what something looks, that's a. That's not. Like, I can't really write that on the contract as much as possible. I try to attach as many pictures as possible so that way we can paint the same picture in our minds and expectations. But, sensei, it's like a difference in, well, I thought you meant this on the scope of work, and then it meant this on the scope of work. And that's where I would kind of go back to my accountability and being like, if I wasn't clear on that, then I'm. I might need to bite the cost or I'm going to say, hey, I messed up. I should have been more clear. We should have had a walkthrough together and talk about this. You're saying that this is going to take you extra time and materials, like, can you work with me on this? And typically, when you're coming from that point of view, they're much willing to work with you on it. And they mean, like, no, that's what I meant. Like, shouldn't you have known that? Like, look at it. Yeah.

[Ashley Kerr]

And so, yeah, give and take to keep things.

[Serena Norris]

Absolutely. And going back to. I can be such a perfectionist with things. And when it was one of our higher end houses, it. They just needed to be perfect and they understood I would be like, this is a house where it. The paint needs to be top notch. We can't just, you know, leave. It needs to be perfect. And though they understood that. And then there were other houses where lower to mid range, less by our expectation. And as I'm going through and they're working hard and they're. And they're, you know, we're at our second level of blue tape. I remember. Okay, what are the comps really look like? You know, what are we going to do to achieve our arv? And I. I would kind of look over certain things like, hey, next time, guys, like, this really needs to be done better. And I would. The give and take on that. I would definitely say, hey, in the future, you know, can we do this? But this is good enough for. For this project. Um, and that's the way that I would tackle that.

[Tony J. Robinson]

What would you say is the mistake you see a lot of rookies make when it comes to managing the rehab? There's a lot of moving pieces here, but, like, is there something that you've maybe seen consistently from newer flippers as they step into this?

[Serena Norris]

Yeah, um, a lot of them is like, they get the keys and they just press go right away. And they don't do a lot of planning on the onset. I think part of that reason comes from they don't know what they should be planning for. So they're like, I'll just come. I'll just take the shoes and I can solve them when they happen.

[Ashley Kerr]

Yeah, like, I don't want to waste time. I got to get started.

[Serena Norris]

I'm. I'm being charged, you know, 250 a day or whatever. And, and here. And what ends up happening is that I had a client about last year that, that he was like, hey, I just bought my first flip. And I was like, great. Like, let's talk about it. And he. On the first call, he goes, yeah, I already had a gc. And I was like. And I was like, well, where's your scope of work? He's like, I don't have one. And I was like. And I was like, oh, no, right. I like, renew right away. I was like, okay. And my first thought was, hopefully this GC is a really good guy, you know? And so I was like, send me over his estimate. And I was, like, looking through it, and I go, okay, you know, I'm not trying to freak you out here, but there's a lot up to interpretation, and there's a lot that he's. They're just bulking in. Okay, we're gonna remodel kitchen. What does that mean? What does that mean? I mean, like, what quality cabinets. Okay. The materials are included. Well, I mean, is he getting his.

[Ashley Kerr]

Is there, like, an allowance for how much you can spend to pick out your fixtures?

[Serena Norris]

Cabinets. Yeah, exactly. Is. Is he actually going to a cabinet shop and buying the correct size cabinets, or is he buying them secondhand off Facebook Marketplace? I mean, what are we. And so I said, okay, we're going to need to build a scope of work. And I knew at that point he just went from, like, you know, not so steep hill to, like, a really steep hill that you might need to step up. So I would say taking that extra time to plan out a scope of work, look at the comps, and get as many estimates as possible before jumping in. And because, you know, we were guilty of it, we kind of sometimes went too fast, and. And we. We set ourselves up for failure for a few projects, for sure.

[Tony J. Robinson]

What's that saying? I think it's Lincoln or one of the presidents. Like, if you want me to chop down a tree, I'll spend the first eight hours sharpening my saw. Same thing, right? It's like, you got to. You got to make sure you're going with a. With a solid game plan.

[Serena Norris]

How?

[Tony J. Robinson]

Because I know you mentioned earlier, like, that some of these things you're able to do remotely. And we just interviewed Dominique a few episodes ago, and she had, I don't know, I think, like, 12 flips going on, but she like RVs across the country. So there is an ability to do this remotely. But how often do you feel that it's necessary for you to actually be at the job site and as you're going, Yeah, I guess. What specific things are you looking for to make sure that things are moving on track with the job?

[Serena Norris]

That's actually great. That actually ties into what I wanted to make a point for. The second question is the other mistake that I see that is that they feel like they have to be there every single day and that they become much more reactive. Most of my flipping career, I spent probably 5% of the time on the job site and 95% of the time on the computer. You know, and being trying to be proactive in planning the next sourcing estimates, Maybe walk with walking property with the contractors too, but planning, getting the estimates, getting the information down, reanalyzing the comps and being proactive. And so we were fortunate enough, it didn't feel like a time because we were driving a lot, but our all of our flips were about an hour to an hour and a half away from where both Tarle and I lived. And so we were like, we're only going to go down once a week if we can, if we can avoid it. And so that made us be more proactive and start systemizing and start effectively communicating with our contractors. So what my process was to make sure that contractors were timely and actually showing up and also that the quality control was there. My cadence was I went down once a week to take full pictures of the property that was like, no matter what, but whether you could have somebody else do that or someone else go down and ended up going in to someone else that did that. But. And taking full pictures of property even if nothing changed. And for liability reasons, if something happens, someone broke in, that is your, like weekly. Even more so if you have someone.

[Ashley Kerr]

Burned down and you burned down, you.

[Serena Norris]

Have right before for the insurance company to say, hey, two days before it looked like this. Where if you don't have pictures for four weeks, they're like, well, who knows? Who knows what it actually looked like?

[Ashley Kerr]

Or maybe the last pictures you have were it demoed in those four weeks. A ton of progress happened, but, you know, documentation.

[Serena Norris]

Exactly. And you don't know what sort of information and picture that you're trying to find until you actually need it. Oh my gosh. And so I, you know, there were times where I, you know, got lazy because we all do. And I was like, okay, I'm. It's the last property out of 10 today. And I'm like going through. And then in two weeks, I'm like, I needed that picture of that wall two weeks ago. And I was like, dang it. That's what I get for like skipping steps, right? And so taking full pictures. I mean, 150 to 200 a week. I did it systematically, all in the same way I do all the exterior first. Then I'd go to the front door and walk through the house. Not clinically psychotic, where it was like every room the same way. But at least that process helped. So when I was going back to the pictures folders, I knew that my exterior was going to be in the beginning in the folder and the back of the house inside was going to be towards the end. So just saving time.

[Tony J. Robinson]

Super small detail question. Like well one follow up actually like do you. Were you taking the pictures on like an iPhone or were you doing like.

[Serena Norris]

Old school like digital camera iPhone which meant that I have like 100.

[Unknown]

That's what I was asking if you're.

[Tony J. Robinson]

Doing like 150 photos a week. Like I just wonder like if maybe like a little digital camera.

[Ashley Kerr]

Well, Henry Washington, he has two phones, the oh on the market and he said all of his work stuff is on that phone because he doesn't want pictures of houses mixed with the pictures of his kids and is completely separate for that reason.

[Serena Norris]

Back in the day too, the iPhone pictures are so big that I had to then resize all of them just to fit in our Dropbox because then our Dropbox got too big. I mean it was, it was a whole thing but we understood the importance of it. I like the second phone thing. That's, that's actually I got two.

[Tony J. Robinson]

Because.

[Ashley Kerr]

I was like, why don't you just get a Google voice number? He's like, it's not about the phone number. It's about separated. Yeah.

[Serena Norris]

So being going back to like, you know, how do you keep your contractors on time? Making sure they're showing up. Quality control being remote is by the way listeners like there was. We've used to do like 15 flips at a time and towards the end there are about six to eight like bigger rehabs at a time. And there were times where I went to South Africa for like a few months at a time and had boots on the ground but following the same exact processes. So taking pictures every single week. The contractors know you're going to be there week. I would never tell them when I was going to be there unless I'm meeting them specifically for a meeting like walkthrough and or twice a week take full pictures. I would do drive reports on the projects. That was especially helpful when I had team members driving the properties for me. So who's working on the job? What progress has been done? Is the house secured if no one is there? Check all the windows, check all the doors, check that the heating isn't at 90 degrees. That was, I mean couple bills we got. Right. Like cadet heaters. Just crazy. And so doing that I also had on the scope of work like at the top I would have some procedures for the contractor to agree to. So like keys always returned to the lockbox. The code is never changed without permission or it's told to heating's always set below 65.

[Ashley Kerr]

That's something I've never thought of, is creating policies and procedures out there outside of the scope of work, of how, you know, how you want the jobs site to run.

[Serena Norris]

No change in designer finishes unless approved by me or whoever is proving them. What else would we have? Make sure all the windows and doors are locked when you leave. As a lot of these interactions I'm having with contractors, especially GCs, but even, like electricians, I'm talking to the main guy. I'm talking to the owner of the company, but he has all of his laborers and workers and that information, not my. So I used to have them posted up on the property as well. And so that would help, you know, a level of defense of being there without being there.

[Ashley Kerr]

No smoking in the property.

[Serena Norris]

No smoking. Or had that. No water bottle.

[Ashley Kerr]

Didn't have that one even. Probably, like, the storage of materials, like making sure the materials are locked inside the house, not left out or that's.

[Serena Norris]

The other good thing about having pictures, was that sometimes materials walked off our job site and we. In order to figure out what day that happened, I'm looking, going right back to those pictures. Pictures. And even though maybe the property was sitting for two weeks because of some reason, there were still pictures taken. And so I can, you know, see, well, they walked off between this date and this date, who was on site and who, you know. And so the other thing is working into contracts, timelines for completions. So subs are a little bit easier when it comes to that because they're really quick in and out. Their install might take just a day or two. And they've got a full calendar. They want the money that, you know, turnover. So not as much a problem with them. But I typically ask my gc, hey, Tyler, Tyler. The Tyler is supposed to start this day. Let me know if he doesn't show up. Okay? Didn't show up. All right. Texting so I can get on it instead of waiting, like a couple days. And I show up and I'm like, shit, there's no tile. Now I've lost four days. And then. So for the GC contracts, we always had a. I'd have them. I'd ask them first, when do you think your completion date will be for the scope of work that we've agreed upon? And he goes, I need eight weeks. And so, okay, that's December 21st, whatever. And I go, how about does December 8th work better for you? Right? Like an extra week or extra two weeks. If I think that they're a Little bit too short. And then of course, they're going to be like, yeah, extra, whatever. They always need it. And I'd say, okay, you get a bonus of $150 a day if you complete before the start date. That includes punch list, completion, everything, or you will be fined $150 a day.

[Ashley Kerr]

So subtract.

[Serena Norris]

Subtract it from the final payment. With that, though, you have to keep track if you delay them for any reason. And so that only really ever became an insurance to us when a contractor was just really going south. And we have decided at that point we're not going to work. We're not gonna move forward with them on a different project. At least we could argue with them that we're like, we're only gonna pay you half of the thing because it took an extra four weeks to complete. And it. It was, like, unreasonable. Right. Just not showing up, you know? And we only paid the bonus, like, one or two times. Yeah, like maybe. Maybe once. But at least they know it's there. Right? And there's some incentivization, but also some penalty.

[Ashley Kerr]

Well, this has been awesome, Serena. Thank you so much. I love talking systems and processes with you because I always learn something new that I can implement in my own rehab project. So thank you so much for coming and joining us in person. Where can people find you and reach out to you?

[Serena Norris]

Yeah, best place. Instagramarena Claire. And from there, I have linked resources. And then send me a dm and if you're doing flips already, I'd love to see them. Send me some pictures. Yeah. Thanks for having me.

[Ashley Kerr]

Thanks. I'm Ashley and he's Tony, and this has been an episode of Real Estate Rookie. We'll see you guys next time.