Real Estate Investing Tips - Why Renovations Always Take Longer and Cost More

Why Do Renovations Always Take Longer and Cost More

Thursday, November 20th, 2008

Real Estate Investing Renovations This issue has plagued my mind since the last renovation that I managed. I found myself thinking, “Why has this seemed to be such a common theme over the years with all the renovations that we’ve done. WHY DO RENOVATIONS ALWAYS TAKE LONGER AND COST MORE?” The project that I’m referencing took just shy of a month longer than it was supposed to and cost several thousand more.

And I know that this is not just a problem that I’m facing either. I’ve heard hundreds of investors complain about this same thing. Sooooo, I’m going to go through the reasons that I’ve come up with so far.

5 Reasons Why Renovations Always Take Longer and Cost More

1. Unforeseen Damages

When you’re doing your due diligence on a property, there are always going to be some instances where you’re going to take an educated guess. It’s not like you can start tearing out sheet rock throughout the house to make sure everything looks good.

For instance, some additional water damage was found under the last roof that we replaced. When the contractor gave me the original estimate, he didn’t know that he would have to replace a good bit of additional plywood. Thus, the job cost more than we thought it would.

I would suggest ALWAYS adding an additional $5K on top of any estimate you get for a full scale renovation. That way, you can easily absorb some additional costs, and if everything goes to plan, your deal will be that much more profitable.

2. Contractor Has Poor Time Management Skills

There is a universal shortage of people with good time management skills. To find a contractor that gives you a time schedule and actually sticks to it is a rare find. BUT, they’re out there!

Remember, time is money so this could be a very valuable team member to have on board.

Here’s a great tip! Have a per day penalty written in your agreement with your contractor. For instance, “Entire scope of work to be finished on or before X-date. For every day past X-date that the job is not 100% complete as per the scope of work, a $35 per day fee will be subtracted from the balance owed to Joe Smith Contracting Services.” (and have them initial beside it)

3. Contractor Has Poor People Management Skills

Most likely, there will be many hands working towards the completion of any renovation project you’re managing. If you have a general contractor that will be using sub’s, he or she will be managing everyone and you will be managing the general contractor. If you make a bad choice here, you will be kicking yourself every day as the renovation drags out in a never ending fashion.

The alternative to hiring a general contractor would be hiring and managing each of the pieces of the puzzle . . . maybe an electrician, roofer, carpenter, foundation specialist, plumber, carpet or flooring guys, etc. This can be a big pain in the neck if you ask me. If you like to do this sort of thing though go for it. I prefer to hire one person that will be in charge of the entire job so that I only have to manage one person. But, as I said earlier, pick this person very carefully.

I’m not even going to mention doing all the work yourself. Sure, do it if you enjoy it, but I personally think your time is better spent elsewhere (putting another deal together, negotiating, networking, team building, anything that can add long term value to your investing business)

4. The Weather

Not much you can do here guys . . . (unless you know something I don’t know) anyway, based on the average weather conditions in your area, budget extra time to account for it.

5. Complexity of Orchestration

There are a ton of moving parts to a full scale renovation. There is a certain order with repairs that you want to go through when doing a renovation. One late contractor can mess up everything.

Let’s say your electrician is supposed to be done within two days and you go ahead and schedule your painter to come in the day after. Well, the electrician doesn’t finish on time. This screws up the painters schedule because he’s already committed to do another job the next week. . . you get the idea.

Just add in some extra time in your estimate to account for the complexities that renovations bring.

Moral of the story, budget extra time and money to all of your renovations. By doing so, you will minimize your risk as an investor, and you’ll save yourself a ton of headaches. Because by planning for it upfront, you put yourself in position to be under budget and time. Exactly where you want to be!

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