I’ve rehabbed a bunch of houses in various areas of the country and I can tell you there is one constant that I haven’t revealed that will guarantee to sabotage your rehab budget, and it happens EVERY TIME!

I’m going to give you a hint: it has to do with your power team.  Yep, the team that is the key to your success, believe it or not.

You may be aware of my report, “The 5 Styles of Contractors and How to Manage Them” which is a report I wrote after going through several contractors and losing money because of the contractor (well, OK, I have to take some of the blame myself – I took on too big a project without having enough experience).  I since had a contractor that was a real dream – in and out in 10 days and THEN sent me the bill.  For some reason my agent didn’t really like him and tried to get me with another contractor.  This guy was so obviously a salesman, that I was able to finally put them into the 5 categories so I know what I’m dealing with and how to deal with them.

Here’s the secret, and unfortunately you often can’t avoid it.

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NEVER allow your listing agent and your CONTRACTOR in the same room together – EVER, especially when the contractor is trying to put together a quote for your project!

When you are Rehabbing Remotely®, you can’t often avoid this from happening, so the next step is damage control.  I can’t say I’ve been real successful with the damage control yet, but it is a necessary part of the real estate investors process. But first, let me explain with some examples:

The first time it happened…

My dream contractor, the one that was in and out in 10 days and THEN sent me the bill, the one that knew absolutely what he was doing and had control of his job, inside and out actually got flustered.  I had already done several projects with him.  He always came back with an estimate and always was on target with his estimate and completion date.  There was this one time, however, when the potential listing agent was with him when he scoped the house to give me a rehab cost.  I never saw him in this state.  This guy was an investor himself, knew what needed to be done, but he came back to me a person filled with self-doubt on that bid.  The reason?  The listing agent was there in the room with him, pointing out every little mismatched door handles and hinges, other upgrades the contractor would never consider, and he left sort of shaken, unsure of himself, and not exactly sure how to give me a quote on that house.

And more recently…

I got this really sweet, unbelievable 3 bedroom 3 bath condo ON THE BEACH in Hutchinson Island, near Fort Pierce, FL.  Remember at this point I had been doing gut rehabs in Chicago where the rehab costs are closer to 6 figures than I ever want to see.  The thought of simple condo rehabs – cosmetics only – is refreshingly appealing.  I had sent a contractor out to the property and asked for a “gut feel” quote – I almost fell out of my chair when he responded $50,000.  My thoughts were that this is not a contractor used to dealing with investors and I would keep shopping for contractors.  Once the property closed, I was ready to get the key.  Come to find out that contractor had the key.  I already had a listing agent lined up and arranged for them to meet at the property so he could give her the key.  BIG MISTAKE.  Next thing I know the listing agent writes to me agreeing that $50k-$60k was on target for the rehab cost for that condo.  Are you kidding me?  It’s a condo!  I have $25k in that budget.  Kitchens and bathrooms, maybe flooring.  Geez.  Diamond stud the mirrors?  Complete home automation package?  I don’t think so.

Then there’s the old “oil and water don’t mix” issue…

I have another house where I got the listing agent involved later in the process.  The contractor had almost finished the project and was following up on some outstanding items found in the inspection report.  We found a buyer for the house and the buyer loved it.  But when the listing agent went out there at the same time that the contractor was out there, an altercation occurred to a level that made the contractor say that all familiar statement, “That’s it, I quit!”

There is ONE exception…

I have one listing agent that also went through the same training process I went through, and has rehabbed her own properties.  I can tell you it’s a DELIGHT when she understands her market so well from an investors perspective, not because she works with investors but because she is an investor herself and knows the “bang for the buck”.  I love it when she tells me I don’t need to update the bathrooms, that it won’t change the selling price of the house.  There aren’t enough agents out there like this one!

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The bottom line…

Even though you have a team that strives for mutual success, you have to remember each party is out for their own individual benefit, not yours.