Week Ending 8/8/21

After coming off our first proper vacation in~2 years, I was playing from behind this entire week.

I started by digging myself out of a few hundred emails. Then spent the rest of the week on calls to catch up on where everything stands.

Here are some notable moments worth sharing...

??Handling Tradesmen & Contractors


A few months ago, one of my oldest friends mentioned he needed to replace the front steps at his house. 

I asked him about it a few weeks ago and he told me he was having trouble finding a mason to come out and give him a quote. “I don’t understand how all these guys are so busy.”

I took it upon myself to solve his problem. I referred my friend to a mason who went to his house the next day, provided a quote, and started work within a week.

From that standpoint, this transaction was a success. The stairs were a safety hazard for his young family and they needed to be rectified. 

The mason verbally quoted my friend $6,000 - $8,000 for the job upon the initial walk-through.

After some back and forth, they settled on $6,100. This price included:
- Replacing the front steps
- Replacing the walkway from the driveway to the front steps
- Removing a cement pad for a shed that no longer exists.

My friend was ecstatic. He was expecting this to cost closer to $10,000.

The mason asked for $3,000 up-front to get started. I wouldn’t have fulfilled this request. I’ve been burned before by contractors disappearing overnight after fulfilling their deposit.

In my friend’s defense, he trusted the mason because the referral came from me. I should have made it a point to tell him not to do that. I’ll need to remember this for the future.

Thankfully, the mason didn’t walk away. He did, however, issue a change order.

About halfway through the job, the Mason uncovered a surprise. My friend admits no one could have predicted without the stairs and walkway being dug up.

Change orders happen all the time. The mason asked for another $3,000 to complete the job, bringing the total up to $9,000. ?

Now I’m mad at myself.

The job is done and my friend says he’s happy. I’m sure he’ll get over the sting of the extra $3,000, but I feel like I could have done more to prepare him better.

If I could go back in time, here’s the advice I would have liked to give him:

From my perspective, there are four components to any rehab job:

  1. Labor
  2. Materials
  3. Profit
  4. Timeline

Contractors and tradesmen are always going to try and sell you the end result for a fixed flat fee. This prevents them from having to break out the job into the 4 components mentioned above.

In my friend’s case, it was, “I’ll fix your stairs, walkway, and remove your cement pad for $6,100.” 

It’s not easy to get a contractor or trade to break out their costs on a job, but…

So how does this work in practice?

First, you ask what everyone on their team’s hourly (or per diem) rate is. Then you ask how long a job like this will take. Then you ask how much they expect to spend on materials. 

From there you calculate your base cost, instead of waiting for the trade to provide you with a quote.

For all materials, agree to reimburse the trade once the materials are dropped off on-site accompanied with a receipt.

For all labor, agree to a weekly payment (Friday) once timecards are presented. Better yet, manage the timecards yourself. 

Anywhere between a 15-30% premium on materials and labor is standard for their profit margin.

Last, but not least, incentivize timeliness. If you can get a trade to agree to a 15% margin, throw in another 15% to get the job done on time. Sound expensive? Good, it should be. Timeliness is evasive in this industry. 

On the other side, for every day the job is late, take off half a day of pay. If the job is two weeks late, they miss out on their last week of pay. 

Most importantly, get it all in writing. 

Here’s a link to the construction contract I used as a private money lender on a fix and flip deal I funded a few years ago. 

It doesn’t quite match a simple job like fixing stairs, but it’s a great starting point. Feel free to download a copy and make it your own.

Is this process annoying? Yes. 

Will most trades agree to this way of working? No. 

Is it good business? Definitely.

I feel like people often get fleeced on small rehab jobs like this because they just don’t do it often enough. 

It’s like buying a car. The entire process is so opaque and it only happens once every 5-10 years so you’re almost “OK” with overpaying to just achieve some result. 

I get it. I’m probably more bothered by this situation than my friend is. But hey, I thought it was a teachable moment for him, me, and now you. 

?Hiring an Admin


I hired a Virtual Assitant! 

She’s starting on Monday. I can’t wait to see how this works out. 

I used my mentor’s hiring process to find the best candidate.

It’s a pretty simple tactic that proved useful in this scenario. Build a micro-project into the application process.

I created a job description for a virtual assistant position outlining exactly what tasks I wanted them to do every week. 

6 people applied. 

After receiving applications, I sent each candidate a micro-project that should have taken them no longer than 1-2 hours to complete.

Only 1 candidate completed it before their interview.

She got the job. 

Ideally, you get more applicants and more people completing the micro-task, but I’m too impatient. I just want to start. And quite frankly, the work was good enough.

Moving forward, my mentor suggested putting the VA on a 30/60/90 day plan and reevaluating the relationship at each stage. 

I still have to come up with project-oriented goals for each stage. Off the cuff, I’m thinking…

  • 30 days: Task-mastery
  • 60 days: Migrate my website to a new platform
  • 90 days: ??? Still need to think of something

I’m looking forward to seeing how this goes. 

?Plan for Non-Paying Tenant


I’ve been talking to a few people about my non-paying tenant who is now behind in rent by $9,600.

Here’s the plan:

  1. File for eviction + sue in civil court.
  2. Sit down with the tenant and fill out New Jersey’s Rental Assistance Application.

One lawyer told us anyone on the eviction waiting list gets bumped up on the rental assistance list. I have no idea if that’s true or hearsay, but I’m running with it. 

The relationship with the tenant has not become adversarial yet. She answers our calls and the conversation is always cordial. I’m relying on that same rapport to encourage the tenant to fill out the rental assistance application. This will ultimately keep them in the unit and gets us paid in full. It’s a win-win.

If the tenant is not willing to fill out the application (because they know they don’t qualify), then things might get ugly. It sucks, but if they are facing financial hardship, they should just apply for assistance. If they’re NOT facing financial hardship and just taking advantage of the current situation to skip out on paying their rent, then we need to go our separate ways.



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Sunny Shakhawala

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