Emergency Rehabbing

[00:00:00] Mike: [00:00:00] What’s up, everybody here. Welcome back to the show. Today. I’ve got my buddy Ryan Roddy Garsa Lazo on, and uh, he really has become the expert that GoTo person for rehabbing, whether it’s training your teams or really building your rehab business like a business. A lot of us as real estate investors, truthfully, uh, the rehab as an afterthought, Oh, I’ll just pay somebody to figure that shit out.

But the truth is, is we really, especially coming into this economy that we’re going into right now, you need to be buttoned up and accurate. Like a professional. That’s what we’re going to talk about today. Emergency rehabbing, taking advantage of this looks like it’s going to be a downmarket to exponentially grow your business.

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Ryan: [00:01:14] Now’s the time, baby. That’s the time.

What’s up Rotty?

Nothing but opportunity here. I’m good, man. Thanks for having me. Yeah. Awesome. So, interesting timing. Uh, when we scheduled you to have you on the show here, you know, the, the proverbial shit and not hit the fan quite yet, but, uh. You know, we’re in a different situation right now.

Mike: [00:01:31] And for guys like you and me, we talked a little bit ahead of time, like we kind of grew up in a downmarket alas downturn. And so guys like us have been gearing up for a downmarket cause you know it’s going to come right? And, and I think for everybody, Trump included, like he’s, he’s talked about this many years ago.

In the past he made his money in down markets. That’s when you go shopping. That’s when you kind of gear up because a lot of people that are in our business that are wannabes, but. Don’t really treat it seriously. Well, I think  out in these markets.

Ryan: [00:01:57] I think the thing that you and I have been hearing a lot, [00:02:00] especially in the last nine 10 days, right, is.

First off for you and me and you and I and guys like us. I don’t, I never realized that we, we made it through, Oh, you don’t Nike. You don’t really have to think about that on a day to day. And then when people start talking about, Oh my God, what am I going to do? I’m freaking out. I don’t have enough cash reserves.

All these different things. You start thinking yourself, Oh yeah, wait a minute. I’ve been there. All of a sudden you start thinking of context of a moment when you were broke or a moment where you were struggling or a moment when you had. The fear that they’re having now. Like I have anxiety, I’m human, but I’m not fearful.

Right, right. I have anxiety because it’s like, well, we’re in an uncertain time. It is what it is. But I’m not fearful the way I was fearful in a way tonight. I was terrified back

then.

Right. But my point

Mike: [00:02:44] is we’re naive cause you just didn’t know what was happening. Right. But

Ryan: [00:02:48] exactly. And now we’re prepared.

And this is a position to try to encourage others to fight the good fight. But the reality is the market’s been hot ever since then. And a lot of people that got in after the fact got fat and [00:03:00] heavy and they lived a good life and there’s nothing wrong with that. But now now’s the time. We’re going to see if they can jump rope

Mike: [00:03:07] and we don’t, we don’t know what’s going.

It’s still early. We don’t know what’s going to happen yet, but we know there’s probably going to be a little bit of an economic downturn here, at least for a while. The truth is, is, uh, you know, you and I haven’t talked about this, but for people like us, people that are in our circles have been talking.

We expected a downturn for years. Like we’re kind of like 10 or 12, 10 years into

Ryan: [00:03:26] like every 10 years. Is it? Yeah. And we’re beyond that. We’re

Mike: [00:03:29] beyond that. So it’s like it was due to happen. Nobody anticipated that it was going to happen the way it did, but

Ryan: [00:03:34] the only person that anticipated with bill Gates,

Mike: [00:03:36] well, that’s a whole nother story.

Um, depends on how big of a conspiracy theorist you are.

Ryan: [00:03:43] Maybe if I got no time for that.

Mike: [00:03:46] Yeah. But, uh, you know, um. At the end of the day. This is what I love about real estate investing, and this is what I love about entrepreneurship, and I want people that are listening to this right now, watching this to think about this, you need to get yourself

[00:04:00] I unfortunately have money in the stock market and I, I don’t like being in the stock market, but I had some cash that we’ve had invested, so we lost a bunch of money over the past few weeks sucks, right? And I don’t understand it and I can’t control it, but I haven’t really lost any sleep over it. And I haven’t lost any sleep over essential downturn in my business because I know that.

Once you get to a point to where you’re like, you know what, I can’t control the economy, but I know whatever happens to me, I can get it all back. And I think that’s the sign of an entrepreneur that’s been through a couple of markets. It’s been through some ups and downs. I’ve been punched in the face a few times cause you get to a point where you’re like, you know what?

Shit’s going to happen. Things are going to go bad. It’s just going to happen. I can’t control everything, but. I’m resilient, I’m a problem solver. I will figure it out. Whatever happens. Right,

Ryan: [00:04:44] and that’s, those are the ones that survive. I mean, we don’t have that mentality. Like it goes back to what I was saying, do I have anxiety yet?

But I’m actually kind of excited. I’m like, I’m like, woo. Because you know what it is. You get a chance of the opportunity, as you said, like an entrepreneur. To go back into the [00:05:00] office, go back into the war room and start really focusing on the challenges ahead, and then you start trying to remember, okay, what did I do back then in this situation?

If that is, if that situation still exist or presented, but again, what do we think of, right? Every challenge is an opportunity, and let me tell you, right, I’m the guy that works with every hedge fund that was thrown at us through that recession, right? You don’t think there might be coming back. You don’t think that other guys have learned from them too and are going to try and stack up?

Of course, because there will be, unfortunately foreclosures, there will be people losing their home. They’re talking about this a unemployment rate being as high as 30% which is unbelievable. It’s sad, but it’s unbelievable. So what do you think happens? Inventory comes back, prepare for it. I am.

Mike: [00:05:43] Yep. As long as there’s people and they need housing.

Then the guys like us are going to be in business, right? I mean, boom,  are going to change, but those things are not going to change.

Ryan: [00:05:53] That’s where I’d rather them, as long as there’s people that need healthcare, healthcare has got to stay open. As long as there’s people, there’s gotta be housing. Real estate is going to stay [00:06:00] open, and point B to that is construction will stay open.

So those are the three pillars, and that’s it’s, it’s the three pillars of the economy. But there are actually two major pillars of our industry, right? Real estate is a pillar. Construction is a pillar, but the other thing that people haven’t really realized is investing is another pillar. And then throughout the years, what I’ve seen, and again, you’re never talking off camera about this a little bit.

A lot of people are getting that reality check right now that they made no one of the three or two of the three, but not all three of the three. Right? So if you’re a rehabber, if you’re an individual that cashflows, you have Turkey projects you property manage at some level, you have to alter the asset at some level.

You’ve got to do something or rental level rehab, construction, a hotel, something. And if you’re not good at it yesterday, you’re not good at it today, which means you’re not going to be good at it tomorrow. And this is your opportunity to start looking at those and saying, listen. I’ve got to start capitalizing on my weaknesses here in focus because there is going to be opportunity.

Mike: [00:06:56] Yeah. Yeah, for sure. And so there’s, there’s a bunch of, you know, I run the investor fuel [00:07:00] mastermind. We’ve got a lot of really successful investors in there. Some people that have been around for a long time. And, uh, we run an agency, Allegion agency, and what I’m, what I’m advising my clients, the people that look to me for advices.

It’s a little, there’s a lot of uncertainty right now, but gear up to double, triple your advertising or more Legion. Because the truth is, is so many people that just stop, and this is, this is what happens is when you’re prepared for this, when psychologically. You’re not freaked out about what’s happening right now.

You’re like, I don’t know what’s happening, but I know that competition, a lot of competition is going to go away. Capital’s going to dry up. And so if you’ve been listening to us for any period of time, we’ve talked about always having multiple sources of capital to prepare for what’s gonna happen next, because in the last downturn, you know, what does that come from?

Lessons learned, right? The last downturn, if you had, man, I’ve got access to a $5 million line of credit. With one bank and then that bank pulls that line away, then you got zero, right? So you’re raising private money. We’ve been talking about this stuff for years and, uh, really anticipating this, although we didn’t know what happened like this.

Right? But you kind [00:08:00] of knew there’s going to be a cycle. There always is.

Ryan: [00:08:02] That’s true.

Mike: [00:08:04] Let’s talk about today. Let’s kind of talk to those that are listening right now that are either have been rehabbing a lot. Uh, might have a couple of active projects going on right now that there’s some uncertainty around.

So it kind of like emergency rehabbing, like a little bit about

Ryan: [00:08:17] how to

Mike: [00:08:19] deal with the current situation. By the way, in Dallas, I, we just looked at some stats yesterday, realtime MLS stats, like there are like 300 and something listings. Yesterday a hundred houses, 190 houses went pending. Uh, there were a couple hundred houses that sold.

I mean, there. It doesn’t feel like title companies are doing remote closings, like there’s people have just, it took like a couple of days and people just pivoted and they’re like. The economy kept going forward. So, uh, it’s not dead here, right. But I think some people are freaking out a little bit.

Ryan: [00:08:46] Well, uh, like I was saying, I, I’ve been saying this every day since, I think the time, the first time the president spoke was maybe like nine or 10 days when he legit did the primetime speech to America, which he’d never done before.

That, that caught my attention. Like, Oh, okay, we might, there might [00:09:00] be something here. Right. Since then, I think emotions naturally had been high for everybody. Investors, consumers. Anybody, your mom, your grandmother, my mom. You know what I mean? Everybody’s human. You get that high anxiety, but I think the first full week was last week, right?

We’re all some kind of everybody starting to go quarantined, right? Local municipalities are quarantining and States are making their decisions and government States are doing what they do, right? Whether you agree to disagree is not the point, but you start seeing that Russian emotion and people are getting scared and I kept telling her, but I go, wait for the first week to be done.

Let people freak out. And then this is the week I said, I said, as of yesterday, I said, as of this Monday, it’s time to hustle against. It’s to get back out there. And like you said, if you’re that wholesaler, if you’re that investor, pump out your marketing harder than ever. Right? Pump that out. Get it all out, man.

Put it all on the line. And, and I, I’m a true advocate for that and I can tell almost everybody else the same thing on the rehab side. Don’t stop, right? There’s people out there like us or you or other investors that will help you get through it to somebody’s room, [00:10:00] right? Keep going, keep moving. The economy has to move.

Keep it moving. If we could do a part by, so let’s go, but in some level that they’re saying, Hey, we are operating in one of those businesses that still can run in a under a lockdown foreign teen, or stay at home in shelter, then do it because real estate is not going to shut down. Right? And this is where that virtual technology comes in.

Virtual sales calls, virtual walkthroughs, virtual inspections, virtual estimates. I mean, it’s happening.

Mike: [00:10:28] Yup. So let’s talk a little bit about, for those that are in, and every market’s different right now. And the truth is, is from the time we’re recording this to the time it’s actually going to go live, it’s going to be a couple of days anyway.

So things are changing on a daily basis here, right? But what do you say? So in my market here, it sounds like it is in Chicago too. In Dallas. They’ve said that a construction is an essential. Is an essential, uh, task. So, you know, contractors are still working on things if they can. One of the big fears here is stuff like supply, like, uh, [00:11:00] supplies.

So is, uh, is is something in to not show up to home Depot? Are they not? Are they going to run out of drywall? Is like, are things going to happen? It’s going to slow that down. So clearly I think all the supply chains for groceries and all those things are working hard to make sure that that doesn’t happen.

Cause that causes a whole nother. Layer problems. But let’s kind of talk to the person that’s in the middle of a project right now and they’re trying to do this stuff remotely. So talk a little bit about your thoughts on how they can keep kind of moving forward. Cause you know, for real estate investors, every day is another day of holding costs, right?

So they’ve got to keep things moving forward.

Ryan: [00:11:32] So there’s a couple of things you’ve got to do. First and foremost, and I hope even if you’re a mid level guy, high level guy or an entry level, it doesn’t matter. You should know what KPIs are, right? That’s what you’re gonna go back and start looking at as your KPIs.

And those KPIs will look at baselines versus actual. Here’s an example. First thing I would do for those of you who have opened rehabs anywhere in the country as, I’ll take your most problematic rehab first, the one that seems to just keep biting you in the ass, that you just can’t get your hands around for a million failures right?

[00:12:00] And I’m sure all of you are like, yeah, dude. I got like all of them

Mike: [00:12:03] get,

Ryan: [00:12:05] they’re like, yeah. They’re like, Oh dude, I got five and all five are a disaster. And I’m like, I got you. I totally understand, but my point is, take the worst one. Start looking at the KPIs. First thing you want to do is look at the original budget, the budget baseline versus the current baseline.

Find out where you’re at. Next thing you want to do is evaluate change orders and you have to do the KPIs on this. You have to track the change orders that you as the investor made decisions on. You want to track the changes that come from the GC and if you have a project manager, you want to see the changes that are coming from your project manager because now you have the time to analyze this project.

What are we missing? Where are, where are these coming from? Then you want to make sure you approved every change order. And then how much all those change orders have added up and changed your baseline budget. See, it all ties together, right. Then what you want to do when you have your baseline budget and you’ve looked at where you’re currently at, which is probably a little bit higher than where you originally started cause it happens.

Um, you want to then evaluate how much of [00:13:00] that budget has altered time. Okay. Now we track the KPIs on the scheduled time. You take your baseline schedule. Let’s say it was a six week project. That’s what you guys project fine. You start looking at all the time associated with all these change orders.

Maybe you’ve done that, maybe you didn’t. Maybe you’re a middle level guy and don’t have those capabilities yet. Maybe you’re a high level guy and you guys are doing that for you. Great. Still look at those. You have to review them. It’s like having a contract. You send it out for signature, but you never reviewed it.

It’s been signed. You just say, Oh, I got it back. It must be signed. Review your paperwork, review your system and your process all the time, every day, right? If you are, then you know exactly what I’m talking about. So you want to look at those change orders because change orders, usually 95% of the time will alter the schedule

Mike: [00:13:44] because it takes

Ryan: [00:13:45] time to go and redo something or do something that wasn’t originally part of your scope of work, which means obviously it adds to the budget and it adds to the schedule.

So then go back and track that critical path. Welcome to project management one Oh one college universities and session. You want to go [00:14:00] back and track how many changes we have, how much time it’s added to our schedule, and what we have to do. To get back the float. The float. My friends is trying to buy back time per task.

I just blew all your minds. This is real. The task in which, for example, your schedule and your scope of work, your scope work says we’ve got to tile the bathroom floor fine, and the hat and the a masters we find. Of course. Then your schedule suggest how many days that might take. Right? It says three days to tile.

The bathroom floor. Right, cool. It takes for that extra

Mike: [00:14:32] day, it’s called

Ryan: [00:14:32] slippage. Okay. Now we get to buy the float. How do we get the float? The float is, I got to find another task within the project to get a day back because I can’t add a date to my schedule. I can’t afford that anymore. That’s the mindset.

You must operate right here, right now, whether it’s the coronavirus or let’s take the coronavirus out of this. This is crisis mode. This is what a project is going off the radar for you right now. It’s going completely off. You need to start this process [00:15:00] over and over and over again. Regardless of the reason you’re in crisis mode, regardless, maybe one of your contractors is completely sick and that could happen right now, actually one of your contractors and you are battling over money, so there’s progress delays.

There’s a simple science and going back into your schedule and your money by tracking construction KPIs to figure out where you’re at, how bad it is, and where you need to go. And I don’t want to lose people cause there’s a lot to this, but that’s the person that comes to mind. For anybody who’s open has an open rehab, look at the budget compared to the current budget.

Look at the time compared to the current time. Look at the change orders, add all that up and see how much money is added to your budget and how much of that is added to your time. Then and only then can you make a decision with your GC if you either going to be able to sell as is, get it to a certain point and then sell as is or rent as is.

Or maybe even turn an ARV in a new rental, right? You may say, I was going to flip this, but I want to have to hold this. Right? There’s options out there. There truly are options out there, and that’s what I’m saying. I [00:16:00] just wrote this manual emergency guide that I’m almost done with it. I’m going to put out for everybody.

The reality is there’s options, but you have to look at it from a construction standpoint. Now, if you have a project manager, you and your project manager need to work together, and this is where that project manager shines right. Yeah. We hired this project manager.

Mike: [00:16:15] Theoretically, you

Ryan: [00:16:16] should have come from construction.

So theoretically he should have an idea of what I’m talking about. The sun level

Mike: [00:16:21] for sure. And then at the same

Ryan: [00:16:22] time, you get what your GC and discussed this because now it’s daily. Daily, daily focus. When you’re a crisis mode in any rehab, regardless of Corona, and you’re in crisis mode, it’s a day to day action.

Now, what’s my day to day plan? What are we doing tomorrow to get done? Uh, for Wednesday, what are we doing Wednesday to get done? A Thursday? It’s no longer a week to week, month to month project. You already blew that. That’s my point. Yeah, control it that way. You got to control it day to day. So when you try to be macro, you didn’t know how to even be macro in the first place.

Right now you gotta be micro and you got to learn fast how to be micro. Because they’re all looking for you for guidance.

Mike: [00:16:56] Any tips on, uh, for those of you that, for those that are

[00:17:00] Ryan: [00:17:00] too much?

Mike: [00:17:00] No, that’s, it’s a lot for sure. It’s good information for sure. For those, for those that are, uh, by the way, before I was a real estate guy, I was a corporate schlep and we had project managers manage all sorts of stuff, Gantt charts, all sorts of projects, right?

Lots of different project management softwares. So, and I’ve led a bunch of projects to, in corporate America, of course. You know, rehab hundreds of houses to, I’ll say the average investor is probably, you know, doesn’t have a project manager and they’re doing it themselves. Fly by the seat of their pants a little bit, cause you, as you know, that’s not a surprise for those that are, that are that even that understand what you just said.

Talk about how to implement with your contractor. Cause sometimes they’re like, Hey, I get it. I get slippage. I get that I’m a little a day or two off here. I need to find it somewhere else. I’m over budget. I need to find it somewhere else. How do you go talk to a contractor, give some tips for how to go.

Cause you know, so I talked to the

Ryan: [00:17:48] contractors differently.

Mike: [00:17:49] Every contractor is different. For sure.

Ryan: [00:17:51] Once I talked to him directly, cause I am by trade a contractor and I don’t deal with their shit. So it’s different. I know. I know what they’re talking about and what you’re not talking about. So I don’t, I don’t have patience for

[00:18:00] Mike: [00:17:59] that.

A lot of contractors don’t necessarily use the terminology that you’ve used there or they know, Hey, you need to move faster or whatever, but talk about how somebody is listening to this right now can say, okay, I’m a week off now because of all this other crap that’s been going on. Here’s what I think they’re going to understand how they can go.

Try to make up time

Ryan: [00:18:17] by looking at what’s left. So to answer your question, we go back to kind of my earlier point is go back to looking at isolating the day to day. Then. So go back to the schedule. Because if it’s more of a time of trying to, if it’s more of an issue of time, right? We’re not talking about budget, we’re just talking about time.

Then the first thing you want to do is go back to the original schedule that you guys agreed to and hopefully sign together. That’s a whole nother conversation and you go back to that schedule and say, you know what? You know, we’re off track and we need to figure out where we went off track. Now. That’s easier said than done because there’s a process to this, right?

There’s a project management processes. You should be tracking correspondence and communication. You should be communicating and oversight and supervising [00:19:00] on the projects weekly, multiple times a week. There should be pictures and videos taken. There should be daily huddles happening. There should be one GC meeting a week.

I mean, this is all the things we teach cause it happens, right? And most investors, like you said, they don’t know that. They don’t even know how to do that. So that’s what I’m saying is I’m painting a picture of those listening who don’t know how to do this and never had to do that. And you realize how important what I’m saying is now hopefully moving forward, the whole idea guys is you want to come out of the quarantine a lot different than you went in right time to do that.

So what I’m, what I’m trying to shell shock you with is the reality of what your contractors know that you don’t know. And they’re not going to sit there and ask you to babysit me when they know you should be babysitting me. Right. That’s why I was saying, I talked to contractors different because I know exactly what the hell they should be doing and I don’t put up with that shit.

And they may or may not like that. I don’t care. That’s their problem, not mine. Because at the end of the day, I hired them. They didn’t hire me. So at the end of the day, I look at it that way. So when you go back, simply very simply put, go back to the [00:20:00] schedule, talk to your GC, have a meeting onsite and say, we need to go through this together.

I want to, I want to figure out where we missed. Was it? Was it a delay material? Was it a delay in a draw? Was it my hard money? Lenders? Inspector doesn’t know what he’s talking about and I don’t agree with his 70% you don’t agree with the 70% but that’s all they want to give us the 70% now I got to come out of pocket with my own cash loan and now I’m irritated.

There’s so many variables, brother, that’s now now speaking to those mid-level guys who know exactly what I’m talking about. So those are just a couple pieces of the game. But you want to go back, look at the schedule, figure out where you went wrong. And then figure out a plan day to day. Okay? Okay. Okay, listen, I don’t want to fight with you.

I just want to get this thing done. Here’s the idea.

Mike: [00:20:42] You know,

Ryan: [00:20:43] tile took too long. The drywall didn’t get here on time. That took too long.

Mike: [00:20:47] We need to create the flow.

Ryan: [00:20:48] How do we buy back time and go through the scope of work and the schedule, and maybe you can reallocate line items. Maybe you could take things away and say, you know what?

At this point, I don’t, we don’t even need to do that. I’m [00:21:00] not going to, we don’t need that. Or you sit there and you jump into the conversation or rewrite the contract. That’s why there should be an addendum on the end of a contract. It’s a whole another class, and you go back to your dentist and say, listen, here’s the deal.

I’m going to go buy the vanities, all the bathroom fixtures, all the stuff. Even though I know it’s in your contract, I’m gonna go buy it. We’ll rework the numbers later, but not today. I got to get out there

Mike: [00:21:21] so that you can participate in

Ryan: [00:21:23] now. It’s the best time, more than ever to do that right now in emergency rehabbing, this is the best time for you to look at your contract with your controversy.

Listen, I’m doing a story on buying all the materials right now while I can. I was going to the store and buying all the money or all the materials with the money that I have. While I can. And you and I are going to figure this thing out and we’re going to make it right and we’re going to work it out.

We’re going to restructure the contract, but one of my first bits of advice that I think you asked me earlier when we sat down like is what can they do? Go to the store and buy your materials if you can afford to do so now, because. There will be delays in materials, like you said, from big box, from, from [00:22:00] uh, sources, from warehouses to big box stores and big box stores to projects.

That’s going to happen. It’s probably starting to happen. So while you can afford to do so by all the materials, put them in a locker, put them in a garage, put them in your garage. I don’t care. But don’t put them on the project because you can’t afford to have them stolen or ripped off or damaged. Right.

You got to start there. And that’s part of risk analysis that happens early on in the project when you’re looking at production phase of construction. Whole nother class. That’s what I was saying. Like what are we focused on, man? Cause

Mike: [00:22:32] we only have a half hour. We could probably get like a five part show here.

I think, well maybe they don’t spend the rest of our time talking a little bit about. Um, I think of people that are listening to this that are rehabbers and we haven’t for a while. I’ve been working with this contractor for awhile. They kind of learn how to manage that person based on their personality, right?

But I think coming out of this, what we’ve talked, when we kind of teed it up up front is like, Hey, come out of this being better and smarter. And you were going into it, right? [00:23:00] Get ready, like strengthen those, strengthen your muscles for coming into this new market. Maybe take a little bit of time. Let’s talk about how to find the right contractor, because there’s always this balance between.

You know, the one guy, the cha, we call him Chuck in a truck. The guy that like does it all, but we’re going from one job at a time.

Ryan: [00:23:17] Texas thing, man, I’m gonna have to use that up

Mike: [00:23:19] here too. I’ve got three levels. I’ve got a, I forgot what I call them all. There’s the guy in the wrapped Hummer, right? He’s the most expensive and has a lot of layers of management there, but you know, shit’s a little more buttoned up.

There’s the Chuck in a truck, right? It doesn’t even have a business card. He’s just. You know, it doesn’t have enough gas to get home tomorrow, but he’s just working day to day says yes to everything. Could you lay tile? Yeah. You get a texture. Yeah. Electrician. Yeah, they do it. All right. So that’s not, you know, don’t go there.

Right. And then in the middle, there’s the guy that. Okay. It’s kind of the owner operator managing three, four, or five projects can hang doors himself if he has to. He’s in there doing stuff. [00:24:00] Somebody sick. Well, I’m going to, I’m going to roll up my sleeves and get it done. So there’s kind of like this, uh, I’ve simplified it and put it into three, these three buckets.

But anyway, talk a little bit about, um, how to find the right contractor for you. And, you know, considering the average person is. Is not full on doing five 10 projects at a time. Like maybe talk to the guy that’s doing a couple at a time, has two or three rehabs going on at any time, so isn’t happy with who he’s working with now, let’s say.

Ryan: [00:24:27] So again, let me give some background to answer that because there is no formula. There is no science. The people, we can’t control each other, right? That’s people need to understand that there is no form. Anybody who says this is how it’s done. They’re full of shit. There is no formula. The reality of it is, as an entrepreneur, as an investor.

You have to learn a certain, to a certain level, whether that be a person that came from construction, who’s a construction manager, per se, a project manager per se. Or maybe you are GC that now runs a big company like something like we did. Right? The idea with that is there has to be [00:25:00] some fundamental business, um, um, mechanisms within them.

They have to understand that they have to understand processes and systems. Um. And the rehab. Yeah. I’m gonna make this quick. I’m gonna make this quick. And the rehab game, you have a level contract who does not rehab. They do consumer level retail build-outs where they could charge 40% markup and the rehab game you have the C-level contract.

That can basically work within your margins, but you pay for what you get, which is shit, right? The reality is very simple, right? Before we get into how, find a contractor, remember what you hire you, what you pay for is what you get, and if you don’t know you’re hiring riff Raff, you’re hiring riffraff here.

I ain’t got a two, three man, four man crew that’s supposed to. Do 22 trades that exist when you build a new custom home. So if you have a new custom home in the retail world, it takes 22 legit trades to get done, and you have a rehab that’s going to cover 22 trades because there’s 22 different things to do in the house.

Think about that logic. You’re trying to get two, three, four guys to do 22 trades who might be good at [00:26:00] two great at one suck at the rest, but you get, okay, so wake up, stop actually blaming everybody but yourself. Take the accountability, right? So at that level, to answer your question, what you want to do when you start looking at those kinds of contractors is start thinking, am I, am I willing to pay a little bit of a higher margin to get the job done with a little bit more quality precision.

Right? There’s three major things in rehabbing that every investor wants quality time and budget. You’re not going to get all three. It doesn’t. It’s not going to happen, right? So you have to pick each piece, each rehab, which one matters most right now? It could be the RV, it could be the market, it could be time, could be weather, it could be season.

All right? Pick which one matters every single time and then go into that with the contract. With that mindset, that right now what matters to me is quality. Then you’re not going to hire the seat. You got to hire the a. Right? And you’re going to pay for that, but what did that a cost you? 30 33% and you’re like, Holy shit.

But he gets it done three weeks early. You’re going to complain now. [00:27:00] I don’t know. That’s what I’m saying. That’s not for sure. That’s my opinion. Makes sense.

Mike: [00:27:06] Good stuff. Good stuff. Yeah. You get what you pay for. And I think, uh, you know, one of the things that I’ve always advocated to with contractors is. No, this is what I teach students, coaching students, all that you should never work with somebody that hasn’t been referred to you from somebody else that you know and trust because you know, if you go find somebody on Craigslist and you’re going to get what you pay for usually,

Ryan: [00:27:26] right.

Yeah. But here, here’s the deal. Let’s, let’s be Frank, man, I’ve made a ton of referrals to guys who hit home runs for me and hit fall balls for them, right? This is a game like baseball. You’re only good as your last home run, and that’s the reality because can cause it’s very hard to remain consistent in this industry if you don’t have a system in a process.

And just like an investor. Let’s take, let’s take it. It goes both ways, man, and that’s our job. That’s what the rehab Depot does, is show both ways and bridge that gap. It goes both ways. The investor, let’s say Mike’s got it all figured out, Mike Scott and mr Handbright himself, investor fueled. [00:28:00] Boom. He’s got it locked down.

He’s got the system in the process. Every time he meets a contractor, he invites him into his process and systems that this is how I work. This is how I operate. This is what I expect. All right, let’s work. Right? You’re doing that contractor a favor. By doing that, cause I always got something. He’s got leadership, right?

He’s like, all right, Mike’s gonna leave me. We’re going to just, we’re going to just go work out. Let’s take the opposite. What if a contractor came to you and has a system and a process and the investor does it, which they do, and the investor doesn’t know to ask that. A lot of contractors have their own way of doing things and it doesn’t mean that it’s bad.

It doesn’t mean it’s wrong. It doesn’t mean it’s illegal. It doesn’t mean it’s a deceitful. It’s the fact that investors find out after the fact and they feel like they were lied to. It’s like you didn’t ask dude. You know, and that’s what I’m saying, is it? It really does go both ways. A lot of these guys do have a process.

A lot of these guys, most contractors make money on material markups. It’s a fact. Then they add in the GCP on [00:29:00] top of that fat. Okay, so a lot of your guys actually will make the 40% in your rehab budget. It just won’t be a flat fee. They might say, okay, I can do the 15% margin. I, I’m with you on that, but you best believe I’ll make my 15% through the job too.

Right. And again, is that seafood? No. They know their numbers. You don’t, whose fault is that? Right? That’s what you did a real estate transaction and you buy a property from a seller who has no idea what you’re doing. This is that wrong? No. They just don’t know how the process works. That’s your job if you wish.

No, it’s not right or wrong to me. If you want to explain the process and go for it. If not, it’s not. They didn’t know. It doesn’t mean you rip them off, right. Or another process. And that’s why open dialogue has to happen early on when you meet a contractor, you have to get them engaged and open ended questions, meaning ask questions that you’re going to get some feedback right.

Mike: [00:29:53] When you

Ryan: [00:29:53] do your first prewash first off, go meet contractors on job sites. Okay. The [00:30:00] only vitamin of coffee, that’s not what they do, right. Don’t even take them off a job site cause you wouldn’t want somebody taking your guy off your job, would you? Okay. So keep them on a job site. They’re more than happy to be interviewed and talked to when they’re, they could show you something they’re proud.

Right now. Look at my team. Look at my crew. Look what I’m doing on the man. Right? It’s good for me to see

Mike: [00:30:17] an investor right. Oh, good for you to see their work.

Ryan: [00:30:20] Yeah, 100% you can ask them questions all day long. Who owns the property? How many have you done? What’s the schedule like? Are you guys on time?

What’s the budget like? You know what kind of finishes? Where are you shopping from? How many guys you got here? You can observe it. They’re clean. If they’re dangerous, if they smoke enough, they drink in the house. They’re smoking weed in the house, your universe. You could observe all these things right in 10 minutes and they’re happy because you to them money just walked in.

They don’t have sales. Right. These guys don’t, aren’t, aren’t marketing themselves like they should be, and if they are, it’s not very, it’s not very good. They’re not capitalized. So you’re putting yourself in their world, which they will respect you for.

Mike: [00:30:54] Yeah.

Ryan: [00:30:55] That was that dialogue. Then when you’re ready, you call that individual, you do your [00:31:00] pre walk, whole different class on rare situation.

But during pre walk, when you had your scope of work at hand and you’re walking a project and you’ve talked about an open floor concept and I want all these can lights and I’m blah, blah, blah, blah, blah. You’re asking that contractor, Hey, listen, even if you know the answer, engage them. You know, I want to knock this wall down, but I don’t

Mike: [00:31:18] know if it’s a, if it’s a load

Ryan: [00:31:20] bearing wall, what do you think?

Right? Because you’re going to get the guys who are like, uh huh. Yeah, been there, done that. Oh yeah, no problem. Did that last one. I’m sure. No problem. I can do it. I don’t want that guy. I want the guy that says. Well, why would you want to do that when we can do this? Because that’s going to cost X, but this is going to be a little bit shorter.

It’s probably gonna cost the same, but this, this could be done in less than a week. That’s the guy I want and that’s what we need to create. We need to create the conversation because remember, you’re going to be dating this school for a little bit. How to make sure you get to know the guy early on because later is too late.

Mike: [00:31:53] For sure. For sure. Awesome, man. Hey, we’re, we’re about at a time here, but thanks for sharing with us so far today. I think the key guys is we want [00:32:00] you to develop a skillset and take yourself to another level because the truth is, is the market that’s upon us, there’s a lot of uncertainty right now. I won’t pretend to have a crystal ball and know what’s going to happen here.

What I do know is going to happen is a lot of people are going to flee. The marketplace. A lot of your competitors are going to fly fully away. Um, you’re going to be able to find new contractors because some of them are going to be out of work, right? They’re going to be hungry to get back to work.

They’re going to be eager to find some new customers, and there’s a lot of opportunities here for you to improve your business and take it to another level. So question Rodney. Good stuff, buddy. Hey, so if you guys are listening right now. Uh, Rodney is also one of our experts on the series we’re doing three times a week.

It’s called, we call it, I give it a really long name. I spent, I was like

Ryan: [00:32:41] five weeks. I think I’m locked and loaded.

Mike: [00:32:43] Yeah. So we’ve got ’em. You can find out about it at flipnerd.com/america flipper.com/america three live workshops a week, Monday, Wednesday, Friday, usually. And they’re live. We stream online.

You can ask questions. We’ve got different experts coming on every 20 minutes to get some different

Ryan: [00:32:58] perspectives. How do we get [00:33:00] this done in 20 minutes? It’s beyond me, brother,

Mike: [00:33:01] cause you know, well, yeah. We’ll, uh, we’ll figure it out. But, uh, really good information, a lot of experts, and you can come check out Roddy.

Again, it’s gonna be joining us over the next several weeks, so that’s a flipper.com/america Rodney, if folks want to learn more about you, I know you put a lot of training out there, you’ve got a lot of information, you’re having a lot of physical, like training events, and now you’re moving some of that online just to adjust with the market.

Go to learn more about all this stuff you’ve got going on.

Ryan: [00:33:26] Go to the rehab depot.com. That’s our website. If you want to learn more about our services, there are going to be on a Rotty services page. Um, we have physical boot camps all across the country. Um, but we also, most of them are home based in Chicago and for the time being, if they’re going to be all online, we have one coming up, the 23rd all online for six hours and be sure to log in and join us for that.

And so I’ll rehab project management. You can catch me on Instagram at legendary flipper on Twitter. I’m at legendary Roddick. And then obviously on Facebook brother, I’m everywhere, man. And YouTube. Yeah. I’m always trying to put out content for the industry.

Mike: [00:33:57] Yeah. Awesome. Awesome. Well, we will share all those [00:34:00] links in our show notes here for you that are listening.

By the way, guys, stay safe out there. Don’t get too scared here. Look, there’s a lot of uncertainties. We know that. Keep safe. Keep your family safe. Use this as an opportunity to be learning a better skillset. Preparing yourself for what’s next. What does that dude, he’s the, we’re

Ryan: [00:34:16] on videos. I made this two rubber bands stapler and a paper towel, and you have a legit mask.

Mike: [00:34:22] Okay.

Ryan: [00:34:23] Freaking out guys and just get to it.

Mike: [00:34:27] Yeah, so don’t want to, I don’t want to put any fear into you guys. A lot of uncertainty. The truth is, is uncertainty is a breeding ground for

Ryan: [00:34:35] opportunity as well. So make sure you

Mike: [00:34:37] take advantage of the opportunities that are coming up, coming to board, and take advantage of the opportunity.

Of all the time, you’re probably saving right now, not commuting, going to kids’ sports, maybe not even going to work. Don’t piss that away on Netflix. Make sure you’re

Ryan: [00:34:49] learn, evolve, learn. You’ve all read, watch, ask.

Mike: [00:34:53] Absolutely. Absolutely. So everybody, if you haven’t already subscribed to the FlipNerd show, we’ve been doing this for six and a half [00:35:00] years.

Literally. Uh, we have over 1500 shows on flipnerd.com so you can learn more. flipnerd.com you can subscribe to us on wherever you’re watching this or listening to us right now, iTunes, Stitcher, Google, play, YouTube anywhere. If you haven’t subscribed yet, I’d appreciate it if you did give us a positive review.

If you got some value today till then, see how the next show take care. Thanks for listening to today’s show. There are three ways I can help you start or grow your real estate investing

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