The 5 R’s of BRRRRRilliant Real Estate Investing
Part 2 of 5
Welcome to part 2 of my 5-part mini-series focusing on the ‘BRRRR’ method of real estate investing. As a recap, this acronym stands for ‘Buy-Renovate-Rent-Refinance-Repeat’. While this is simply one of many available investment strategies, this is the one I chose to focus my efforts on.
Today’s article is going to focus on the “Renovate” phase. This is typically a favourite discussion point because everyone wants to know how I keep a handle on my projects.
Let’s start with some basics: When you have a project and you’re ready to begin and you’re looking to hire a contractor, you essentially have 2 options:
Option 1: You hire a contracting company that is very well versed in the building code, they understand the points at which you will require an inspection, and they set out an estimated timeline for your project from start to finish. You select your materials, finishes, and colours, etc. from their product lines and they will take care of measuring, ordering, coordinating trades for plumbing, electrical, drywall, etc. Typically, when you chose this level of service you will be given a ‘Project Manager’ or ‘General Contractor’ who will take care of the logistics for you. For this level of service, you will certainly be paying a much higher amount for the project however, depending on your circumstances, you simply may not be in a position to be able to manage a larger project or you may not have the knowledge base to do this.
Option 2: You take it upon yourself to sub-contract out the various trades and you become the “Project Manager”. This involves a lot more work on your part. This will require you to understand when and how and WHO to call upon. Where to get your materials from, keeping track of timelines, budgets, material lists, and building inspections. This is the option that I chose! To keep costs at a point that makes our projects make sense from an analysis perspective, I have to ensure that our projects are staying on budget! I have spent numerous hours studying the Ontario Building Code to ensure that I know what needs to be done, and in effect, I am the one giving direction to our trades on what steps need to be done when. This keeps me in full control of our timelines, budgets, and materials.
Now that you know what your options are here are some steps I would ALWAYS recommend doing before signing on the dotted line regardless of whether you are self-managing or hiring out:
ALWAYS get more than one quote! There are a lot of really amazing contractors out there, but there are also a lot of really not so good ones! I always disclose that we are getting quotes done by multiple companies upfront. You will learn a lot about a contractor and how they work simply by going through this process. Many do not show up, and many do not know how to quote! I’ve even had contractors show up on a potential job site, measure the entire house and then email me a “quote” that says “time plus materials” at $50 an hour. Be careful!
Create a payment schedule! Always always always ensure that you have a set schedule for payments! When this schedule is being created, it also needs to include what the contractor will have completed before the next installment has been paid. I have seen time and time again, where contractors will get to the “date” of the next payment installation and require payment to be made, but the work they’d agreed to do has not yet been completed. Remember, you are paying for a service! You wouldn’t go to a restaurant and order a $100 meal, and still pay the full bill if all that was delivered to your table was your appetizer. And the same goes for renovations! No service, no money!
****Kelly’s Pro Tips*****
Always make sure you get your contract in writing, signed by all parties, and dated! If you don’t have this in writing you may be setting yourself up for a huge headache and a massive loss in your pocketbook!
Ask for proof of insurance! The last thing you want is to have someone get hurt in your home and then you are liable for their injuries
And last but not least, DO YOUR RESEARCH!!! Ask for references, search them on google, find reviews and check out their social media accounts! After all, this is a person you are going to be allowing into your home! There are a lot of really great contractors out there, but there are also a lot of scammers! Protect yourself!
I hope that you found this helpful, but can easily understand that this could still seem overwhelming! If you’re interested in a BRRRR strategy investment opportunity and would like to discuss the possibility of a co-venture real estate model with proven systems, models, and successes, don’t hesitate to reach out!
Stay tuned for my next mini-series article where I will talk about how to Rent out your rental property and how to screen for qualified tenants!
Much love,
KC