We FIRED Our Contractor…

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This is the digital nomad quest podcast with Sharon Tseung. teaching people how to build passive income, become financially free and design their best lives.

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Hey, guys, it’s Sharon no Shawn from good sweet homes. And today we’re gonna talk about how we fired a contractor. Thanks. So let’s talk about how we got to this point. So if you guys see my video on the $65,000 house, you may have noticed that I was a little bit worried about that contractor. He wasn’t being very responsive, and he was taking really long with our repair. So let’s rewind on how we even came across this contractor. We initially found this property on bigger pockets as an off market listing in Central Texas. And we were really excited because you want to branch out and invest in more places like that, when we went there, we took a look at the property, we saw that I need a lot of rehab work, and we didn’t have a set team in that area. So we did have to go through that effort of looking for a contractor. But at the time, we saw another investor drive by and contractor was with her and this is before we had actually purchase a property we were just visiting it to see if it made sense for us. Now that investor pass on this property because she thought it was too small for her but the contractor was there. So we asked him hey, do you mind take a look with us? And he said, Yeah, sure. And he told us all these great things had already come to this property before you take a look around. So we knew exactly what it needed to do. And give us a very attractive offer on the bid even tell us that you work with some very famous real estate investors as well, we believe okay, this guy seems like a great guy to work with this project goes well, and you can work with him on other projects in the future. So now I realize you should be cautious when people are overly optimistic. The people that have been a little bit more difficult for us in the real estate world have been the ones who tell us all these really nice things and are a little bit vague, whereas the people I feel like we’re a little more trustworthy. It’s like they just give us the cold hard facts. And we know Okay, that sounds good. Like it’s very professional. Whereas this, it just sounded like it was playing on our emotions where we’re like, Okay, that sounds really good, right? And I’m kind of a gullible person. So I was just like, wow, that sounds amazing. Like, this person’s perfect. We first met him, I thought, Okay, this is gonna be the answer to everything that we’re trying to do. Because we were looking for a team in Texas so that we can really scale our portfolio. And they were saying all kinds of different things like how they have 15 people on every single job. So get everyone working on a different part of the house at the same time and turnaround times. There were two weeks for a flip project. So then we were like, ready to sign up with him. We decided, okay, let’s just go for it. Right. But one of the things we didn’t really do was our due diligence. So one of the things you guys should definitely do is make sure to look if they have an online presence, because I think that’s like one of the most important thing to check the reviews, check their social media, their Yelp and everything like that. Make sure they’re really legit, right. We’re very gullible when we basically signed up with him, because when we looked it up online, we realized not too much social presence and a little bit of bad reviews that we saw, we were like very worried, right? So make sure you do that upfront work initially before you hire a contractor. Another mistake that we went was we just went with the first guy that we met in practice, what we should have done is called at least three different general contractors in the area and compare them with each other. Also check the referrals, right? Ask them for any people that they’ve completed work with, call them and see what they’ve said about that person. Yeah, moving forward. After that mistake. We definitely did this. For every part of the process with vetting any real estate person that we worked with, we decided to really call references. Even if we were lazy, we’re like, we need to make sure this is legit, because these are people who are going to work with you for a long time. So going back to the story, when we agreed to work with our contractor here, he sent us a bid, but we didn’t initially put in a contract, there was no payment schedule laid out. So we weren’t even sure how we’re gonna make the monthly payments to him. So it wasn’t after a few weeks, where we noticed that progress wasn’t really being made here that we started coming up with these issues. That’s when started doing more of the background checks and getting more worried because we couldn’t find online presence, there’s no accountability, there’s no way to get a hold of him because he would just ghost us. So what we actually got back the table, we found his wife’s contact information through Facebook, it was a whole mess. We finally said you know what we need to have a schedule in place so that if you don’t hit these milestones, we’re going to fire you, we also create a payment schedule to show every line item and we’re going to pay them for the labor after to complete each line. And one of the things I think we did well was that we made sure we didn’t pay all it upfront, we made sure to pay just when the labor was actually done. And then for materials, we purchase it ourselves. So he would essentially go to Home Depot and then the person would call us and then we would give the credit card information and things like that we would get the invoice. So we knew that we weren’t getting up charged for material what we have to do in a contract now is we want to make sure that we have all the information right there in the box so that if there’s any issues we can call them up or find their address. So we also put in a contract exact timeline of when the property is expected to be completed. So if they say it takes about a month we give them some leeway maybe an extra week or two and we say if you can complete before this date, we’re actually give you a bonus and a contract. We have bonuses and penalties depending on when they complete the project. So we have like a per diem rate. If you complete the project in a certain amount of days, then we pay you this amount of bonus but every day you late we’re getting subtracting a certain amount every single day. So I supposedly motivates them to complete the project on time or earlier. Now this property was maybe two hours away from us. Every time we checked out the property we’d see like not much progress have been made and we are pretty angry because it’s like we just wasted two hours driving there and then we have to waste another two hours driving back and we saw nothing really happening and sometimes he wasn’t even there or like maybe he was with me

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one other person when he had told us like a 15, person, crew and all these things, so it just made us really worried. And then sometimes when he would ghost us, I would just like panic, right? I’d be like, What is going on? Are we getting like conned or something like that. But one time, he called us back where he was saying he was scared to face us. So he just basically ignored our calls, because he was saying that there are more unexpected issues. And he just didn’t want to, like, tell us to get us angry. Whereas it made us even more angry for him not to like answer his phone. So you make sure that you know, you’re a contractor who’s actually really responsive, because this was just really shocking for us to kind of encounter right in the beginning, when we first hired him, he was extremely responsive. So I would say that it is kind of hard to gauge that because maybe you sign up with him, but then he starts being less responsive and things like that. So I would say if someone continues to act like this, you shouldn’t just keep giving him a second chance. And I think that was something we kind of messed up on, we just kept letting him do this over and over again, where it became a three month process. And we just kept like being so nice to him and be like, alright, you know, it’s okay, like, just tell us next time and stuff like that. Whereas now we would fire the contractor a lot sooner if they are unresponsive, and just taking way longer than they had promised. So now we were three months in deep, right? We’re like, Okay, what should we even do, we’ve sunk some money into this project, like we already spent a lot. And we have seen that much progress. I think we paid fairly on the things that were completed. But it just felt like he didn’t know exactly what to do in certain scenarios that ended up causing more issues. And sometimes the work wasn’t done. Right, right. So now it’s costing more to kind of fix his issues. So then we started looking into more contractors to hire and basically figure out how to let go of this person, we had come back from this trip, basically saying that this project was supposed to be done before we got back, essentially. And then when we got back, it was still pretty messed up. Like we still hadn’t seen the property being finished. And then I told him, you know, we can give him a second chance. He’s very like forgiving person, he’s always trying to like leave the best in the person. Whereas for me, I’m like, we have to cut ties, now we’ve given them so many chances. So when we started looking for another contractor, we realized that we can’t really hire without kind of letting go the person because they need to walk through and give us the real quotes, right. So we can get some realistic bids so that we can start moving along the process. So we’re in talks with two contractors, and we decided to just let go of our previous contractor when we visited the property next. So when we had to hear that conversation, we were getting pretty anxious about it, because I had never really fires him before. But we took a look at the property. We told him he is there looked around, and you know, not really to our surprise, but we notice that the property can really be remodeled after a whole month. So I told him straight up like, Listen, this is not where it should have been. We gave you a lot of chances. And we were going to charge you you know, a certain amount of money every day if you’re late. But that’s if you had like a week or so to go here. There was no way you can finish in a week. You went in fishes in a month. And he’s like, Yeah, I said, Hey, we’re gonna let you go. And he said, I’m sorry. Yeah, I understand. I apologize to you guys as man, this this person. Okay, I guess he’s handling it pretty well, you know, when you when you fire somebody, there can be all kinds of different reaction, right? That can be really mad that can ruin your house. Like he took it pretty well, because he understood that we give them a lot of chances. And he’s can perform though, luckily, he was able to take all of his tools and stuff out of the house, we changed the lock on a lockbox and he always been good ever since. And then once the new contractor got started, everything’s just been going really smoothly. He explained to us that if he saw his project like that, after like weeks or something like that, he would have let him go right away. He’s like, this guy is doing you dirty, like all this type of stuff. Like it was just really sad to hear. But it was a good wake up call for us, because we were just being super nice about this. And I think in the real estate world, you do have to move quickly if things aren’t working out. And when you’re letting go of a contract, or you do have to put it in writing. So you have to do like a termination of the contract. And you also want to make sure you have lien waivers in place. So lien waiver is put in place so that a contractor can’t just come back a few months down the road and say you didn’t pay them put a lien on your property, I have them sign a lien waiver, it says that we have paid them in full, you know, they’re satisfied, and they’re let go, if there’s complete separation, and it can’t come back to the property. Yeah, that’s why we recommend putting it in writing so that they can’t somehow come after you later. So we got them to sign everything like that. And then once we did that, our next contractor just went in and started making all these crazy like fixes. We’re now we’re getting photo updates every single day and seeing a lot of progress. So this property should be done in a few weeks. I think another thing that’s motivating him is also that he knows we’re investors, and he knows that there’s opportunity for more work if we’re happy with the results. So make sure that when you are looking for contractors, let them know that if they do a good job, there’s more potential for future project, you work with them because they are looking for work. They want to make money. So if you can continuously supply them with more projects, they’re going to be happy and you’re going to be happy as an investor because you can get these projects fixed and maybe even participate in active real estate and start flipping homes or something like that. I don’t know if that’s in our future because we do love holding the homes but you never know. Right? And also we want to be working on more projects where we’re more hands on getting these fits and maybe even doing short term rentals. Like I mentioned in previous videos. I’m really excited for the project moving forward

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worked, it was a lot of stress like during this time, and I think that nothing is worth as stress, right, you might be holding on thinking, Oh, maybe I can get a cheaper price. But if it’s not working out, it’s probably going to end up costing you more in the future. That’s another thing too, right? You don’t want to just go with the cheapest quote, you want to get someone who’s actually going to be able to get the work done. So check the references and check the photos of previous work. And I know we’ve said a lot of tips. So let’s summarize a few of those. So ultimately, make sure you do your due diligence, look up their online presence, call the references and make sure you put a contract in place with payment milestones or EPL and workflows complete so that if you have to let someone go, he’s not losing any real money. And I also recommend paying for materials directly so that you don’t have to worry about charging more for those materials and have regular text updates from the contractor make sure that they’re doing the work make sure they’re sending photos of the progress if you’re going to let someone go I would change the locks so you make sure that they don’t like come in and mess up anything and also make sure to have a termination of contract in writing and a lien waiver as well so they can’t come after you if you have any issues. Make sure you fire fast. So I hope you guys enjoyed this episode on us firing a contractor. I hope it gave you guys some insight on what you guys can do if you ever faced that situation. So I hope you guys enjoyed this episode. Please make sure to rate review and subscribe. It really helps our podcast grow. And thanks again. I’ll see you guys in the next one.

Transcribed by https://otter.ai