The Rookie’s Step-by-Step Guide to Home Renovation Projects

Key Takeaways:

– Home renovations can be profitable in real estate investing
– Serena Norris is a graphic designer turned full-time investor
– She found a mentor who taught her the ins and outs of investing
– Serena focuses on BRRRR (buy, rehab, rent, refinance, repeat) strategy
– She emphasizes the importance of systems and processes in successful renovations
– Serena helps mentor with project management and organization
– She provides tips on estimating rehab costs and finding good contractors
– Serena shares valuable systems, tools, and templates for rehab projects
– She discusses the importance of checklists and software in project management
– Serena works alongside Nate Robbins on their flipping projects.

BiggerPockets:

When done well, home renovations can help you make a SERIOUS profit on your properties. Whether it’s a simple fix or a complex rehab, having a few systems and processes in place will go a long way toward ensuring your success. The best part? Any rookie can implement them!

Welcome back to the Real Estate Rookie podcast! Today, we’re chatting with graphic designer turned full-time investor, Serena Norris. After a friend introduced her to the book Rich Dad Poor Dad, real estate quickly became Serena’s new obsession. She quit her job to spend the following months networking and attending meetups until, naturally, she found a mentor to show her the ins and outs of investing. At first, she was willing to take on all kinds of mundane tasks and soak up as much information as possible. In no time, Serena was running her own BRRRRs (buy, rehab, rent, refinance, repeat)!

Whether you need help convincing a mentor to invest in you or managing your own home renovation projects, Serena’s got you covered! In this episode, she delivers a thorough breakdown of how to estimate rehab costs and find a good contractor for your home renovations—as well as some of the invaluable systems, tools, and templates you’ll need along the way! If you’re EVER going to do a home renovation (which you probably will), DO NOT skip out on this!

Ashley:
This is Real Estate Rookie episode 330.

Serena:
I figured out right away that he just needed help keeping everything organized in his mind because he’s got so many projects going on. It’s like when you’re project managing and you don’t have systems going up, and so I just started recording as much as I could, information, recording where they’re at in the construction process, what they need to do, keep all the tasks organized, so that way, he’s on the road calling me, “Hey, run through the priorities right now.” So that was in the beginning where the value was, and then just continuing to organize from that so that we could be more effective and efficient.

Ashley:
My name is Ashley Kehr, and I’m here with my co-host, Tony J. Robinson.

Tony:
Welcome to the Real Estate Rookie Podcast, where every week, twice a week, we bring you the inspiration, motivation, and stories that you really need to hear to kickstart your investing journey. If I look a little bit different, I’m actually sitting in a hotel room. I’ve been here since Sunday, and I didn’t even tell you this yet, Ash, but there’s this idea called a Think Week that Bill Gates used to do where he basically go into a cabin in the woods somewhere, and lock himself away for a week, and just read a bunch of stuff about whatever is pressing in his business. So I’ve been trying that out. I’ve been here since Sunday. I leave on Friday. So, really, just deep diving in a lot of different parts of our business, and it’s been incredibly helpful to have a week with nothing.

Ashley:
So are you shutting out everything else, like your normal daily activities, like you are actually on vacation? Yeah?

Tony:
Yeah. So, literally, I mean, outside of the podcast, I really haven’t had any meetings or calls this week at all, and I’ve even deleted social media from my phone just so I could really be focused in, and it’s been an incredibly productive week.

Ashley:
So that’s why you haven’t responded to the 5,000 memes and reels I sent you?

Tony:
That’s probably why.

Ashley:
I’m just kidding. But today, we have an incredible guest on today, one of my best friends that lives across the country from me, Serena Norris. So she is coming on today as an expert in systems and processes, and mostly, we’re really going to focus on project management of a rehab. So if you were doing any kind of rehab in a project, whether it’s for a BRRRR, you’re going to keep it as a rental property, or it’s going to be a house flip, or even it’s a short-term rental that maybe you want to furnish, we are going to go through systems and processes you should have in place, including the checklist, the templates, and the software.

Tony:
Yeah. Serena is just a wealth of knowledge, guys, and there’s some episodes where she’s like you’re going to have to go to and re-listen multiple times just to really soak up all the knowledge, and this is one of those episodes. So you guys are going to get so much from the next, I don’t know, 45, 50 minutes, however long this conversation is with Serena.

Ashley:
Yes, and get your pen and paper ready because towards the end, she goes through every template you should be creating to run your rehab projects, and I think that is so informational. Every time I talk to her about real estate, I learn something new.

Tony:
Learn something new. Yeah.

Ashley:
It’s like, “I need to be doing this.” So this is a great opportunity for us to get her on. She also works alongside Nate Robbins who was on episode 326. So they co-exist together making these flips happen that they’ve been working on.
Serena, welcome to the show. Thank you so much for coming on with us today.

Serena:
Thanks so much for having me.

Ashley:
So tell us a little bit about life before real estate.

Serena:
Oh, life before real estate. So I actually went to college for graphic design, marketing, and branding. Then, I did that for a few years in Beverly Hills for a really high-end men’s wear company on Rodeo Drive. After a few years there, I was in my early 20s, and I just realized that I wanted to work for myself, but I didn’t want to freelance graphic design, and I didn’t know yet what I wanted to do. The only thing holding me in LA was I had a country music/classic rock band that I was in, but I decided to move to Hawaii just for a couple months, and it ended up being a year and a half. When I was out there, I had a friend that made me read Rich Dad Poor Dad, and he plugged in my ear about buying a duplex and house hacking before house hacking was coined a term. I started really thinking about my childhood and my interest in real estate in general, and that’s when I really just started thinking.
I was literally obsessed with anything houses, any shows, remodel shows, HGTV, and my… thinking about it like it just runs in my family. My dad was a general contractor. My stepdad was a general contractor. Obviously, my mom had a type. My grandpa was a general contractor. My other grandpa was an architect. Ever since I was little, I was in and out of remodels from the time I could walk because that’s all my dad did, and we’d consult on floor plans. Even Sunday mornings, we’d open up the newspaper, and there’d be like Floor Plan of the Week, and he’d dissect it for me and tell me why the bathrooms all have to be on one side of the house, and this, and whatever.
So I then was like, “Oh, when I was little, I used to draw floor plans for fun, and I used to ride on my bike all through the neighborhoods. Anytime I saw a house for sale, I’d always pick up all the flyers, and I’d go home, and I’d spread them out, and I’d literally comp them without even comping them and trying to figure out why one was worth more than the other,” and I was like… I lived in the poor neighborhood behind a really, really nice neighborhood. It was one of the first dreams, and so all the houses were really awesome, which is probably why I wanted to look at the flyers. Then, even if there was an open house, I was a kid, and I’d put my bike to the side of the road and walk in. They’re like, “What is this kid doing in here?”
So I just realized I had an interest in real estate and that it fit how I wanted to make… had the opportunity of making passive income, working for myself, being self-employed, and so I just was like… At this point, I actually don’t know anyone else in construction or real estate. My dad had retired, and my grandparents had passed. So I just was like, “Okay. I’m going to go online, get my license, and move back to Washington where I know people, and start from there.” So, literally, three days after I moved back, I was at my cousin’s wedding, and I met my mentor, Tarl Yarber. Maybe you guys have heard of him. I actually sat across from him at the rehearsal dinner, and so it was one of those moments where right time, right place, and he was talking about how he flips houses, and I started getting really excited because I was like, “I don’t know anyone who flips houses, and here’s this guy right in front of me. This is what I want to do.”
So I played it cool for a while, for a couple days, the wedding, his destination wedding. Then, right as he was about to leave, I was like, “Hold on, hold on.” I was like, “Can I get your contact info?” He’s like, “Yeah. What’s up?” I was like, “I’m going to work for you. When can we meet next week?” So we ended up meeting next week at a Starbucks, and I was telling him what I want to do. I was like, “Hey, I’m not working. I can do this full-time with you, whatever you need.” So I just started assisting him because at that point, he was flipping 20 to 25 houses at a time just him, and so that was a lot. He was like, “You know what? I actually need some help,” and he really did. So I jumped in and just started helping with everything. A lot of it was choosing the finishes at first because he was really not design-oriented, and then we pretty much had no systems in place. We were writing scope of works on Word documents and really-

Ashley:
Wait, that’s not what you’re supposed to be doing.

Serena:
I mean, you can, but… I mean, not Word document.

Ashley:
Yeah. I know what you mean.

Serena:
Not pages on Word. I’m talking about one page Word doc for a whole house remodel, and the thing was it’s like it’s because at that point in the market, it wasn’t… Contractors weren’t really busy, and so he would leverage the contractor and the agent that was going to list the house and had them work together. He trusted both of them, and that ended up working for him. But as he got busier, and with more projects going on, and then how contractors were getting more busy as the market was getting… There was more demand for them. They weren’t going to take the time to go and plan the house. You need to tell them-

Tony:
You got to do that legwork for them, right?

Serena:
Yeah.

Tony:
This is so much good information, but I just want to pause for a second because there’s so much in this story that we got to circle back to. So I don’t know how many times you and I have talked, and I never knew that you were in a country/rock band, so that’s something we got to… We got to talk about that offline a little bit, but we also interviewed Nate Robbins. I can’t remember which episode he was, but if you guys just go back up… 326. All right. So you guys go back four episodes, you’ll hear Nate’s episode. You, Nate, and Tarl, this trifecta that manages this massive flipping business, and now events and all these other things together, but it all started by these just chance interactions.
If you guys go back to Nate’s episode, Nate was working in a bank, and Tarl walked in, and it was through that conversation that led to something. You and Tarl sat across from each other at a rehearsal dinner, and the relationship grew from there. The reason I bring that up is because I think for a lot of our rookies that are listening, you might oftentimes or every once in a while also find yourself in a position where you might be sitting across from someone that could potentially change your life, but you have to have the courage to take that opportunity when it’s presented to you. Certainly, you very much could have had that conversation with Tarl, let that weekend pass, and then never said anything to the guy, but you said, right before he walked off, “Hey, hey, hey, I’m going to work for you. Let’s figure this whole thing out.” I think that’s the level of courage should it takes. So my point to my rookies, if you’re listening, when that opportunity presents itself, you’ve got to have the courage to take it because it could pass you by.

Serena:
Yeah. No. Absolutely. I also want to note. I came from a place of… I’ll just jump in. “I don’t want to cause any more work for you. What can I do today that will just alleviate any stress for you?” Because a lot of times people would come to us once we were established and was like, “Hey, is there a position for me, or what can I do, and dah, dah, dah?” I was like, “If I have to think about this that hard, you’re actually adding work for me. I’m not ready to hire anyone.” So it’s like when you do find a mentor, and we can touch on this a little bit later, some advice on getting started, but let them know that you’re here and really be assertive, and going, and intuitive like what they need, and then try to fill that as soon as possible so they can see the value that you’re going to give them so that they want to invest in you.

Ashley:
What was that for Tarl, and how did you figure that out with him? Was it just picking up on things at the conversation at the wedding?

Serena:
Well, I think it started in our conversations, and then I went… We met at a Starbucks, but then we went and started walking properties, and I figured out right away that he just needed help keeping everything organized in his mind because he’s got so many projects going on. It’s like when you’re project managing and you don’t have systems going up, you’re really flying by the seat of your pants. When you don’t have other team members, you tend to keep all of the information in your head and not put it down. Well, now, you’re adding the second person that needs to have information, and so I just started recording as much as I could, information, and started organizing that for him. He would call me throughout every day and say, “All right. Run through what I need to do.”
So I was just like the sounding board where I was at the computer doing some tasks that he needed, started analyzing properties. I didn’t even have my license. I didn’t even have access to MLS. So I’m literally analyzing through the Zillow and whatever the best I can and at least giving him like sending him some sniff tests on deals, but I would be recording where they’re at in the construction process, what they need to do, keep all the tasks organized, so that way, he’s on the road calling me, “Hey, run through the priorities right now.” So that was, in the beginning, where the value was, and then just continuing to organize from that so that we could be more effective and efficient.

Tony:
One thing that makes me think of Serena, we recently had Mike Michalowicz in the podcast as well. Gosh, guys, I should be better with our episode numbers, but anyway, I’ll figure it out. I’ll say it, but Mike came on, and he talked about his book Clockwork. One of my favorite books that I’ve read in the last couple of years, but it ties into what Serena is talking about right now. She said that Tarl was managing 20 plus flips by himself, which is insane, but when you are by yourself, you don’t have to systematize everything because like you said, it’s all in your mind. But the second you want to bring somebody on, now you’ve got to go through this pain of taking all this tribal knowledge that you have and trying to download it into this new person. So, for all of our rookies that are listening… and believe me, I made the same mistake in my business as well. The lesson for all of our rookies that are listening is that even if you just have one property, if your plan is to scale up and to buy more, focus on those systems and processes on day one because it’s so much easier to build out SOPs. It’s so much easier to get your processes in place when you have one property than when you have 10, or 20, or 30, or 50.

Serena:
Absolutely, and when you get to that amount of properties, all of a sudden, you’re like, “I need someone now,” and then you have to pause, and then your projects delay, and then the training process. So, honestly, one of my biggest things that I tell new investors is just start recording information. The whole systems and processes label can sound really scary, and it’s super complex, but keep in mind the best systems are super simple to use. Right? One of the first systems that I put in place for Fixated, our company, was somewhere where we could all access the lockbox codes. It sounds so simple, but I would show up to a property, and then all of a sudden, the lockbox code had changed, and I’m trying to call Tarl, and then he’s not answering because he has a meeting, and I’m just sitting there for an hour. Right?
It’s just such a time wasted, same thing for him, and so I was like, “I’m going to find a centralized place online, so Google Sheets, Smartsheets, whatever it is, where we can put the address, the lockbox codes, the entity names, and who’s driving it that week.” That was one of the first systems we ever made, and it saved everyone so much time, and we just elaborated from there. So I’m really big on centralized information, and start that from day one. I hate doing something twice. So if you find yourself keep trying to look up information, it’s taking you a long time, then that’s your cue that you need to put a system in place.

Ashley:
Or relying on someone else to give you that information via text or whatever. Text messages go through so fast that something Tarl told you last week as with the code boxes, having to go through back text messages, scrolling, looking for that piece of information.

Serena:
Then, we added location of lockbox because that was a thing, too. It was like, “Cool. Lockbox. 1, 2, 3, 4,” but I’m walking around the whole house, and it’s on the neighbor’s fence on the right side like behind the bush. So, yeah. Like I said, really simple system. It saves a lot of time, and time is money.

Ashley:
So once you started putting this together for Tarl, what was your actual position with him? What did you bring to the team? What does your role look like now, and how long have you actually been doing this?

Serena:
Yeah. So I started with Tarl back April 2015, so over eight years ago. At that point, it was really just assisting him in anything he needed for the projects, learning… biting off more and more as I was learning, and then I became an agent. So then, I could help him analyze deals better by using the MLS, and I also split my time at that point actually becoming an agent full-time and then also helping him. I started putting finished packages together. So with the design, and the market increasing in demand, and housing prices increasing, and doing a little bit more higher-end stuff, we needed to be much better at picking the design, and the finishes, and the floor plans, and so I took over making the design packages, and then also driving the properties once a week, and reporting back anything for him, coordinating some of the finished stuff like cabinet people, and that’s where it started.
Then, as it evolved, I started taking on some of the project management, and then over the years, I pretty much ended where I’ve taken over all of the project management, managing all the contractors, making the scope of work, managing our coordinator and material orders, and just pretty much getting the property from A to Z. Also, I confirm the underwriting because I’m the part of the team that has to get the property from acquisition disposition and make the business plan work, and so I’d sign off on the underwriting for that because I was the one closest to the numbers. Construction costs are constantly changing, and I was the one that knew that the most, so Nate would send me over the projects and his underwriting, and I would do the stamp of approval. So then, we would go into construction, and then I’d list them on the backend and disposition, and get them sold so we can make some money.

Tony:
I was just going to say, Serena, so you mentioned… You’re throwing some phrases around. I just want to break them down for our audience here. Define acquisition and disposition for folks that aren’t super familiar with those phrases.

Serena:
Yeah. Acquisition, buying the property, and then disposition, selling the property. So we would do, mainly, fix and flips. We’ve done probably a quarter of the deals that we’ve done together, our BRRRRs. So we’d buy them, we’d rehab them, then we’d rent them out and refinance. So our “disposition” would be that we are now renting them out and turning them over to a property manager. But yeah, acquisition would be sourcing the deal, running the numbers, making it make sense, which is underwriting, and then acquiring it and putting it in our name.

Ashley:
So I want to go further more into your project management role such as how you’re estimating rehabs, how you’re hiring contractors, how you’re managing the contractors, how you’re managing the rehab. So let’s just start with the estimation and deciding what materials you’re going to use, and walk us through what is the best process that you have put together for this.

Tony:
If I can jump in before you answer that, Serena, I just want to let all of our rookies know. Ashley, Serena, and I spent a day together. Maybe that was a little over a year ago, and we got to walk with Serena through a few of her projects, and Serena is like a savant, like an encyclopedia of project management for flipping houses. I love James Dainard, and I feel like you and James, when it comes to managing a rehab, are neck and neck with each other, so you guys are-

Ashley:
Except Serena’s process is-

Serena:
God, I was like, “Wow, that’s the most complicated [inaudible 00:21:00].”

Ashley:
If you see the difference of their templates, and worksheets, and actual computer screens, Serena’s is way more detailed than James’ is.

Tony:
Yeah, yeah, but I think even for me, Serena, before we even get into that piece, I feel like people can sometimes feel overwhelmed, especially if this is your first time doing this. So if we can even just start there first, like how do you… I’ve got this old beat-up house my first time doing this. How do I even take that into like… How do I not get overwhelmed, I guess, by looking at the start of this big project?

Serena:
Yeah. The first thing that comes to mind with that, putting myself in their shoes, is rely on… Work backwards. Start with the comps. The comps are king. You have an example. So the comparable houses that you need to achieve, you’re after remodel value. That’s what you’re going to reference in a map of what to do with that property, and so when you are in the… Planning starts during acquisitions because you have to think, “Okay. What’s the strategy for this deal? Am I just putting new carpet in, and I can sell it that way, and that’s what makes me a good deal, or are we going all the way down to the studs, putting in all new electrical, plumbing, whatever?” It’s, “What value do I need that project or that property to get to in order to make sense for my deal?”
So if you’re feeling overwhelmed with the amount of rehab, then maybe that’s not the project you start with. But if you’re like, “Okay. I see the finished product of what it needs to be, and now the house is in this state right now. What’s the difference in that?” well, that’s your scope of work, and then anything that you need to fix to make it sellable. So, yeah. Comps are king. A lot of people will buy houses, and they’re like, “I want to make it so cute. I want to make it like HGTV. I want to…” They end up overdoing it, and it’s like you don’t have to. Don’t get emotional. Don’t get attached. Don’t worry. There’s going to be houses where you can get super excited about as you grow your business, and you invest more capital, and do higher-end deals if that’s what you want to do. But today, this is still a business, make sure that you’re not investing too much in it. So that’s my answer would be just comps are king. Always rely on those for your initial direction.

Ashley:
Now, you’re using a lot of the same materials for each flip. How are you tracking this? How are you deciding as to what material, what toilet you’re going to use, or what paint color you’re going to use? So you talked about looking at comps, but once you’ve decided what your ARV is, your after repair value, what’s the next step for you to actually build that scope of work to build that budget? Do you have information that you’re pulling from? How are you knowing what estimates are going to be, all of that? What’s your best advice for a rookie on how to do that?

Serena:
Yeah, so I would say… So building out a scope of work, really, the way that we structure it is we’re going to go… We have everything like exterior, interior, and we just label out a lot of it, like materials and labor for some of the things, but also… Honestly, if you’re just starting out and you really just don’t even know where to start, you’re like, “The fascia looks like it’s bad, but I don’t know,” one of the things that-

Ashley:
Wait. Can you explain what fascia is for anyone that might not know?

Serena:
Fascia. Sorry.

Ashley:
I mean, that’s one thing right there that… It was a long time before I even knew what that was.

Serena:
That’s true. Part of the siding. If you see part of the siding underneath the roof, side of the house, it looks like it’s rotting a little bit, but you’re like, “I don’t know. Is it okay if I just paint it? Do I have to replace it? I don’t know.” Honestly, one of the things that we used to do when we weren’t as knowledgeable about construction would we’d hire a home inspector. Yeah, it’ll cost us a couple hundred bucks, but we would ask them, “Hey, I don’t need a report. Can you just walk it with me, and I’ll make all the notes?” just so maybe they’ll give you a half price or something because they don’t have to spend time making a report.
Go through with them, and then they’ll point out all of the defects of the house like, “This…” Tell them your intention with this house, “I need to fix it up to be like this. Can you help me identify things that I must fix for this house?” Then, that should cover then some of the more structural items where then you can look at the comps, and then decide for the finish level and the design items. Right? If all of your comps have quartz, or granite, or stone countertops, and that’s the level of finish you need to get to to get the value that you need for the deal, then you’re going to put in… that’s what you have to put in.
The other thing is walking with a bunch of contractors and having them give you a line item estimate, and that’s also going to just give you more and more information. Ask questions. Contractors love to talk about construction, so you’re walking… and they love to show you that they know what they’re talking about. So if you walk with them and go… Trust me, you don’t need to know everything. I didn’t know everything by no means. Even though my dad was a contractor, I didn’t know a lot about construction. I didn’t know what fascia meant either, but I’d walk with them. A lot of times, they’re like, “Well, this needs fixing,” and I was like, “Oh, it does?” in my head. They’re like, “What do you want me to do with this?” and I go, “Well, what would you do?” Then, they’d answer, and then they’d give me a few options because they love to talk about what they love… They love to hear themselves talk, so I’m like… and then I go, “Okay. What’s the most cost-effective of those?” and they’d be like, “This.” “Is it going to look okay?” “Yeah.” “That’s what we’re going to do then.” Right?
So contractors will be your friend, for sure, and also, hiring the home inspectors or going to meetups, creating relationships with other investors. Maybe you trade off, “Hey, I’ll go walk your properties once a week, do reports for you, take pictures for you if maybe you can just walk a couple projects for me and help me build a scope of work or something.” Right? Our investor community, we found, in Seattle was so supportive. I know that’s not everywhere in the US, but we know how the world it is out there especially to learn, and no one got to where they were without the help of someone, and so there are people out there that are willing to help you and want to see you succeed.
So getting that information and like, “How do I even build a scope of work?” that’s going to be your starting point. Going back to the technical side of it is we used to… We started with Excel or I guess Word doc, and then Excel, and then we moved up to Smartsheets. From the first scope of work that you create, have that be your template. Start a template from day one. Right? So we’re going back to that whole don’t have the information in your head and keep it there or repeat the wheel over and over. Again, if you make a scope of work, use that as the foundation for a template and just continue to build on to that, so that way, when you go to make another scope of work, you’re not starting from zero. You’re going to save a lot of time.
The way that we ended up figuring it out was that we wanted to start with a template, scope of work, on anything that we’ve ever done on a project. Anything we could ever do with a project, even like removing a car, removing an RV, whatever it was, we made a massive list of whatever and built on it. Don’t get me wrong. We didn’t start that from day one. We built on it as we’re doing more projects, so that way, we could just take that list, and then delete what we don’t need from any new project so we didn’t miss things. The reason why we started doing that, which was years later, by the way, was because I can’t tell you how many times I forgot to have the contractor put in a dryer vent. So a dryer vent is where the dryer exhausts to the outside, and we don’t really put in a washer and dryer into our flips. We have the buyers buy them, but we at least put the hookups, obviously. But a lot of times, the dryer vent, that actually goes in the wall, but you don’t think about it until the end of the project, really, and so-

Tony:
So what you guys have to do, like cut the drywall?

Serena:
You have to cut in sheetrock. Yeah, we’d have to cut in drywall and put it in, and I can’t tell you like when… three or four times, and it’s at the end of the project, or it came up in inspection, “There’s no dryer vent.” I’m like, “Oh my God,” and then we look like idiots to the buyers, right?

Tony:
Yeah, but mistakes sometimes are the best teachers, right? We had a similar issue where we rehabbed a home, and our crew didn’t put a P-trap into the drain in the shower, and it was causing the smell to come back up out of the sewage. We were like, “What the heck is going on?” We had to send all these plumbers, and one plumber finally found the issue that it was a P-trap. So now we make sure. Anytime we’re doing a flip, we go, “Did you put the P-trap in there?” You know?

Serena:
Yeah.

Tony:
It’s those experiences that teach you that.

Serena:
Yeah, 100%, and I bet the plumbers go, “Well, duh, I put in a P-trap.” My answer to that is I never assume. Never assume. Also, the biggest tip here, never assume that something is going to be done. Always over-communicate. Even if it ticks off your contractors, you let them know, “I never assume. I just want to communicate with you.” Yeah, that’s how we started that process with the scope of work is we just started missing small things, and it’s like, “I’d rather start with something big, and then delete what we don’t need.” That would make creating scope of work so much faster too for us.

Tony:
[inaudible 00:31:48].

Ashley:
I want to tie that into how you were talking about getting a friend or another contractor to walk with you and help you out build that scope of work. I think one really big thing is don’t rely on that person to build the scope of work. Go and do it yourself, and have them look at it, and see if there was anything you missed as a second set of eyes. Don’t ask a friend from a meetup or somebody you met to help you on it and be like, “Can you build the whole scope of work? I have nothing.” Have something prepared for them to present to them to look through so it doesn’t take up a ton of their time. They can just maybe point out something you missed like a dryer vent. We had a project where a contractor used the old wax seal on the old toilet, put in a brand new toilet, put in brand new tile floor, but used the old wax seal, and we had the same thing. The smell was coming up, and it was because the old wax seal in there.

Serena:
Yeah. The other thing for scope of work that’s really, really important that we learned the hard way is that be very specific in your scope of work. So what we would do is we’d have one column for the label, like just drywall. But then, we’d have an information, description column next to it to say, “Replace drywall A, B, C areas,” or like, “Repair everything to this level of finish.” Right? Be really specific because if you just put “Repair drywall,” legally, that contractor would be like, “I repaired the drywall over here,” and they’re like, “Well, what about the drywall over here?” or, “Well, that didn’t look like it needed to be repaired.” So be really specific in your descriptions in your scope of work, so that way, if… You don’t want to assume every contractor is going to be a bad apple, but there are ones that will take advantage of you, and so you need to make sure that you protect yourself in that verbiage. Yeah.

Tony:
Let me ask one follow-up question on the scope of work. I want to get into the contract and the payment schedules. I guess this ties into it, but are you having… and Ash, I’m curious of you as well, but are you having your contractors sign the scope of work before the job starts? We’ve had some issues in the past with some contractors where once I asked them to sign the scope of work, they just ghosted me, which is probably a good sign that we didn’t work with them. But I guess what’s your process for holding contractually the contract, the scope of work?

Serena:
Yeah. Absolutely. So my process is I create the scope of work off my template that I’ve already used, I delete what they don’t need, I make sure that the descriptions match what’s actually needed on the project, and then I export that into an Excel, and I have them bid right off of that Excel.

Ashley:
So they’re going and filling in the line items for each amount?

Serena:
Yep.

Ashley:
Okay.

Serena:
Filling in the line items, and to be honest, the contractors love that because it saves their time. They don’t have to type up a scope of work on their estimate because you’re like, “I want a detailed line item estimate.” That creates so much work for them, and it might not be in the verbiage that you want. So we would control the verbiage, and then at that point, they’d give us the Excel sheet back with their numbers on it.

Ashley:
It’s so easy to compare then, too. Yeah.

Serena:
Then, I could compare apples to apples so I’d be able to make decisions quicker, or I’d go back, and then we’d talk about it. We’d negotiate. That would also help me. On that scope of work template sheet, I also had my unit costs so I could go and plug in quantities to create a detailed budget. I’d obviously delete that before I send it over to them, but that would also help me understand how to change those numbers if I needed needed to. If costs went up, labor went up, or something, then that makes me be able to revise the template. So, anyway. So I create the scope of work, export it to an Excel-

Ashley:
Hold on, Serena. Before you go on, I want to really highlight that as to how you are tracking what the going rate is for different labor in your area and in your market. I actually remember. Six months ago, a year, or whatever, you had told me that you were working on updating everything because everything had changed so much in the market [inaudible 00:36:08].

Serena:
Yeah, every three months. Yeah.

Ashley:
You’re like, “I’m spending my day going through and actually updating pricing for what the painter costs per square foot and all these different things.” I think that is something very simple, that information, to just start gathering as you’re getting contractor estimates in for each project and just slowly keeping that information together. It’s just going to help you become better and better at building more accurate estimates.

Serena:
Yeah. Absolutely, and I just want to note. Some of you might be thinking, “Oh, how do I budget a unit cost?” Right? Because carpet has a different unit than square footage for paint or however they’re going to… the contractor is going to bid it out. A great book to read is Estimating Rehab Costs by J. Scott. He lines that all out and how contractors do their estimates. Yeah. So that would really help is like I control the format of that, so that way, I can compare apples to apples and update my templates. So that way, when I’m going through and confirming during underwriting before we buy the property, I have the most accurate numbers that I can predict that I’m going to get when I finally get the estimate back from the contractors.
So then, at that point, contract related, I have the scope of work in the Excel format with their numbers, we’ve agreed on it, and I’ll save it as a PDF, and I’ll attach that to a contract that we have that lines out, “Here’s the property. Here’s the owner. Here’s the contractor that we’re going to use. Here’s the estimated… or Here’s the deadline date that they’re going to be finished with. Here’s the deposit amount they’re going to get, how they’re going to get draws.” Draws are partial payments towards the total payment, and what happens if we want to split ways, and then we’ll also do a penalty per diem, like $125 a day if they go over their completion date.
So all of that verbiage that we need. It’s just a couple pages long contract, and so I’d attach that PDF to that contract, and then I’d also attach our finished packet that I would create with all of the materials that we’re going to use and for them to order. Then, also, if we have floor plans as built, which is the existing floor plan, and then the proposed floor plan, and I’ll attach that all together in the same PDF, and I’ll have them sign the contract and initial each page of all of those pages, so that way, it’s binding.
The best part is that the scope of work is in our verbiage, so we control anything. If there’s any dispute on… There’s no miscommunication at that point. To be honest, what Tony said is he’s had contractors that haven’t wanted to sign that. Well, that’s a red flag because contractors should want to get into agreement where both parties are on the same page and they’re happy with what they’re signing and moving forward in a partnership.

Tony:
Yeah. Serena, so much gold there. Everyone that’s listening, you’re probably going to have to go back and replay this episode a few times because there’s so many nuggets in what Serena is saying here, but yeah, that last point you made about it being a red flag, 100%. Absolutely true. I guess one last question. So you’ve got that all laid out, but in terms of actually paying out the contractor, are you walking the property with them to say, “Hey, these milestones were met. I’m going to release this draw,” or how were you actually validating the work is done before paying them?

Serena:
Yeah. Absolutely. So different contractors require different deposits and payment schedules. So if you’re working with a general contractor, we typically wouldn’t give them more than 20% deposit, but that’s not a hard rule. If they have to purchase a lot of materials upfront and you can look at your scope of work to determine that, say, maybe they’re redoing all the siding that’s going to be heavy upfront cost to them, then we might increase that a bit, but we would do draws on completion. So we, our team, what our process was is we’d walk the property at least once a week, and we’d take full pictures, at least 100, 150 pictures, and then we’d upload them into Dropbox. You can also do Google Drive, and we’d review those pictures.
So whether it was me walking through and deciding the completion and feeling uncomfortable for them to request a draw payment, then I would allow that, or I would do it from all of the pictures, so from afar, and then confirm, “Okay. This completion seems about right,” and we would have them do equal draws for the remaining. Then, if we had permits on the property, and so we needed to have final inspections, typically, all the construction is going to be done, and then you have final inspections. The inspections might come back with corrections that are needed to be made. Even if the scope of work is technically done, we would withhold about 10% until everything was finalled, all the inspections were finalled. So that way, we still had leverage over them, something to use, because if you pay them too much too fast, then you have no leverage. They’ll just leave, right?
The other thing is that anytime that you have a contractor bidding, if you think that it’s too low, then really consider that as well because we’ve had contractors that they were good contractors, but they didn’t know how to estimate, and so sometimes we’d get things back and be like, “This just doesn’t seem right. This actually seems too low.” Instead of going, “Woo, we got a deal,” I just want to let you guys know that that can cause problems in the long run because they might run out of money halfway through your project, and if they run out of money, they’re going to have to go find other jobs and work on other jobs, and then let your job sit, and they may not even be able to ever come back. So just keep that in mind down the road.

Ashley:
So you’ve mentioned a lot of things that you’re doing to track this rehab for each project. Can you go through like, “Here’s the different templates I have,” and the different softwares you’re using? What are the things that rookies should be creating? You mentioned scope of work. What are some other types of templates they should be creating and use to work from for every single rehab from start to finish?

Serena:
Yeah. So I’ll go through our platforms first. So we always use Dropbox for our file storage. So what we would do is… and everything is a template. The second that we’re purchasing a property, we would go into Dropbox, create a folder for that project, and then have these same uniform folders for everything. We’d have our Analysis folder, which all of our acquisitions, our P&L sheet, anything having to do with the deal, the comps. Right? Comps, P&L, anything that has to do with the deal. Then we’d have the purchase docs. We’d have our Rehab folder. So all of our contracts are going to go in there, our bids that we’re going to collect, invoices, whatever.
Then, we have our Rehab Pics, and in that folder, we would label each time that we would drive the property and upload pictures. We’d label it the date, who took the pictures, and the status of construction that it was in. So it’d be like, “April 1st, this date, Serena took the pictures, and electrical rough-in completed.” So, at that point, we could go back and go, “All right. I’m trying to find… I need to see in the walls. We’re at the end of the project. I need to go find where an outlet is because it’s hidden in the drywall.” So now I know instead of sifting through hundreds of folders of dates and stuff, I know, “Oh, electrical rough-in. Right there.” That wasn’t perfect from day one. I did that a lot until I realized, “Maybe I should label these folders in the order of construction.”

Tony:
Some organization, right? Let me ask. Just out of curiosity, is there a reason you went with Dropbox versus Google Drive?

Serena:
Honestly, Google Drive wasn’t a big thing eight years ago, so it was like-

Tony:
Yeah, that’s true.

Serena:
Because we started that process way back in the day, and so Google Drive works just as well. So we’d have Dropbox. That’s where… all of our file storage. Anytime I got a bid, whether we used it or not, I put it in the Bids folder. Every invoice, we put it in the Invoice folder. Then, we’d have also our plans. So that’s where we’d keep our floor plans, finished packet, our safe scope of work. So that’s one platform we’d use for our file storage, and all of our team members had access to it.
The other one is we use Smartsheets. So Smartsheets can be a bit pricey, but if you plan on doing multiple projects, it’s something to invest in. That’s where we’d build our scope of work and budget template. So, we had that. For those of you that don’t know Smartsheets, it’s pretty much just a really high-tech Excel. So we’d have our scope of work and budget template within that. Then, we’d also have this sheet called Our Accounting Hard Costs, and that was pretty much it, just an ongoing… any expenses for that one property. The second you purchase something, the second that anything is paid, it just goes in there, and so-

Ashley:
Was this something that was then sent to a bookkeeper who actually formally entered it into QuickBooks or something?

Serena:
Yeah.

Ashley:
Okay.

Serena:
Exactly. So our bookkeeper had access to that sheet, and she would audit the accounts to make sure there wasn’t any fraudulent activity, and making sure it was all balanced, and then she would then input that into QuickBooks.

Tony:
Gotcha.

Serena:
Yeah.

Tony:
So she was using that spreadsheet to reconcile against the bank statements or whatever to make sure there weren’t any transactions missing or anything like that?

Serena:
100%, and then at that point, our whole team at any point could be like, “Hey, was this contractor paid?” I don’t need to go and call Nate/Tarl for that or my assistant for that. I can just look it up and see if it’s paid. Right? So a lot of these systems that we’ve created, these centralized information places that, that’s what I like to call it, limits the amount of time I have to communicate with my team members because the more time we have to pick up the phone, and call, and we’re waiting for information ever… It just takes so much time.

Ashley:
I never want to talk to Nate and Tarl either. I totally get it.

Serena:
Honestly, at the end, people are like, “Do you talk to Tarl all day every day?” I’m like, “I haven’t talked to him in a week.” We just wouldn’t talk and we… So, yeah. So we have our scope of work and budget sheet, we have the accounting hard cost sheet, and then I also have a finish package template. So the finishes are going to be the types of doors, the door hardware, the countertop cabinet, tile design, whatever, and the same process as the scope of work. I just started as, “I need to make a template. Okay. I’m going to start with this project, and I’m going to put, okay, what it is. Exterior door, what the description is, where to get it, and a picture of it, and then I’m just going to… Anytime we have a project, I’m just going to add this in to the template.”
So, eventually, I just built this massive template of all of these materials, and I could just go shopping. A lot of times, we would redo the same finishes on each house. So when I’m in the planning phase, and I figured out what a scope of work is going to be, I’ve looked at the comps, I figured out the level of finish that we need to… what type of materials we have to put into it, I’d pull up that sheet, and I would just select what I wanted, “going shopping,” and then I would export it into a PDF. That’s something that my team could reference, the contractors can reference, I can reference, and that would be something that we’d also attach to that scope of work within the contract.

Ashley:
Serena, I’ve heard you talk about this sheet a ton of times, so Daryl and I actually built this out, the materials list. One thing we did is that we would just link the actual product in there. So we did flooring, here’s the types of flooring, we’d link it in there, then we actually hired a virtual assistant to actually take the data from the link and actually fill out the other six columns or how many there were, and that was so much faster.

Serena:
Look at you. You’re better than me. I didn’t have that. I still do it myself.

Ashley:
At first, I was like, “I cannot sit here and do this. This is getting so much data.” I’m like, “This is awful. My fingers are…” So then, we just did that, and it was so cost-effective, and somebody could do it way faster than me that has a better attention span, I guess. Yeah. You just go to Upwork and search, “This is what I need done.” You’d show a screenshot of your template, and do a Loom video of exactly how to pull the information, what information you want from each link, and have it all filled out. Yeah.

Serena:
I also like keeping… Now that I’m thinking about it, I actually should have had the link. I’m going to add the links to the product within that PDF because I used to put the pricing down in for each line item, and then I’d give it to the contractor. But if I didn’t have that pricing updated, and they estimated right off that, and they’re responsible for buying the material, but then they go to Home Depot, and now it’s gone up $10 per door hardware, they come back to me, and they’re like, “I need more money.” Now, I’m like, “Well, shoot. That wasn’t what was in the projection.” So I said, “I’m going to delete all the pricing,” and they’re going to have to just be responsible for looking it up. If I put the link in it, they could just click it and do their own quicker research, but yeah, that was a thing. It’s like don’t put the pricing.

Ashley:
That’s one piece, too, yeah, that we struggled with this. If it changes, it goes on sale, or whatever, even like it’s discontinued is having to go. So maybe that’s something, even like hiring a VA every quarter to go in or whatever, and just all you have to do is make sure these links are updated.

Serena:
Yeah, that was one thing we would do periodically every couple months is I’d have my assistant go through and make sure everything was updated on the scope of work, prices. So I wouldn’t put the prices on the finish packet because that’s what the contractor is referencing when they’re estimating, but at least for… If there’s a door unit cost on our scope of work budget and they’ve gone from $260 to $350, I want to know that. So I’d have her do that.

Tony:
Serena, one question I want to ask was you’ve got these systems dialed in to really high level of detail, and I think one belief, maybe a limiting belief that a lot of people have when it comes to flipping homes is that you got to be there to walk the properties, you got to be there to shake the contractor’s hands, and make sure that you’re checking on their work. Is that true, or is it possible to do this remotely as well?

Serena:
It’s totally possible to do it remotely as long as you have boots on the ground that are driving the properties at least once a week. So even if nothing changes in the rehab, say, it’s sitting there, we’re waiting for permits to get processed, we will still drive it every week because you never know if squatters are going to show up. All of a sudden, a pipe is going to burst. Whatever. You want to make sure that you also have pictures if anything happens that you need to go to court for. Not to scare you guys, but if someone breaks in, and you need to file an insurance claim or something like that, you now have a record trail.
So the blessing, the biggest blessing for being efficient in our business was the fact that both Tarl and I lived over an hour away from all of the projects that we did. So there was no way we’re going to drive two, maybe three hours in traffic to and from those projects every day or every other day. So we created these systems to be able to manage them afar. We’ll go down once a week, and we’ll take pictures once a week. Then, we trained our contractors that if they had a question, they text us a few pictures, they send us a video, or we FaceTime them, and we’ll get them the information that they need. Then, we also made sure that we had boots on the ground in that area, networking maybe newer investors that wanted to learn where if we really needed something, then they would help us out because we’re also contributing and helping them grow their business.
The other thing is we’d also have a handyman on-call where… Say a basement all of a sudden starts flooding and our contractor can’t get there that’s on the job or it’s not part of his scope, we need it clean up something after hours, and they’re just going to be too expensive to do it, they’ll go, and put bags, and check it out, or something like that. So in the beginning when we didn’t have systems set up, I was working six and a half days a week. Long, long fricking days, but mainly on the computer. I’d only drive the properties once a week. As you start setting up these systems, these templates, and getting really good at the planning in the beginning to get the contractors, all of the information that they need upfront, then you’re really just monitoring the construction as it goes along and problem-solving little things that come up that were unforeseen in the beginning. So, within the last few years, I’ve gone to South Africa for two months at a time while I have seven projects going on, for example, or I travel a ton at least once a month, and so-

Ashley:
You’re not even home right now as you’re doing this podcast.

Serena:
I’m not home right now. Yeah. Exactly, and having that freedom. Honestly, that’s why we got into real estate, right? So start today and building those systems, building those templates, and it’s… Like I said, they’re not scary. Just start putting information down on paper, and then figuring out how you want to organize that. If you’re not the best at that, then hire a VA that is good at organization, and then eventually lead up to hiring a team member that is. Then, I did realize that we didn’t cover another platform that we use that’s really important. Should I touch on that?
So we have Dropbox for our file storage, and we have Smartsheet for all of our data, like scope of work, costs, finishes, whatever. But then, we use a project management tool, like communication. We use Asana. So you can also use… I know Ashley use Monday.com, right? But very similar platforms, and we would create, again, a template, surprise, for all of our projects. So when we’d acquire a property even… Actually, there was a template for acquisitions too, making sure like, “You need A, B, C, D. Purchase things,” just to keep you organized. It’s exactly what you need, right?

Ashley:
Like you have insurance in place. You’ve got the electric meter, you know who the electric company is. Yeah. Account number.

Serena:
100%.

Ashley:
Yeah.

Serena:
So we just created a template for project management. So did we transfer the utilities in our name? Have we requested a bid from the general contractor? Have we done the floor plans? Have we done this or whatever? So that way, nothing goes missed, and then we’d also use Asana to communicate with each other. So instead of emails, texts, whatever, we would try our best to actually communicate with each other in that task that’s related to that item, and that worked really well for us. That’s also where we would manage our schedule of construction. Again, build it to however works for you and your team, and if you… The way that we laid it out is in the order of construction, chronological, how things needed, and that’s how it stayed organized for us. Yeah. I think that’s pretty much all of our platforms. I mean, QuickBooks for the accounting.

Ashley:
What about for the rental properties that you guys keep? What software are you using for that?

Serena:
I’ll try to elaborate on that. I honestly don’t do any of the property management at all, but I do think-

Ashley:
Is it AppFolio?

Serena:
AppFolio? I’m not sure. Actually, for acquisitions, Nate, he would use Podio as a CRM, but I was never in there. Yeah. I’m not sure actually what we use for our property management because I don’t want anything to do with that, so.

Ashley:
I guess before we wrap up, there’s one last question we want to ask you, and that’s, if you have to start all over, what would be some of the first things that you would do today starting completely over?

Serena:
I know. This is a tough one. I think [inaudible 00:58:21].

Ashley:
Start a new band?

Serena:
Yes. Start a new band. Honestly, if you’re out there really deciding like, “Okay. What asset class should I go into? Should I flip houses? Should I do short-term rentals? Should I do commercial, or what should I do first?” at first, consider the lifestyle that you eventually want. In the beginning, you’re going to work your butt off wherever you go, but imagine down the road the lifestyle that you want. What’s the liquidity that you need? Right? Do you need cash now consistently, or are you able to keep your equity in like you just want a longer-term hold?
I get really clear on that because wherever you go, whatever you decide to do, you should put your all into it to become the best at that before you pivot to something else, and then you could also help to become clear of what you need for other people in your community, so really defining… Just like you would define a buy box for a project, a property that you want to flip, become branded of like, “This is what I’m after.” So that way, people know how to help you so that when… and then also, the type of mentor that you’re looking for.
Like I said, no one got to where they got in this business without a mentor, and people do want to help you. It’s just that… Come to them. First, go to meetups, and the simplest thing that comes to my mind is if you want to get into house-flipping, but you’re like, “I just need to see to learn, and I’ll feel more comfortable,” just say, “Hey, how many properties you got going? Oh, cool. You’ve got eight projects going on. That’s amazing. Would it be helpful for you if I drove your properties once a week, took pictures in an organized way, I’ll take at least 150 pictures for you every week, upload them in the way that you want to be uploaded, so that way, you have them, you can reference them, and I maybe can take a drive off your plate?” Then, they’re probably like, “Yeah. Why not? Okay.” Right? But then go, “Then, would it be okay… If you’re going to meet a contractor there, can I just come along? I’ll be a fly on the wall. Can I just shadow you, see what you guys talk about, or whatever?”
Real estate isn’t hard, right? It’s not rocket science. The hardest thing is having the courage, the grit, the compassion to do it. Right? So by learning through familiarity, you’re going to feel so much more comfortable in it and realizing this isn’t actually rocket science. You see that needs to be fixed, you write down that needs to be fixed, you have someone give you an estimate of what that’s going to be fixed, and then you decide yes or no. Right?
So that’s where I started. Also, create systems from day one, so that way, when you do end up amping up and you need to add team members, the information is there, and it’s not all in your head, and then if… I would put healthy contingency margins. If you’re not really confident on your rehab costs and your analysis, just make sure you put some contingency in there so you’re not eating into your margin, and always follow the comps. Don’t get emotional or attached.

Ashley:
So where can people find a consultant?

Serena:
Huh.

Ashley:
But really, Serena, thank you so much for coming on and taking the time today to teach us all about this, your process.

Tony:
Yeah. It’s fantastic.

Ashley:
I know. I was writing notes. I could see Tony taking down notes too because anytime we talk to you about this stuff, I always learn so much information. So I’m sure every single listener has at least five takeaways that they can put into action today. So where can everyone reach out to you and find out some more information about you?

Serena:
Yeah. So, on Instagram, my handle is @serena.claire. So S-E-R-E-N-A-.-C-L-A-I-R-E. Also, you can email me, [email protected]. I love helping new flippers and people in real estate find their way. Yeah, that’s where you can find me.

Ashley:
Thank you so much for joining us. I’m Ashley at Welcome Rentals, and he’s Tony, @tonyjrobinson on Instagram, and we will be back on Wednesday with another guest. We’ll see you guys then.

 

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Property Chomp’s Take:

If done well, home renovations can be a lucrative endeavor in the real estate market. Whether you’re a seasoned investor or a rookie, implementing systems and processes can greatly contribute to your success.

In this episode of the Real Estate Rookie podcast, Serena Norris, a graphic designer turned full-time investor, shares her journey into real estate and provides valuable insights into project management and rehabbing properties.

Serena’s interest in real estate was piqued when a friend introduced her to the book “Rich Dad Poor Dad.” She quickly became obsessed with the idea of investing in real estate and decided to quit her job to dedicate her time to networking and attending meetups. Eventually, she found a mentor who guided her through the ins and outs of investing.

One of the key lessons Serena learned early on was the importance of organization and project management. She realized that her mentor needed help keeping track of various projects, so she took it upon herself to create systems and processes to streamline the renovation process. By recording information, tracking construction progress, and organizing tasks, Serena was able to assist her mentor effectively and efficiently.

When it comes to rehabbing properties, Serena emphasizes the significance of estimating rehab costs accurately. This involves thoroughly assessing the property, identifying necessary repairs or upgrades, and obtaining multiple contractor bids. By having a good understanding of the costs involved, investors can make informed decisions and avoid potential financial pitfalls.

Finding a reliable contractor is another critical aspect of successful home renovations. Serena advises investors to do their due diligence by conducting thorough research, checking references, and interviewing multiple contractors. It’s important to find someone who understands your vision, communicates effectively, and delivers quality work within the agreed-upon timeframe and budget.

Serena also stresses the importance of having the right systems, tools, and templates in place to effectively manage rehab projects. This includes checklists for each stage of the renovation process, templates for contracts and agreements, and software to track expenses and timelines. These tools not only help investors stay organized but also ensure that nothing falls through the cracks during the renovation process.

In conclusion, home renovations can be a profitable venture in real estate when approached with the right systems and processes. Serena Norris’s journey from graphic designer to full-time investor showcases the importance of organization, accurate cost estimation, and finding reliable contractors. By implementing these strategies, investors can increase their chances of success and make a serious profit on their properties.

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