5 Systems Every Rookie Investor Needs for Faster Rehabs and Bigger Profits

20:18Serena Norris:Over time, so over projects, I've created a super extensive scope of work and budget template. So I essentially have been anything that we've ever done to a project will go into that scope of work template. It becomes organized. So that way, I'm just working off of a scope of work template where I'm just deleting what I don't need instead of having to think to add what I do need.

20:44Ashley Kehr:Serena, is this like in Google Sheets, in a project management software? Where does this template live?

20:49Serena Norris:Yeah. So I used to use Smartsheets and now I've rebuilt everything into Google Sheets to be like an all-in-one. We were using Asana, Smartsheets, and other platforms and I rebuild it all in Google Sheets. You just need a Sheets, some sort of Excel platform to use this. And so the structure of that template is you'll have your item, your line item, and then the most important part is like you'll have your description, line item description. And what that defines is what needs to happen with that line item. I also describe the outcome of that item. I specify what is included in that line item. So if it's materials and or labor or both.

21:42Serena Norris:And then I'll put a quantity by it to give me out some numbers, some costs associated with it. But most important part is the description column. And the reason why is before when we used to just do our scope of works on Word documents, like literally bullet point, like this is, it would be like a one page bullet point walk with the contractor. So you get it? Cool. Like see what I see.

22:10Ashley Kehr:Serena, I have a question on the line item. So in this template, how are you breaking it down? Are you going room by room? So it's like the kitchen, this is the cabinet, or are you doing it by like the trade. So here's the plumbing section. Here's everything we're doing for the plumbing.

22:26Serena Norris:I do it by trade. Um, 100%. I do not suggest doing room by room. Um, the reason why is because I, I want to be able to, um, put a quantity next to each one and have it one place. I also want to have it in the format of the way that contractors think. So I can, if, if, if you're comfortable going through room by room and that's comfortable when you are on the property to make notes. But when you go back, I really, I highly suggest putting it in a format where you're going trade by trade. And so I'll, I have it in three main categories. You have like your initial services, which are going to be getting the property clean to even start construction.

23:12we have like initial landscaping we have reiki trash out demo making it like a clean slate so

23:20Serena Norris:contractors can go in and work then i have my all of my exterior and i have all of my interior and uh and then for all of the line items within there each category they are separated out by trade. So I have all my plumbing. I might separate out like plumbing and then like plumbing fixtures, but plumbing is all together. And then the light items within there are actually what's happening. So like plumbing install. And then my description is everything that comes with that. And the most, like back of the day, what we used to do, like for example, with drywall, that one bullet point would just be repair drywall that would be the only information we're giving to the contractor and then he'd give us some number back based on filling in the gaps and assumption he had and then he would execute and and then we would end up surprised why he didn't do it to the level that we were thinking of right and so what we learned is that that extra description in there instead of just saying repair drywall we are describing the outcome we want repair drywall throughout the entire house to make the walls smooth and blend in.

24:42Serena Norris:We want them to match the texture with existing. Or if it's like install a new drywall, we're detailing what level of finish that we want it. Or if you don't know the level of finish for it, then describe extremely fine texture or smooth wall, no texture at all. and then include materials. I like to split that up into two different categories. Is it design material, like a finished material or installation materials, and then labor? Who's responsible for that? So once that line item's complete, I always think about like, that is your contractual language. If you took it in front of like, say there was a dispute and you took it in front of like judge judy like who would she side with okay i wanted to make it like where there's like absolute like no um no question about what needed to be executed and not only does that create like apples to apples eliminates any sort of ambiguity or assumptions um but then it takes me out of the question they know exactly what to do they don't have to ask me another question about it.

25:54And eliminate surprise change orders on the back end

25:58Serena Norris:as well, if it didn't meet my expectation. So going line by line, making sure that all of those details are covered. And, and luckily, I know beginners are asking, like, I don't even know, like how to fill in that information. We live in probably the most easiest time we've ever lived in order to learn and gain information. Like use those tools, use ChatGPT and AI to help you with this. Google and ChatGPT can even give you a framework, a checklist to go through. And when you're walking a property, you know, it'll give you like, look at the fascia. Well, what's the fascia? Google what the fascia is.

26:39Serena Norris:Like these projects are your opportunity to learn. And I suggest creating like a scope of work to the best of your ability up to about 85 % and then start walking with contractors and just ask them to help you fill in the rest of the 15%. Get clarity on them. Ask them what they suggest. Contractors love to talk about what they know, right? So leverage that. Also, you can hire a home inspector. They don't know everything about construction, but they'll at least tell you what to look for, what buyers are going to care about on the back end as well. We used to pay that like a few hundred bucks to walk the property with us and don't need to report or anything.

27:27Serena Norris:Just point out what is going to be a defect or what I should look at. And that helps you put all of the pieces together and then you can start getting pricing.

27:37Tony J. Robinson:Serena, when it comes to contractors and you mentioned kind of relying on them a lot during this process, should a rookie investor, if they've never done a rehab before, should a rookie investor be working with a general contractor first, or would it make more sense for them to go directly to the subcontractors, like the actual tradespeople, the plumbers, the electrician, the folks doing painting and drywall and the millwork, or would it make more sense to work directly with the general contractor as a rookie? Yeah, I would say just to give some background on how, where I ended up was I would pretty much only hire a general contractor for about 30 to 40 %

28:24Serena Norris:of the scope of work and the rest that I would set out. One of the reasons why we need to do that was our market just to keep costs lower, but there is some learning curve because you have to understand the coordination between all of the subs. And the GCs who are hiring all of those subs, they fill in all of those gaps for the trades where the electrician stops and the plumber starts, for example, for certain things. So to answer your question in the beginning, absolutely go the GC route. And when you are analyzing, you might need to add a percent, 10, 15 % on top to when you're analyzing deals, just because GCs are going to be a bit more expensive, but they're going to help you do a lot of that coordination.

29:14Serena Norris:And you can also learn how to manage a job site from them in the process. I would say, though, vendors that you should always go directly to from day one, find a cabinet and countertop vendor and stay in control of that process the entire time.

29:31Tony J. Robinson:So that actually leads into my next question, Serena. You said you'll use the GC today for roughly 30 % of your overall scope of work. As they start to maybe mature, how should they make the determination of when to use the GC versus when to just set it out? You mentioned cabinets as one example, but just what is your decision-making process to say, keep this with the general contractor or sub this out to someone else? I would say if, okay, maybe it helps to

30:06Serena Norris:explain what that 30 % that I'll always use a GC4 is. So that's typically more on the finished stage of the house where there's a lot of overlapping processes for when it comes to millwork and doors install and paint and flooring and where that would be really technical for me to figure out how to schedule all of those contractors. And again, I am not a contractor and I don't want to become a contractor because I'm a real estate investor. And so if it's too technical and overlapping and I don't understand the process to it, then I will rely on hiring out at GC to coordinate all of that. Now, in the beginning of the project, when I started getting more comfortable of hiring electricians directly and then just communicating with the general contractor, if they're already on a job, hey, I'm going to be coordinating the electrician.

31:08Serena Norris:Can you let me know when you are ready for electrical rough-in? Can you let me know when you're ready for electrical trim out? And typically I only needed to schedule them twice. And so, and I felt confident enough in, to my dog's crying, confident enough in, in their scope and, and, and coordinating them that I could take that away. Because GCs, they will add about a margin on top, 10%, 15%, 30 % of that subcontractor bid just to coordinate them. And so you'll want to eliminate certain times. But it still needed to work within my system. So if it was simple, the coordination was simple, it was easy, and it didn't take up too much of my time, and I understood their scope, then that's when I would start taking it over.

31:59Ashley Kehr:Now, you said you might mark it up for a GC because they pay a percentage or cost a percentage of whatever the overall budget is usually. But what about, do you add any buffers or contingencies when you are estimating the cost of this rehab? Yeah, especially in today's market, please add in a rehab contingency.

32:23Serena Norris:Right now, labor pricing and material pricing are really variable. And what was nice from 2015, well, 2017 to 2021 is in most markets, they were really hot. So we're getting multiple offers, typically getting offers that are over list price. And so if we ended up going over budget and in part during the rehab, we'd be saved on that back end. But in most markets right now, it's not as hot. You might get list price, you might get below list price, and you might be offering buyers a seller concession as well. And so you need to have like your rehab budget as accurate as possible. And especially if you're newer, that's going to be hard for you to do.

33:19And so I would definitely add a contingency on top of that.

33:23Serena Norris:And you know what? If the project doesn't pencil with those numbers, then it doesn't pencil and move on because you need to protect yourself with it. And, yeah.

33:35Tony J. Robinson:And you mentioned margin and your initial budget, but once the rehab starts, I think this is where a lot of rookies kind of get punched in the face where they're like, I'm going to budget$2 ,700 for this full gut rehab. And it ends up costing 10x that amount or 5x that amount, whatever it is. But how do you make sure that once the rehab starts, assuming that you had a good budget to begin with, how do you track your actual cost against your budget to make sure you're not having any cost overruns?

34:09Serena Norris:Yeah. So I have my scope of work organized in a way where when I get a bill, like I can see what those costs and actually that excluding that scope of work and what that bill actually ties to. So I'm comparing apples to apples where, okay, here's my scope for all of the electrical that I need to do. I need to do a full rewire or I just need to change out these outlets or just move a few lits. That's all in one place within my scope of work. So when I get the bill from the electrician, like I can cross-reference those are. And over time, I developed like a cost tracking sheet that kind of like puts the costs like where what I've projected, what I have bid, and what I've actually paid out.

34:58Serena Norris:And it all balances kind of like a checkbook and then lets me know at any given time during the project where I am projected to hit my budget. For a long time, we didn't have that. A long time, it was random bills coming in. They don't match the scope. We couldn't track anything until it was near like almost the end of the project or after the projects ended and were paid everything out. And at that point, we don't have any control to pivot or bring back any costs. So my goal is that at any given time during a project, I know what my projected numbers are going to be. So if I need to choose a tile that's a little bit less expensive on the back end, or maybe choose a task that I know I can DIY, like Nate once had to do a short fence or something just to save up some money.

35:52Serena Norris:put on his work belt and build his events so he can stay within budget. You can actually make that decision at that time. So, yeah.

36:02Tony J. Robinson:So it sounds like the biggest mistake is that a lot of times folks are a little too retroactive in comparing their actual expenses against their budget, but doing it in real time gives you the ability to kind of stop, pause, reassess, and make changes as needed. Now, I want to get into, Serena, the actual tools, the software that you're using to operate all of these systems and keep your floats profitable. And we'll cover that right after a short break to your word from today's show sponsors. There are two kinds of real estate investors, those who have reviewed their insurance and those who think that they have.

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40:23Tony J. Robinson:Don't overpay the IRS. Head to costsegregation.com before April 15th. All right, welcome back. We were here with Serena, and she just talked through the systems that every rehabber and flipper should have. how to stay on budget. But I want to talk a little bit more about some of the tools and the software. So when you think about running your rehab projects, you're running your flips as a business, what specific software are you using? You already mentioned Google Sheets, but what else are you using on a daily basis to stay organized?

40:55Serena Norris:Yeah. So I used to use a bunch of different platforms and that worked for a while, but my dream was to have it more in an all-in-one place. So I was, you were going to need a file storage. So whether Dropbox or Google Drive, we use Dropbox because Google Drive didn't even exist back in the day when we started. And so file system, then you need a Excel-based system. So Smartsheets, Google Sheets, or Excel. I don't suggest Excel because you really want it to be able to update in real time, especially when you start adding different team members. And then you have to your task management software.

41:40Serena Norris:So we use Asana. I know Ashley used monday.com. That's going to be your task management. Use Podio for acquisitions. I know there's so many options out there now for that, for acquisition pipeline and CRM. Um, but honestly, I rebuilt the smart, my smart sheets and my Asana to be like all in one into Google sheets now. So that's what I operate within. So that way I just have one master Google sheet for each project that has like 10 or 11 tabs. And that's my sense. That's my centralized information, my project hub that I use.

42:22Ashley Kehr:So now that you have a place to organize documents, like your scope of work, invoice permits, photos and contracts, that's all in Dropbox. How are you kind of now connecting these systems? So connecting your Google Sheets to your Google Drive, to your Dropbox, to your task management software. Can you maybe give us an example of like one, maybe one little process and how it all implements and integrates together?

42:51Serena Norris:Yeah, absolutely. So now actually, instead of Dropbox, I'm going to use Google Drive because now I have the Google Sheets. So it's all within my Google. But then I can easily link them to each other. And oh, another system that I wanted to mention is that I use Chief Home Design Pro for floor plans. It's pretty easy to use. And it's like super capable. You can build like a whole house with it. But I use it for like, probably use like 2 % of what it's capable of to do the floor plans. And so, yeah, to tie them all together, of course, and within your Google Drive, each folder, you're going to have like links to all of your Google Sheets as well.

43:44Serena Norris:But yeah, I keep all of my files, all of like the contractor estimates within the drive. All of my once I'm done with the floor plans, I'm exporting them into a PDF on the drive. I very clearly highlight which ones are finals, which ones might be old drafts. I like archive those. So that way, like your filing system is really organized that imagine like if anyone went in and try to find something that didn't fully know or wasn't onboarded, they'd be able to find it. And building it all in one hub as well, like help just like organize that information in one place. And so I don't even really need to link it anywhere.

44:28Serena Norris:It's all together.

44:29Tony J. Robinson:Serena, I think obviously we've covered a lot here on what Ricky should be focusing on. And like I mentioned at the top of the show, I've walked your project with you. I've seen how dialed in everything is. And I appreciate you sharing early on how that was an iterative process for you didn't start off that way. But with each subsequent deal, it got a little bit better. But what piece of advice do you have for the Ricky listener who has no idea where to start when it comes to even potentially estimating the rehab, and what that process looks like? Non-negotiable is what you need in order to execute a project is a scope of work and you need your design and finish information.

45:13Serena Norris:I like to keep them separate because, again, I'm thinking about standardization. So my scope of work that I'm going to be you build from day one is your is your launch pad for a scope of work template that you should be using for each project. and you just delete what you don't need, customize to that specific project or like add in and you keep adding. And so your scope of work, the design elements are typically going to be different per each project. That's why I like to keep them separate. And then your task management. So, and that's really a progressive list of everything that you need to do and with like, and putting dates next to it.

45:55Serena Norris:So those are really like the three main pillars that you need for each project. Uh, and so for the, uh, scope of work, if you don't know even where to start, what I suggest is, uh, is hiring a home inspector to walk with you on the property and identify, uh, actual defects to the house, stuff that would come up with a buyer's inspection after you're done and start, and start making note of all of that. I'd look at the comps and look at your subject house now and say, what needs to change between my subject house to these comps that I'm trying to get the ARV? What's the difference? I need to describe that.

46:42Then you're going to put it into by trade.

46:47Serena Norris:And we, like I said, we live in like the best time to have resources for information. So I definitely highly suggest like utilizing AI to help you through this, help you organize it, and then put it into an Excel sheet. And then even give it the questions, like give it a prompt, like for this line item, can you help me describe what the outcome should be, what the level of finish could be, or what the, and then decide, should I have materials included or is this labor only? and then once that's billed for that one project, duplicate that for the next and then work off of that so you're not making everything from scratch.

47:35Serena Norris:And same thing for the task management schedule. Use Chat2PT, hey, for a fix and flip, can you give me a schedule outline for everything with a flip, right? And that will give you a place to start, at least a reference, and then you can customize like what works better, best for your process.

47:53Ashley Kehr:Well, Serena, thank you so much. This is one of the biggest questions we get is how to run a rehab project, how to management, how to build out your scope of work. So thank you so much for giving us this little mini masterclass on getting organized and being able to be efficient and successful at running a rehab at your project, whether it's a BRRRR or you're doing a flip. So where can people reach out to you and find out more information?

48:20Serena Norris:Yeah, absolutely. So I am going to be doing a lot of education over on Instagram. You can follow me at systemstack.io. If you want to learn about construction management, rehab execution, how to systemize working with contractors, that's going to be the place to go to find me. My personal is also at Serena Norris underscore. And also if this conversation really resonated with you and you want to go deeper into how to actually run flips like a business. I'm now sharing the exact system that I've built over the last 10 years. It's now available to the public. So go over to at systemstack.io or systemstack.io.com and you need to learn more.

49:00Ashley Kehr:Well, thank you so much. We really appreciated you taking the time to share your experience with everyone. For everyone listening, make sure you subscribe to Real Estate Rookie on YouTube and that you're following us on Instagram at BiggerPocketsRookie. I'm Ashley, he's Tony, and we'll see you guys on the next episode. At some point, your little real estate side hustle stops feeling little. Rent's coming in, maybe you've got a couple properties now, and suddenly the money part gets real. Your tax bill's going up, you're Googling LLC versus S Corp at midnight, and you're just hoping you didn't miss something that'll cost you later.

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