Buying Your NEXT Rental & How to Save a Fortune

Ashley :
This is Real Estate rookie episode 434. Let’s get your questions answered on today’s rookie reply. I’m Ashley Care and I’m here with Tony Jay Robinson,

Tony:
And welcome to the Real Estate Rookie Podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now, today we’re diving back into the BiggerPockets forums to get your questions answered. Now guys, the forums is the absolute best place to get answers quickly to all of your real estate investing questions by tons of experts who know all the ins and outs of doing this the right way. So today we’re going to discuss whether or not you should Airbnb a room in your house, should you fix up a property with materials from Home Depot, whether or not you should rent out your primary move into a new home, and tips for managing contractors that are thousands of miles away. But first, our very first question.

Ashley :
Yeah, so Tony, I’m looking in the short-term rental and vacation rental discussions right now on the BiggerPockets forums. Is there one that you want to pick from?

Tony:
Yeah, so I got one here from Chelsea Colon and she says, my husband and I are planning to put one of the rooms in our house on Airbnb, either as a short-term or a medium term rental for traveling healthcare workers and such. We would like any tips, tricks, and don’ts for any of those that rent out rooms on an individual basis? It’s a great question, Chelsea. And I think the first thing I’ll say is that we’ve never actually rented out single rooms before. So when we rent out, we only do entire homes, but there is a level of demand for I think the room rental. Now, the first thing that I’d say, Chelsea, is people just sometimes assume that there’s demand for room rentals in their market, but that’s not always the case. So the first thing that I would do is look into the data and try and understand are people actually looking for short-term and medium term stays in your market?

Tony:
So on the short term side, you can go, I guess both the short term and the medium term side. You can go to sites like Air DNA and type in your city location, filter that data down to just rooms within a home. That way you’re not getting studios or other full rental units. Just filter it down to other rooms and other homes and then start to see what the going rate is for those kinds of properties or for those kind of listings. That way you have a sense of what you should expect from a revenue standpoint. You can also search websites like a furnish finder where people are listing their medium term rentals fully furnished and you can see what the going rate is there. But I’d say that’s probably the first step is just doing your analysis first so you have a good understanding of what the revenue potential is for the short term or the medium term because maybe you might make more doing it as a long-term rental and then just letting someone rent that room out on a 12 month plus basis. So I’d say doing that research is the first step.

Ashley :
Yeah, the thing that I like about doing the short-term rental especially and the midterm rental of the long-term is that you can pick and choose your windows of time that you actually want someone staying with you. So like Christmas morning, you’re waking up with your tenant in your house coming down the stairs or breakfast Christmas morning looking for the present under the tree. So that is the one thing I would love if I was house hacking and I had a room that I was renting out, if the numbers were pretty similar and you had your choice, I would pick short-term rental just to have that opportunity to be able to block out dates like, oh, my parents are going to come stay with us, or you want the house to yourself, so you’re going to be making a baby this month or whatever it may be, is having the ability to block off those dates.

Ashley :
So that’s why I like that. As far as the San Atonia, I have no experience actually renting out a room, but I have rented out an individual office in a commercial building. So it was a business that had a large building and to try to offset a little bit of the mortgage, we rented out a single office in the building. And some of the things I learned from that experience is you really need to lay out what they have access to, what’s available for them to use and any other shared expenses. So one thing that happened was they would come and use the big copier because it was faster. Well, that’s ink and paper that’s coming out of the other businesses pocket that they’re paying for. Is that something that was included? Not really, but we didn’t think of these things, so there was nothing in the lease about it.

Ashley :
So same with toilet paper, paper towels. What are the things that are going to be provided to this person when they’re living in their house? So maybe they have their own separate bathroom, which would be great, way better. And so their toilet paper, things like that, that’s on them. But in the kitchen, unless you have two kitchens, there’s going to be a lot of shared things like, oh, just taking a paper towel from here to use for whatever. So I think being very clear cut. And then I’ve seen in a lot of house hacks, we’ve had Craig curl up on the podcast, he’s written the book, the House Hacking Strategy of BiggerPockets. Everybody would get their own cover and that’s where they have their own food, things like that, even plates and things like that. If you use a plate, what is the timeframe that is allowed before you wash that plate and put it back?

Ashley :
Because if you go into the BiggerPockets forums, you can actually see people talking about this. It may seem like such a silly little thing, but not cleaning up after themselves and the person be like, oh, I’ll get it tomorrow. Why are you making such a big deal of it? So I think setting as many expectations as you can, just having a policy book as type A as that can sound. But here’s the policies for the place, and this is in both of our best interests to live civilly. And obviously that’s more for medium-term rental than a long-term rental. Short-term rental, you should be pretty much providing everything for them that they have. And maybe in the kitchen you’re saying, here’s where you have access in the kitchen. I don’t know if you want to give them full range of, here’s my organic, really expensive food that you have access to, but I think maybe you don’t even give them access to the kitchen where it’s literally a bedroom and maybe a bathroom that they have and then they don’t even have access to the kitchen or the living room. It’s just they have those two rooms only, which I’ve seen a lot on Airbnb.

Tony:
Basically what you’re saying, Ashley, you’ve got to set really clear expectations upfront to make sure that there’s less friction once that person is actually staying there. And I think that’s honestly one of the things I’ve found to really lead to success from short-term rental management, really just real estate management in general, whether it’s tenants or guests, is being able to set those clear expectations upfront about what are the rules of engagement for you staying at this property. I think that does reduce a lot of friction there. She talks about tips and tricks. We’ve covered a little bit of that, but in terms of the do’s and don’ts, again, this is me more so speaking from what I would do if I were stepping into this, but if I’m renting a property, I’m trying to go between the short term and the medium term, I’d want to understand the demand in that market.

Tony:
I’ll give you an example. There are some markets that are heavily seasonal. Maybe it’s like a beach market in Florida where labor day to Memorial Day, or sorry, the other way around Memorial Day to Labor Day, you’re jam packed. Everyone wants to be the beach during the summer, but that time in between September to late spring, it’s pretty dead because no one typically goes to the beach, but you get a lot of the snowbirds who come down and they want to stay for a month or two at a time. So I think understanding what those ebbs and flows are of your market and then switching between the short term and the medium term depending on what the demand calls for.

Ashley :
So we’re going to take a short break and when we come back we’re going to find out what you should do before you move out of your primary and turn it into a rental.

Tony:
Alright guys, so welcome back. Now, Ash, what about you? What questions from the form are sticking out to you?

Ashley :
Yeah, so I’m in the rehabbing and house flipping by the way, you guys. I am doing a talk at the BiggerPockets Conference with James Dard on this exact topic here. So if y’all see you guys in BP Con, maybe you’ll be in our Sunday session talking about rehabbing and house flipping. Okay, so this question here that I see in the forum’s discussion is from UL and he says, curious where everyone sources their material for flip servers. I mainly looked at Home Depot, those for flooring and larger items and got hardware like knobs, faucets from Amazon, Wayfair. But curious to hear where you get all your materials from. I also need to get a double vanity for my master bathroom. Any recommendations? So Tony, you’ve done a couple flips and I know you guys order a lot of your material. So what is your go-to for the short-term rental rehabs that you’re doing?

Tony:
Yeah, so there’s a couple places, right? So I’ll talk about the finishes first, the stuff that the guests and your tenants will actually see. But there’s a couple of websites. There’s one called Host, GPO, there’s another one called Minoan, and Minoan is M-I-N-O-A-N. And Minoan specifically, we use a ton because we can get furnishing items. We can also get things like flooring, tile, et cetera. They have relationships with Wayfair, with Creighton Barrel, with a Pottery Barn with a lot of the places that you might order some of these items from Tile bar. So what we’ll do, when we were doing the hotel renovation for example, we loaded up all of our flooring and our hardware and on our vanities and all of those things and we sent a quote out to Minoan and they were able to source and get different negotiated discounts on all those items. And then we went directly to some of those suppliers and we said, Hey, we’re looking to buy all of this material for you guys, what’s your best price? And we were able to negotiate between the two of them to figure out where can we get the best discount. So I like going direct to the supplier, but sometimes if you work with some of these third parties, because they get so much volume, they might be able to get bigger discounts than you being able to do that by yourself.

Ashley :
I’ve been obsessed with part Pottery Barn and West Elm Furniture lately, and I want to completely redo house and all their furniture. So I’m going to have to sign up just to quote, check it out, the discount on those stuff. Yeah,

Tony:
Honestly, one of the biggest things, and this is no one’s not sponsoring this episode, but one of the reasons that I really love them in addition to the discounts is that they also help with the logistics of ordering and delivery, which is super cool. So you place your order through Minoan, Manan then places all those orders with the individual suppliers and then you can track everything through Manino as well. So I’ll give you an example. We ordered, I think it was like bed frames through Manino and I think the actual supplier was like West Elm or something like that, but there was a delay in the delivery and Manone was one that brought it to our attention. They said, Hey look, just so you know, these bed frames got delayed, but here’s another option that we think will get delivered in time and then here’s a credit for the inconvenience of us having to replace this bed frame. So there’s a lot that comes along with working with a company like that as well.

Ashley :
And that is such a huge convenience of having everything in one dashboard instead of going through your emails looking for searching bedside, where did I get that from Amazon, where did I get that from?

Tony:
And if you need to replace something, you can just go back to Manoa and see all of your old orders and you can list each project by its own name and say you need to replace a vanity or you need to replace a bed frame, just go to that project and it shows everything that you ordered. So there’s a lot of efficiencies that come along with it.

Ashley :
So we order a lot of our furniture actually from Ashley Furniture because I really like to go in and actually see it and they set it up. I will never, ever in my entire life put together furniture anymore, ever. I’m done. So I love that they set up all the furniture and put it together, but we actually have this mattress in the a-frame and everybody raves about it and I was like, I’m like, I’m pretty sure I just got a middle of the road mattress. And so we actually went there the other day because we’re still about to set up another property and we, we had to go through their whole search history of all of our different orders from there and try and find it where if we would’ve used Minoan or something similar to that, we could have just looked it up on our own and actually probably price shopped it to get it even probably cheaper than buying it directly from Ashley Furniture too and just they have a great name too. Branding. Yeah,

Tony:
I was waiting. I was waiting for that part. Just love to go in and see your name on the big marquee when you walk in.

Ashley :
Oh, the kids just tease me every time we go there about it. Yeah. Oh, this is your store.

Tony:
Yeah. What about things Ashley? Like the flooring, some of the other materials even like the seal wax deals for the toilets and all these different things. Are you shopping around for those? Do you typically have a go-to place where you’re just purchasing those items and it’s kind of on a rinse and repeat?

Ashley :
Yeah, so primarily Lowe’s just because a Lowe’s is closer to our projects than Home Depot, so I don’t really have a preference between the two. We do have started doing this where when we’re doing a large turnover, we are sending in everything like going online, sitting at home, adding everything to cart and then emailing it to somebody at our local Lowe’s and then they actually go and bid it out for us and then bring us the discount. I think Home Depot calls it the bid room. I don’t even know what Lowe’s calls it, but I think something else. So we are getting a lot of materials from Lowe’s. The thing I can’t stand about some of these big department stores is the pickup, and I no longer involve myself in pickups, but it can be somebody waiting there because you scheduled your pickup for this time, but they still send someone measly back to the back of the store to gather all your stuff and then finally it comes up 30 minutes later, then you have to check through everything and then if there’s something missing.

Ashley :
So there are some specialty things that I’d like to get some other places just because it’s pretty comparable in price, but just because the customer service and the delivery of or picking up the material is so much more convenient. So there’s LL flooring, we get a lot of our flooring from there just because you go in, you pick it out, you pay, you drive around back and they immediately load it in and it’s just like that instead of having to wait around. So Ello Flooring is another one that we use too. And then there’s a couple tile places we’ll do too.

Tony:
Yeah, I think the biggest thing is just shopping around. We just interviewed Sean and Anne Wayne and they talked a lot about how they take really tight control over all of their supply ordering because they realize that’s where they can get some more margin in their project is by maybe going to a few different places to get quotes for flooring, maybe going to a few different places to get quotes on hardware, going to a few different places to get all these different material quotes and not just rinsing and repeating every single time because price has changed from vendor to vendor and who’s going to give you the best price at that time I think is super important. So I think the biggest thing you shop around, don’t overlook the big places like the Home Depot, the Lowe’s, but also don’t be afraid to go talk to some of those local smaller vendors that are just in your neck of the woods

Ashley :
And also going to, when you’re looking at the prices, comparing them getting some kind of cash back. So whether you sign up for all those or a Home Depot card too to save that extra 5%, or if you are getting a Chase business card and you’re actually putting it all on the Chase business card instead of writing a check for it or using a debit card or whatever, then you can kind of get some money back. That way too is finding the best card to actually use to pay for the materials too.

Tony:
Well guys, look, we love talking real estate. We love answering questions just like this with all of you and we would absolutely love it and appreciate it if you could hit that follow button on your podcast app or wherever it is you’re listening. The more folks we have following, the more folks we can reach and want to help some more folks with the Real Estate Rookie podcast. Alright, so Ash, I’m looking at the general investing discussions and I found a question from Kathleen. So Kathleen says, I live in the west town area of Chicago. I’ve recently been thinking about renting out my current primary home. It was built in 2019, the value’s about 550,000 bucks and I have a mortgage at 2.65%, which is great. The interest rate is 2.65% and I’m buying a new primary home that was built in 2020 value $700,000 and I’m thinking about putting 20% down in the same area.

Tony:
However, I have a few concerns. So she lists out some pros and cons here. The pros living conditions. So she’s going from 1400 square feet to 1700 square feet with some boutique features. Another pros at the rental market seems good in this area. And then the final pro she listed was that another property is being added to my existing real estate portfolio, which currently includes two other properties. Now the cons interest rate, she says for this new purchase, the $700,000 purchase, it’s a 7% interest rate. So obviously a little bit higher. The current home is too new to be rented out. Another con is that people often say not to buy property in Chicago due to high taxes and low appreciation. And in the last con is that there’s no necessity of moving since I have a decent primary home. She says any professional advice would be helpful. Really appreciate your time. So it seems like the premise of this question is should she move out of her current primary residence, 2.65%, moved in four years ago into another home, slightly bigger, but with a much higher interest rate and a higher purchase price. So I guess when you hear this question Ash, what comes to mind for you first?

Ashley :
Well, I was going to do the math real quick, but then you didn’t entertain everyone while I was trying to do it. So while I answer your question, I was trying to figure out what her mortgage payment was. So if she’s buying a property that’s 700,000, she puts 80% down and her interest rate is 7%, assuming it’s amortized over 30 years, what would her mortgage payment be without escrow? Then comparing that to what her mortgage rate was for her first property that she bought, even though we don’t know exactly what the value is, we know what the value is now, but not what she actually purchased it for to kind of figure that out because I think the best thing is to run the numbers. So on that property you’re living in now, if you were rented out, what could you rent it out for?

Ashley :
What would be that dollar amount and then the new property? What would be your mortgage payment on that new property and what is the difference that you will be increasing your living expenses by, if any? Maybe your living expenses would actually decrease if the rental income is more than what your mortgage payment is on that first property and there’s actually room for it to cover some of your mortgage on the second property. So I think that’s a piece of the puzzle we’re missing is to what are the numbers on that property of it being a rental? So will it cashflow, will it break even and you’re going to bank on appreciation of that property, but then you also said Chicago has low appreciation in that area, so maybe there won’t be that, but if you are going to decide to go this route, I think the first thing to really look at is what is an exit strategy If it doesn’t work out as a rental, so you want to move into this new property, you move in and then you realize that it’s not renting out. Maybe you rented it for a year, you can’t find another tenant, it’s a strain on you to pay this mortgage also then could you sell the property no problem and be done with it.

Tony:
Yeah, all really good points Ashley, and I think maybe even taking it one step back, Kathleen, I think the one question that we really need to answer to is what’s more important to you right now? Is it upgrading your primary residence and gaining that extra 300 square feet with some of those boutique features that you mentioned? Or is it adding another property to your real estate portfolio? Because if the goal is that you really just want a new home, okay, then cool. Even if maybe from an investment perspective, it doesn’t make a ton of sense if that’s just truly what you want for your personal life to make that decision. But if the goal is just to have another rental property, then you have to ask yourself the question, does it make more sense to take that 20% and instead of popping into a $700,000 property in Chicago, does it make more sense to take that 20% and put it in another property in some other city where you can get the cashflow that you’re looking for? So I think that’s another missing piece as well, is what is the actual motivation for even considering this and then depending on which one is more important to you, that can kind of help point you in the right direction as well.

Ashley :
Yeah, I think that’s great advice right there. Definitely a way to start to think of it. What is your why for considering this option and then run the numbers on the deal. Okay, so in our next question, we are going to discuss tips for managing a renovation that is miles away from you, but first let’s hear a word from our show sponsors. Okay, so Tony, what is the next question you want to pull out of the BiggerPockets forums?

Tony:
So I am in the bird discussions and there’s a question from Nam and she asks, Hey everyone, can you share their experience managing general contractors remotely? Any tips you could share would be greatly appreciated. So Nam, I love this question and it’s so funny. I was actually digging around on my BiggerPockets account last week and I logged in to check something, but I just ended up going through all of my old posts and I found one of the first things that I posted in the forums. It’s literally there. If you search my name, you’ll probably find inside the forums, but it was me talking about the very first birth that I ever did, and this is back in 2018 I think, or 2019, but go find it. You hear me talk about it. But I bring that up because the very first real estate deal that I did, it was a long distance burr.

Tony:
So I was in California, the property was in Shreveport, Louisiana. So if you’ve been around the show for a while, you’ve heard me talk about Shreveport a lot, but that very first deal I did was actually a really solid deal. It was a great burr. Now I had some fear nam around very first property. Does it make sense for me to do this remotely? But here are the kind of guard rails that I was able to put in place to give me the confidence to manage that rehab remotely. The first thing that I did was I really tried to focus on finding a contractor that was known, liked and trusted within that community, and I did that a few ways. First, I asked my lender who was a local credit union in that city, I said, Hey, do you have any contractors that you recommend I go talk to?

Tony:
They gave me a short list of people. I asked my agent in that market who worked with investors quite a bit, she had a name for someone and lo and behold, there were a couple of names that showed up on both of their lists. So I was like, okay, cool. This is a good place for me to start. I think I also posted inside the BiggerPockets forum and I think I got a recommendation from there as well. So just leaning into the network that I was building within that market of folks who have maybe already been vetted by the folks who I was working with. Once I found that person, I asked two of them. I think I got two different quotes for that first one to both give me bids on that property and once I had those bids, I was able to have some conversations with them and then figure out who did I maybe enjoy working with more, who did I like a little bit, a little bit more, and I chose the person that they ended up working with. Now once we actually closed on the property, these are the steps I kind of took to somewhat hold that person accountable. First, I think it was every Friday once a week I would FaceTime the general contractor and they would walk me through the property to show me the updates. So that was one kind of layer of confidence that I was given.

Ashley :
Is that something you clarified ahead of time? You set that expectation when you hired the contractor or was this something it was like, okay, as a project one, I shouldn’t need to do that.

Tony:
I don’t remember how we kind of fell into that cadence, but I’m sure I said like, Hey, I’m not going to be able to walk the property. So we got to find something out. And I think that was the solution that we landed on, which just kind of FaceTiming the property, but honestly that it gives you a little bit of an update, but it’s hard to really get a good sense just by doing the FaceTime walkthrough. It gives you an idea. But the other two things I did is what really gave ’em the confidence. The second thing Ash that we kind of put in place was the bank where I got the HAR money loan from. Again, it was that local credit union. Before they would release money to the contractor for work completed, they would actually send an inspector of their own to the property to validate that everything was done.

Tony:
So that was major for me as a first time investor because I had someone who not only knew that market but had worked with this contractor before and they were able to take his scope of work, compare it to what he was invoicing for and make sure that those things were done. The third thing I did was before we actually finished the entire rehab project, the property manager that I hired, I had them go walk the property to do a final walkthrough. So they’re putting in their tape saying, Hey, we need to fix this, we need to fix this, we need to fix this. So I was FaceTiming with the contractor throughout the bank, was sending an inspector at the different milestones to make sure that those were done. And before we officially wrapped the project, my PM went through and added all of their notes. So those were the three layers that I put into place. Now I know I just rambled a lot, but this was my experience the first time that I was doing it. So yeah,

Ashley :
I think as far as doing an out of state rehab, I’ve only done two of them and I had a partner that lived there was the boots on the ground and a project manager. So I can’t speak to the same experience, but we’ve had a lot of guests on the show and I’ve talked to a lot of people and what I have learned, and so I’m actually doing a flip now that is over hour from my house, which I always end up having to go there when it’s during rush hour, so it takes me an hour and a half. But we settled on a contractor that we’ve used before. So if there is something or some way that maybe you already have a property in this market and you have a simple rehab, just a small project, maybe a couple things in a bathroom or maybe flooring, replace, whatever it may be, you can start out with something small to see how the process goes on that small project before you go and you buy a completely gutted house that needs a full renovation and you’re giving one GC full control of this thing, never having worked together and never having experienced yourself overseeing a general contractor.

Ashley :
So I think if you can kind of date the contractor first. So we do a contractor usually with an apartment remodel before we’re giving them a whole house that we’re working on, whether that’s going to be a cabin that we’re renovating for short-term rental or for a house that we’re flipping. But we start off just kind of dating them with giving them a little task or a little job to see how that process goes before handing over a house.

Tony:
I love that approach, right of dating before you jump into it. And I think when you have that opportunity, it’s great, but maybe for Nam, if she doesn’t have that property yet, Ash, I guess what questions would you ask to say or to maybe give you that confidence if you can’t give them a small job to start with?

Ashley :
Yeah, I think setting the expectations ahead of time. How much is this going to cost? What is my budget? First of all, they should be able to give you an amount that is going to cost. If you’re getting a lot of, well, I don’t really like to put a definite number because things could change, blah, blah, blah, I wouldn’t go with that contractor. I want to concrete number. Understanding that once you rip the walls open, there could be things that are added on and there could be change orders, but a contractor should be able to put together a concrete cost for you of what it’s going to cost, what their estimate is. The next thing is a timeline. They should be able to provide you with the timeline. While we are on this podcast, I got a notification that my flip right now is delayed because we’re waiting for the inspector to come and inspect the electric so we’re at their mercy until they come and inspect it when it’s convenient for them.

Ashley :
So I’m not punishing my contractor because we’re delayed a couple of days waiting for the inspector to come, but there should be a timeline in place where if there are no outside circumstances, your contractor can say, this is the timeline, this is the project due date. So just those two things your contractor should easily be able to provide for you, and it’s a red flag if they’re already wishy-washy won’t commit to any of that. So that would be the first thing. The second thing is have someone as the boots on the ground or some sort of checks and balances, whether that’s the agent you bought the house from, Hey, can I pay you 20 bucks a week? Or whatever it may be to go and just stop by the house, take a video for me and send it to me. Is there anything that you see that stands out?

Ashley :
I mean even if it’s a 50 bucks, a hundred bucks, whatever that cost is going to be, that could be less expensive than having a contractor do something completely wrong. And even though your agent probably doesn’t know everything about construction, if you could find somebody else that actually has construction knowledge even better, but your agent goes through hundreds of homes and can even my agent who doesn’t know anything about a construction, she is very, very curious and will consistently point out some that doesn’t look right. I don’t know what’s wrong or if it is right, but let’s question that and let’s second guess that. So having somebody that can go through and do that too. And then just during the interview process, what’s the gut feeling? How do you feel about the person? Are they communicating well with you? Are they actually listening to you or are they constantly pushing things onto you like, oh, you got to sign the contract now, we got to get started right now or else you’re not going to get me, and stuff like that. So I always take that into consideration as to how they actually handle the onboarding process of you as a new client too.

Tony:
Yeah, I think vetting them upfront is probably one of the most important things. If you’re doing this remotely and you touched on a lot of important things, but that communication piece is probably one of the biggest ones because if you have a GC locally that maybe isn’t the best with communication, but they do a really good job of everything else, you can kind of offset that by just going to the property yourself. But if you’re doing this thousands of miles away, you don’t have that luxury. So you really need to vet someone on not only their ability but their ability to do the job, but their ability to communicate effectively as well.

Ashley :
Yeah. So you hear a lot of people talk about don’t give money to contractors upfront, right? There is a red flag. If they ask for money upfront, they’ll just run with it. But Tony, what about the other side of it? So you are a contractor, you get this phone call from an investor lives out of state, you can’t meet them, they want you to do this rehab. Are you as a contractor, would you consider asking for money upfront? Since you have no relationship with this person, you don’t have any references of this person, no referrals. They literally found you on Google, they live out of state, can’t meet you. All these things. Would you want to ask for money upfront, just like on a business aspect, not because you’re a sketchy guy, you’re going to run with the money, but because you’re afraid you’re going to do some of the work and not get paid for it. Do you think that is contractors way go into the BiggerPockets forums and tell me, is this something that you would do? Not because you’re scamming them, but because you don’t know this person or anything about them and you would ask for money upfront?

Tony:
Yeah, it’s an interesting take ash or you’re definitely stirring the pot with that question. I think, I guess putting on a contractor’s hat, I feel like there’s probably less risk for the contractor to start a job without money being paid than there is for the investor to start a job and not get paid. Because I feel like if you’re looking at it from a contractor’s perspective, you literally know where this person’s property is. You can look up where this person lives, depending on the property records, you can maybe put a mechanic’s lien against their house. There are more avenues for recourse. If you’re the contractor who has a signed agreement that’s doing the work, then I think that there is for the homeowner that’s working with the contractor. So I feel like a lot of it does come down to just in the same way that the investor should be vetting the contractor to see what kind of vibe am I getting? The contractor should be doing the same thing for that client as well to make sure that they want to enjoy or that they both will enjoy working with each other.

Ashley :
You know what? Contractors are going to start asking for proof of fund style before they build out a scope of

Tony:
Work. There you go. That’s one thing they can do, right? Prove to me that you got it.

Ashley :
I mean, one thing you could do too is have your attorney hold the funds in escrow and say to the contractor, like, here it is an escrow. Here’s the draw schedule that we put together in their contract. You submit it to my attorney or you submit it to me and I give permission to my attorney. If we have a dispute, it’s held in the escrow account for the dispute to be settled. So I don’t know what an attorney would charge to handle that, but I think it would be a lot. But I feel

Tony:
Like it wouldn’t be too much. Right.

Ashley :
Do too. Yeah. Unless there was a dispute, then that’s where they’ll get the legal fees.

Ashley :
Well, thank you guys so much for joining us on this episode of realestate Rookie. If you have a question that you would like to ask us or you need an immediate answer, you can go head over to biggerpockets.com/forums. Leave your question there, and don’t forget to give back and answer some questions too. Maybe you can even connect with someone that’s also in your market and make some new real estate friends. We just did a session last night for the Real Estate Rookie bootcamp with BiggerPockets, and what we had everybody do is go into the BiggerPockets forums, go to their profile, and you can set keyword alerts. So if you, for Buffalo, I have the keyword alert for Buffalo set up. So every time that someone mentions Buffalo, I get an alert once in a while. It’s like Buffalo, Wyoming, or it’s actually about the animal of buffalo, but usually it’s about Buffalo, New York. But you can also set other things like more specific like flipping in buffalo or boutique motels, whatever that may be, and you’ll get a notification whenever there is a keyword. So go everybody set one up for whatever market you’re investing in, so you get an alert every time someone posts in the forums about that market you’re interested in investing in or currently are investing in. Okay. Well, thank you so much for joining us. I’m Ashley. And he’s Tony. And we’ll see you guys on the next episode.

Tony:
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico content.

Ashley :
I’m Ashley. He’s Tony, and you have been listening to Real Estate Rookie.

Tony:
And if you want your questions answered on the show, go to biggerpockets.com/reply.