Juggling work and family is always hard.
Adding serious real estate investing to the mix is even harder.
But juggling toddler + newborn + investing in 19 doors your first year as a buy and hold real estate investor + rehabbing and flipping properties remotely from out of state + building an online real estate coaching/consulting business all at the same time is…insane.
Or crushing it.
And today’s guest has done just that. In this week’s podcast, I talk with Erin Helle, an army veteran turned “take-massive-action” real estate investor and house flipper.
We deep dive specifically on tips and strategies for rehabbing fixer-upper properties for maximum impact.
What you’ll learn:
- How to evaluate which upgrades will give the biggest bang for buck when you have a limited budget
- Erin’s step-by-step process for rehabbing, from first inspection to project complete
- How much $/time to budget for a rehab
- Tips for finding good contractors at reasonable rates
- How to manage contractors (dealing with poor communication, staying on schedule, etc)
- Simple rehab tasks that are worth learning yourself to save time and money
Have you rehabbed and flipped real estate before? What key lessons did you learn? What are your tips for finding and managing contractors effectively? Let me know by leaving a comment when you’re done.
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My guest today is Erin Helle.
Erin is a 14-year army veteran who, after returning from deployments to Iraq and Afghanistan, became a real estate investor specializing in house flipping.
In addition, she purchased 19 doors during her first year as a buy and hold investor, all while juggling a toddler and a newborn.
Her portfolio is currently a mix of single-family homes, a duplex, a triplex and a 10-plex. And she regularly flips houses in the Nashville and Clarksville metro areas of Tennessee, while also building a coaching and education business to help other real estate investors.
Erin, sounds like you’ve been incredibly busy, so thank you so much for taking time to join us today to share tips and strategies about how to rehab fixer-upper properties for maximum impact.
Erin Helle 2:05
Yes, of course. Thanks for having me.
Andrew Chen 2:08
I would love to start just by learning more about your background. Can you take us back to the time and tell us the story of how you got into real estate investing and became an expert on rehabbing and remodeling?
Erin Helle 2:21
Yeah. I have always been around construction my whole life. I come from a family of entrepreneurs, so I think I have those bones in my body.
But I really didn’t think that I would ever do this more than just a side hustle. I thought that I was going to stay in the army for 20 years.
And life happened. We had kids. Things changed very quickly.
And I just slowly started looking into investing.
And it took me a while to jump the gun on my very first one, but once I bought my first investment and I really saw the value of that property appreciate, I saw the money coming into my bank account every day.
And I built a relationship with the tenant, which was really cool too.
And I was just hooked after that. I just was like, “I got to figure out how to scale this. I just want to turn this into something more than just a side gig.”
And it slowly has become almost a full time thing at this point.
Andrew Chen 3:19
Got it. So it sounds like you have a portfolio of buy and hold properties which you invest in for long term, but then you also have a business where you are flipping homes largely in Tennessee.
I would love to talk a little bit about some of the things you’ve learned around rehabbing and remodeling, how to be strategic when doing this.
First, to set the stage, so we can get a sense of your experience and background, how many homes at this point have you rehabbed and flipped?
Erin Helle 3:56
I should know an exact number, but last year I did seven. And the year before that, I only did one. And that’s just me myself, just using my structures.
And I’ve partnered or been involved in some way in a handful of other ones and just finished up one this year.
Andrew Chen 4:20
Got it. So in your experience in doing rehabs, what are some of the most impactful upgrades and renovations that rehabbers with a finite budget can do for maximum impact?
Common wisdom is kitchen, bath, flooring, and paint. But even if those are where the gravity wells are, are there specific tips or strategies you can share when it comes to specific things to do in those areas, or if there are other areas as well?
What are specific types of upgrades, specific types of products and materials that you use for maximum impact?
Erin Helle 4:58
I think that the one thing that applies to every type of flip, whether it’s a starter home in a C class neighborhood or a million-dollar home in a really affluent neighborhood, the biggest thing that you have to do as a flipper is look at all the major systems and make sure that you’re upgrading all the major systems.
I mean HVAC, whatever the heat and air conditioning sources, electrical, plumbing. And then you got to look at the bones and the structure.
And that applies across the board. And that’s pretty much the only thing that applies to every single house.
When you’re looking at any individual property, the key is figuring out what the comps are.
And what people don’t really realize necessarily is the value of any individual home isn’t necessarily based on what is within the four walls of that home.
It has to do with the surrounding properties. It has to do with the market activity.
So you have to realize that when you are renovating a starter home, that the comps have Formica countertops and carpet and vinyl or laminate flooring, you’re not going to get a significant amount of more money by putting hardwoods in there or putting granite in there because the property just won’t support those types of upgrades.
So you’ll spend that money, but you won’t get it back. And so the best thing you can do as a flipper is thoroughly analyze the comparables.
A real estate agent can pull those for you. I think it’s important that you have a real estate agent on your team, multiple even.
And they need to give you a really good idea of what you’re looking at, properties that have sold in the last six months in the smallest possible radius, ideally even in the same neighborhood, on the same street. And you need to get a really good idea of what you’re working with.
And my goal is always to just make it one notch above the next comparable. I want it to be the nicest street on the block, but only slightly nicer.
And that doesn’t mean upgraded per se. That doesn’t mean more expensive finishes. It just means more appealing in some way or another, which will depend on who the buyer is.
So you have to do all that research. Figure that out.
I actually just recently finished two renovations. One in November that was absolutely a starter home sold for $230,000, and just got an offer on my most recent flip that’s under contract for $600,000.
They’re both within Nashville, but just obviously a very different demographic, a very different type of renovation.
The major systems cost about the same in both of those houses, even though the renovation on the $600,000 house cost four times what the other one did.
In that lower price house, we just had to get creative on how to make it a little bit more appealing to the buyer.
We did these cool tiled countertops, which some people loved, some people hated. Our buyers loved them.
And we did some cool drop light fixtures, which were really inexpensive. And then just a fancy backsplash, which was fairly inexpensive but definitely an upgrade for that area. And the buyer loved it.
So there are ways to upgrade it without spending a lot of money, but your upgrades just need to appeal to and be relevant to the demographic that you’re going after.
So that’s a long answer, but hopefully that makes sense.
Andrew Chen 8:40
Yeah, it makes sense.
So to make it pragmatic for folks, do you go to open houses in an area before you purchase a fixer property that you’re planning to flip to basically temperature check what the surrounding properties actually have in them, and then taking a mental heuristic for what the average is to figure out how to go just one notch slightly above that?
Or what is your process for developing that vision for what you need to have, but not too much more?
Erin Helle 9:15
I think that what you just talked about is a great way to get an idea, especially if you’re living where you’re investing and you have the capability of going to other houses and figuring that out.
If you’re investing from a distance like I am, I think over time, you get an idea of what area has what type of finishings. And then I just mostly look at pictures at this point.
I’ll get a neighborhood. I’ll get a specific area of Nashville or Clarksville, and I’ll just automatically have an idea of who the buyer is going to be.
And that’s just based on my experience as a real estate agent and as an investor. And then I’ve lived there for a couple years too, so I have a pretty good lay of the land that comes with the experience.
But if you don’t have that experience, you can, like you said, go to open houses, walk through. Just drive around the neighborhood. It will come to you fairly quickly.
And then you can just get pictures from your real estate agents.
Typically what my agents do for me is send me all the comps, and then they send me what the closest comp looks like.
So if I’m looking at a 1200-square foot, three-bedroom, two-bath house, they’ll send me the most recent sale that meets very close to those numbers, same size, similar layout, whatever. And then I can see exactly what upgrades they have in them.
And renovation flipping is very common, so it’s easy to find a comp that’s just been flipped for the most part. And you just take it from there and see what your budget can accommodate.
Andrew Chen 10:50
Got it. So to that end, could you help us understand, maybe walk through the end to end process for how you execute a rehab from the initial property visit?
I know it sounds like you’re looking at the systems, trying to get a sense of the bones of the home. But in particular, what are the markers that you’re looking for? What are you trying to size up?
And do you follow, at this point, having done this now a number of times, a standardized playbook to plan things out, design the look and feel based on what you see comparables containing, getting materials, getting your crew scheduled, project managing the whole thing?
Basically help us understand the life cycle of a rehab, if you could walk us through your process, maybe using some examples from your own projects.
Erin Helle 11:37
Yeah. That’s a great question.
I’m a big systems person. And now that I’ve moved away from where I’m investing, systems are even more critical.
And because I’ve built these systems, I’m now able to replicate them for my coaching clients.
Something I recently started doing for those that I’m coaching is basically managing an entire renovation for them, finding them the property, taking it all the way through to the sale.
And then teach them the process along the way. So you have to have that process really figured out, really laid out.
What that process looks like is, first, you have to have the deals coming to you. And that’s the most important part and I think the hardest part for most new investors to wrap their head around.
They’re saying to themselves, “There’s no deals. I can’t compete. How am I ever going to find it?”
And that’s a very bad attitude to have because there are plenty of deals. You just have to put yourself out there and get the right network of people bringing you deals.
And lots of people can bring you deals. You can find them yourself on Craigslist or Facebook Marketplace. You can network with wholesalers and then real estate agents.
You’d be surprised at how many ways you can find deals.
So that’s step one is getting the deal.
Once you have a deal, I always run the numbers just based on some assumptions. And I will look at what the comps are and figure out a general idea of what I think the renovation will cost. And with experience, you can figure out a ballpark.
But at this point, I always overestimate. So I’ll underestimate what I think I can sell it for, and I’ll overestimate what I think it will cost to renovate it.
And if the numbers still work and I’m still able to make the margin that I’m looking for, 10% return on investment, 50% return on investment, whatever it is that you’re looking for, then I would send a contractor out there to go look at it.
The contractor will walk through. Well, sometimes they can. Sometimes they can’t.
If it’s an auction house or if it’s occupied and a wholesaler is selling it, sometimes you can’t get inside of it. So there can be a little bit of unknown in that regard.
So when there’s unknowns like that, you have to just assume the worst. Otherwise, you’re going to put yourself in a really bad position.
Anyway, you figure out as much as you can about the house as possible, which is never going to be everything. So you always have to build in those contingencies. Make sure that you have a little bit of a buffer on your rehab budget.
And then you make your offer. And if your offer is accepted and you’re under contract and you’re moving towards closing, for me, the hardest time, the most work I have to put into a flip comes from contracts.
Between the contract getting signed and the closing date because in that timeframe, I have to go lock in the financing, whether I’m using private venture capital or hard money or whatever it is.
You’ve got to get all that figured out. You’ve got to coordinate with the title company to make sure that everything is on track, they have everything they need, and they have your entity or your personal name, information, things like that.
You have to get your insurance policy. And then you have to hire your contractor or contractors, which, if this is your first time, that can be very timely.
So I would recommend that before you even go into offering on a property, you have a list of contractors that you trust, that you’ve vetted, that you can use when the time is right.
So once you get the scope of work from the contractor, at this point, hopefully you’ve got a really good idea of what the whole project is going to look like. I personally turn that into a contract.
Sometimes contractors will give you just an invoice and you’ll both sign it, or a bid or a scope, and you sign it, and that serves as a contract.
I like to take it a step further and I have my lawyer review the contract and I translate that entire scope into my contract.
And we already have negotiated how we’re going to do the payment, how the draws are going to be done, when they’re going to be done, what has to be done in order to get paid. All that stuff is ironed out.
And then both of us sign the contract. And then we plan the work.
So the day that we close or maybe the next day, work starts. And at that point, I’m just receiving information, making decisions, writing checks, keeping track of all the accounting, and then seeing it through.
And then as we get closer to the end of the renovation, I bring in my real estate team, my realtors or realtor, and I have them do an analysis of how much we should sell it for, when we should start marketing, if we should do a coming soon campaign.
Then they’ll schedule the photography. And then we’ll go live and try to sell it as quickly as we can.
Andrew Chen 16:31
Got it. Wow, there’s a lot of good stuff in there I’d love to unpack.
At this point, first, are you managing your flips from out of state, or are you actually going there on the ground during the rehab portion of the project?
Erin Helle 16:46
Well, right now, the last two that I did, I fully managed from out of state. I have periodic visits planned, but it’s almost exclusively done from a distance with people on the ground that I can trust.
Andrew Chen 17:03
Got it. So to that end, are you essentially using the same contractors over and over at this point and that’s what’s given you the confidence and assurance to be able to manage from out of state?
Erin Helle 17:16
I try to.
I recently had an issue with a team of contractors. They just got overwhelmed and they weren’t able to finish the project.
And it got really ugly when they got behind. It just turned into a bad relationship as a result of a lack of performance.
I thought I would use them going ahead, but they just got themselves in a bad position and their true colors came through, so I won’t be able to use them again.
The team that I use in Clarksville is pretty solid. I’ve got a contractor out there that I trust.
He’s a retired Sergeant Major, so he’s high ranking in the army. And he and I just communicate well. I really trust him.
In Nashville, I’m not quite there yet in terms of contractors.
I have some. My HVAC guy is awesome. He does everything.
My roofer is amazing. And I have a great relationship with those guys, but I’m not at the point where I’d want to be. And that is a significant level of stress.
We’re closing on another one on February 6th and we’re using a new contractor, so there’s a little bit of anxiety there.
So far, talking to him and watching him figure out the project and plan the project has been pretty telling. And I have a lot of confidence in him. And I’ve learned a lot from previous contractors and previous relationships.
So to answer your question, I’m there, but I’m not quite where I’d want to be.
And the other thing that I’ve learned too is that a contractor can do great work on one project, and then he or she can do poorly on another project.
And that might be just a circumstance or a situation based on their circumstances, what they’re personally going through, or maybe they just don’t have the expertise.
Anyway, so that’s a cautionary thing there. I’m just totally rambling right now.
Andrew Chen 19:29
I’m curious. For your Nashville projects where you’re still trying to figure out who can be your recurring go-to folks, for those projects, are you still then flying in to stay closer to the projects, or are you also still managing those out of state?
Erin Helle 19:52
I’m still managing those out of state. I just have multiple checks and balances in place.
I have project managers. I have the general contractor, and then I have a project manager.
And then I also have inspectors. So anytime that somebody wants to be paid, it has to be inspected first.
And that’s part of the contract development process. That’s probably the most important part is having a conversation with the contractor about when they want to be paid, how they want to be paid, and then your expectations on that end.
This last contractor that I had an issue with, he would just send me a text and say, “I need this much money,” and he would expect it within an hour.
And I would have to explain to him over and over again that first you have to send me an invoice. Secondly, I have to get the work inspected.
And then it’s going to take a while to send you $18,000 or $20,000. It doesn’t happen instantly.
And he just couldn’t wrap his head around that, and he would then say, “Well, I can’t do any more work because I don’t have any more money.”
And so he wasn’t really managing the budget. He wasn’t buying materials with the money I was giving him. He was constantly one step behind.
So we didn’t have a great conversation about that upfront. He insinuated that he knew how the draws would work, and I just took his word for it.
And it just bit us in the butt. And it was the same thing over and over again throughout that process.
So I think that having those checks and balances and making sure that everyone understands the process and the procedures is the most important part.
Andrew Chen 21:34
Got it. I want to dive into managing contractors in depth in a moment. But first, more on general rehab strategy.
Even if you manage a project from out of state, are you, at least at some point during the project’s lifecycle, going in person to either do a final check or an initial kickoff or anything like that?
Or are their projects where you are totally remote from start to finish, so you actually never see the home in person?
Erin Helle 22:07
The last two that I’ve done, I have not ever set foot in the house. But thanks to technology, pictures, FaceTime, Skype, all these kinds of things, I feel like I’ve been in the home plenty of times. I’m intimately familiar with every aspect of the home.
There was only one time during this last project that I thought about flying out there last minute, but I ultimately decided not to because it would have cost me about $1200. And I would have rather paid the electrician that I needed to hire that $1200.
And that was just because my project manager happened to be out of town. But I really trust my real estate agents.
My stager actually helps a lot of times with the finishing. She’s usually in there when a lot of the touch-ups are being done, which is a really important part of the process, especially if you have a high end house. And so she’s been really helpful.
And having these people in there constantly and feeding back to me reports based on what the contractors are doing, because you get one side from the contractor and then you’ll get something different from people who aren’t those contractors.
So I like to just keep as many people giving me information about the status as possible, which just helps me with my peace of mind and understanding what’s really going on with the project.
But that has bit me in the butt a couple of times.
One time, my real estate agent’s assistant was walking through the house, getting it ready to show it to somebody, and the light fixture right inside the front door hadn’t been installed yet and it was just sitting on the floor.
And so she said to the contractor, “Put that under the sink or put it away in a cabinet because we’ve got somebody walking through the house.”
Later, when I found out that there were just wires sticking out of the ceiling, that light fixture had never gotten solved, my contractor said, “Well, Ashley told me that we didn’t have to install that.”
And I was like, “Well, what she meant was just put it away for now so it’s not a tripping hazard when someone walks in the door. But you still need to install that per contract to complete the flip.”
So that’s just an example of one of the times where there’s been too many chiefs who aren’t me. And sometimes the contractors, especially if it benefits them or if it’s easy for them, if somebody makes a comment that they can run with, they will.
Andrew Chen 24:42
Got it. At this point, where’s your deal flow mostly coming from?
Erin Helle 24:48
Lots of people.
I’ve got three different wholesalers that feed me deals. I’ve got a team of realtors in Clarksville and another team in Nashville that are feeding me deals.
I just occasionally will look around on Facebook Marketplace, which is a great place to find for sale by owners or even very motivated sellers.
And Craigslist too. Craigslist, you just have to be a little bit wary of. It’s easier to vet people on Facebook.
So there’s not a day that goes by that I don’t get a deal in my email or in my text message. And that’s just because of the relationships that I’ve developed.
And people know what I’m looking for, where I’m looking. And so when they see something, they think, “Erin might like this,” or “Erin would jump on this,” and send it over.
And a lot of those people know my system and way that I do things, and they’ll be prepared with that information.
Andrew Chen 25:50
Got it. So it sounds like you’re not really purchasing off the MLS. It’s all off market pretty much?
Erin Helle 25:57
I have found a couple on the MLS. But really you need to be at the 70% market value typically just to make it worth the flip because it’s very expensive to sell a house. It’s very expensive to get financing.
So you have to have a good amount of wiggle room, which you absolutely can find that on the MLS. But a lot of times, it’s easier to find it off market.
Andrew Chen 26:24
Got it. Yeah, that makes a lot of sense.
When you are thinking about making an offer on a fixer property, it sounds like, particularly in situations where you’re not going to visit in person, then you’re having an inspector go out to do the walkthrough, due diligence on your behalf. Is that right?
Erin Helle 26:47
Andrew Chen 26:48
And so, are you hiring basically a vendor that specializes in property inspections or a dedicated HVAC inspector, etc., to assess and audit all the systems?
Erin Helle 27:04
No. I actually used to hire an inspector every time.
But I’ve learned that, at least in my experience, I’m sure this doesn’t apply everywhere, but contractors tend to know more about the systems and about the state of the house and about what it’s going to cost to bring it up to life than an inspector will.
I just actually got a house inspected this past week because we bought it from a distance. It was a new build, so we had a one-year warranty and that is going to expire here in February.
Since I’ve never lived in the house, I’ve stepped in the house twice, I got an inspection done on it. And the inspection report came back and it’s like “There may be a defect here, but you need to get it inspected by someone who specializes in this or someone who’s trained in this.”
And so that’s typically what you get with an inspection. You get “This needs to be further analyzed.”
And so I’ve just found those reports to be pretty useless. So I skip that part, go straight to the contractor or the general contractor because they’re the ones who can not only tell you what the issue is, but they can tell you how much it’s going to cost to get it to the point where it needs to be.
Andrew Chen 28:31
Do you bring in a few people to basically get a second and third opinion when this happens? How do you manage the conflict of interest that can arise if you just have a contractor who might actually get the work, also be diagnosing the problem too?
Erin Helle 28:48
That is hard.
We just got a scope of work from this project that we’re going to close on the 6th of February. And he gave us an idea of what each system, what each general thing is going to cost.
And he said he overestimated them because there’s only so much he really knows and he’d rather be at the top than us have to increase our budget, which I very much appreciate.
But just looking at that, I can tell when things are high, just based on my experience. He said doors would cost $6000.
And I know that in this type of house, it is very much a starter home. If we had to pay $100 for an interior door, that would be a lot of money. And if we had to pay over $300 for any exterior door, that would be a lot.
So there’s no way we’re going to come even close to that $6000.
And so I went back to him and I said, “What’s this about?” And he said the doorframes are just significantly damaged and also every door frame is custom.
And so he’s like, “We have to take all the doors off all the frames and we have to cut them out to put a standard-sized door in there.” Otherwise, we’d have to go and get a custom door, a specially made door, which is going to cost way more.
But anyway, he did admit that that was still high. And he’s like, “We’ll just have to cross that bridge as we get in there” because he said every door is a different size.
And I’ve actually encountered that same issue on another flip as well.
So I think you just have to have that conversation. Keep the conversation open.
But then at the same time, when I have a budget and I know what I need to do to make the deal work, and I have the return on investment that I’m looking for, and the contractor is going to do what he needs to to get that to pass an inspection on the sale side and get it up to par with the comparables, I don’t care how much money he makes.
I don’t care if he’s buffered his numbers or if he’s skimming a little off the top. That doesn’t really bother me, as long as he’s doing the work, he’s getting it done, he’s being honest in the process, and the numbers work for both of us.
Andrew Chen 31:21
Makes sense. So it sounds like contractors are going to be able to give you a more useful inspection type of opinion once they see it, including at least what they estimate it’s going to cost.
What are the common or frequent problems that, given your experience, you’re now attuned to be paying attention to when you’re reading the inspection report for the major systems of the house?
I guess what I’m trying to ask is, at this point, you probably have developed some sense about what are the common problems that can occur for the major systems of the house, and maybe even have a mental compartmentalization of “This is expensive, medium, or not too expensive.”
Just for folks listening who are earlier in their real estate investing or flipping careers than you are, what are some of the common issues that you’ve now become attuned to paying attention to that can arise in these types of situations?
Erin Helle 32:32
Yeah, that’s a great question. And there’s certain things that apply to a lot of different properties, and there’s others that don’t.
And also, in my experience, there’s no standard for plumbing. There’s no way, for me at least, to just gauge what issues we’re going to come across with plumbing.
I’ve worked in houses that were built in the 2000s that have had major plumbing issues. And I’ve worked with houses that were built in 1930 that have had no plumbing issues. So I don’t have anything really to say on plumbing.
Electrical is a lot different. I think that as long as it’s been upgraded or built after 1970, then you know that the wires in there are usable, are up to code, are going to pass an inspection, if it was done right at that point.
If it was done before that, it’s probably going to have to be completely rewired because the rules have changed about what kind of wiring you can use now. And so that can be $10,000 even in a single apartment, just depending on what it is.
But then a lot of times, we’ll get into a house and the breaker box will just be a mess. And I used to think that that costs a lot of money, but it usually doesn’t. It’s usually $700-900, depending on the situation.
Rewiring a particular light could cost as little as $100, or can cost as much as $800.
Sometimes you can estimate a little bit, but other times, you won’t know until you’ve really gotten into it.
HVAC is pretty straightforward. If you’re doing a flip and the HVAC is 12 years old, you’re probably just going to have to replace it. Even if it works, if you’re trying to sell it at the top of the market, you probably have to have a new system.
And that’s not as expensive as most people would think, $3500-4500 for a new unit and a small house.
The ductwork is what can be really expensive. That can double your HVAC budget if there is no ductwork in the house. But typically, it’s rare that we can’t utilize the existing ductwork.
Or if we are getting to a house and there’s no HVAC at all, we know going into it that we have to pay for the unit and the ductwork.
But to me, that’s the best case scenario because you know exactly what you’re getting into. That number is not going to change.
But when you go into a house and it has a six-year-old unit and you think it’s probably going to be fine, it will just need a quick service and you estimate $500, and then come to find out that you need another unit and you need a splitter and you need to fix this ductwork, and now your $500 just became $10,000, that’s obviously a huge step back.
So really I’m saying there is no rule of thumb. There’s no standard. Every single house is different.
I think what any flipper or any investor really needs to wrap their head around is sticking to a budget. If you have a budget and you go above in this area, it has to come from somewhere else.
There might be situations where no matter what, you’re going to have to increase your budget. But I think before you go there, the mentality has to be that it has to come from somewhere else.
Let’s say you encountered that situation that I’ve just said where you thought it was just going to be a service on the HVAC, but you end up spending $9500 extra. And then let’s say you had $15,000 set aside for the kitchen because you were going to replace all the cabinets. You were just going to do a full gut.
Well, now, maybe you have to keep those cabinets. Maybe you have to rebuild out the base of them because there’s some water damage, and then you have to paint them. But you might save $4000 or $5000 there.
The point is you’re not always going to know. You’re never going to know 100% about what you’re getting into. But you just have to be prepared to adjust and just get the right people in there from the beginning.
But that still isn’t necessarily going to mean that you’re going to know exactly what you’re getting into.
Andrew Chen 36:47
Yeah, that’s a really great point. And sticking to the budget, being disciplined about that is one of the best ways to keep yourself out of trouble.
To that end, are there rules of thumb that you have in terms of thinking about how much money to budget for a rehab? Should folks think about it in terms of dollars per square foot or a percent of the purchase price?
And parallel to that, also how you think about budgeting time for the rehab, from the time you close to the time you sell.
Erin Helle 37:21
Let’s talk about that time thing first because I’ve learned a really cool way to deal with that.
When I get a timeline from my contractors, I build that into the schedule. And then I always motivate them to finish the job early with some sort of monetary reward.
If you finish early at all, whether it’s one day or two weeks, you get a $500 bonus or something that makes sense.
And it’s based on your holding costs. So if you have a house that you’re paying $5000 a month to hold on to, that’s what your interest is costing, that’s what your insurance is costing and the utilities, and your person goes two weeks over, that’s $2500.
So I build in there motivators, but I also build in there penalties.
If you’re more than two weeks late, I always give them a two-week window, sometimes more. If you’re looking at a very long 20-week reno or something like that, you might have to build in more.
But I motivate them to get it done early and I discourage them from dragging their feet and not getting it done financially.
And that’s something that contractors are not going to be willing to sign off on from the beginning, but you just have to figure out how to sway their thinking and just say, “This is to protect me and my investment.”
“And this is just to make sure that you are looking out for what’s best for me, which is to get the job done as quickly as possible. And if you do that, I will take care of you and I will repay you in kind.”
So that’s a cool way to help manage the timeline.
But again, you have to be reasonable. If things do come up, you just have to make sure that you have an open line of communication with your contractor because if you have some major setback, they’re not going to be able to still meet the timeline most likely.
So you just have to have that conversation.
What was the other part of the question?
Andrew Chen 39:16
Erin Helle 39:18
Okay. Sometimes I will use a price per square foot initially, before we’ve gotten in there, before we really know what we’re looking at, if I just know very little.
Or if I’ve been told it needs a full gut and it’s a C class property on this side of Nashville, I know that I can apply $55 per square foot to take it down to the studs.
But that depends on your area. That depends on the type of property.
So that 1% rule, that 2% rule, it applies as an initial assessment analysis, but it’s not really useful much beyond that.
I think it can be used to decide whether or not you want to look further, but it’s certainly not something that you should be basing your entire project off of.
Andrew Chen 40:18
So how do you get from that initial SWAG to something that’s more concrete that you then actually have to stick to?
Erin Helle 40:25
The initial comes usually before I decide to really throw everything at it.
Like I said, I get these properties in my text or email every single day. And so I probably analyze two to five a day, just depending on what we’re looking at. So I need to have a really quick way to look at them.
So I get the comps and I estimate what’s needed. And you can, a lot of times, tell from the pictures. Or a lot of times, a wholesaler will put together an analysis packet.
So you can have an idea whether you’re looking at more of a cosmetic flip or a full gut, and you can base it on that.
So you just upper estimate what you think you’re looking at, and then you make sure that you can still make the numbers work based on what you can sell it on at the end.
If the numbers work and you get to the return that you’re looking for, then I would get my contractor out there. I would try to schedule an open house or a walkthrough or whatever. And then we would do all of our due diligence.
But that part where you just have the price per square foot assumption doesn’t go any further than your very initial analysis.
Andrew Chen 41:42
So by the time you write an offer, have you pretty much already built up a pretty detailed budget for a final budget? So you know that number? You’ve done the analysis before you submit the offer?
Erin Helle 41:56
Yes, exactly. You have a pretty good idea of what you’re looking at as a whole.
Andrew Chen 42:00
Got it. Okay, cool.
So we talked about plumbing, HVAC, electrical. Are there any other foundational systems, common problems that you see in them? And if so, what are they?
Erin Helle 42:12
The next big ticket items are going to be the roof. You want to just get a general idea of the age of the roof and the shape of the roof. And then you’re looking for any kind of soft spots in the floor and the roof.
Because even if you know there’s a soft spot in the kitchen and you know what it’s going to cost to replace or reinforce those floor joists, if you don’t know what’s causing that issue, there’s no way you can budget an amount.
Is it because of the foundation? Is it because there’s moisture under there? Is it termites?
If you don’t know what the root cause of it is, it’s going to be hard for you to figure out what it’s going to cost you to replace it.
Andrew Chen 43:00
Okay. Any issues that you commonly see when it comes to foundation?
Erin Helle 43:09
No. I’ve only done one flip that had foundation issues and it scared the crap out of me.
But I bought it because the wholesale company already had a foundation guy out there and they attached a bid to the property analysis packet.
And it was probably one of the most straightforward things I’ve ever done. He went in the day of closing, got it all done, and two days later, we were doing the renovation as if there was nothing wrong with the foundation.
So I say don’t be afraid of foundation issues, but make sure that you know what the actual fix is, which just requires the foundation specialist.
Andrew Chen 43:50
Got it. Okay, cool.
Having done this many times, do you tend to execute, if not the same rehab plan or design for every project, then at least very similar plans? Or do you tend to vary it up?
And what makes you decide one way or the other?
Erin Helle 44:12
Mine are very different, and it’s always dependent on the house and the comps.
Occasionally, I try not to move walls if I don’t have to. I try not to rearrange a lot of stuff because that requires permits, which take more time, which can cost more money and inspections, things like that. So I avoid those things as much as possible.
And then I just try to augment the existing structure and the existing house. I just try to make that house better. It’s rare that I would just try to go in there and rearrange everything and go to a point where I’m moving things around.
But occasionally, you’ll need to add a bathroom just based on what the comps are.
You might have a fairly big house that has three bedrooms and one bathroom and just doesn’t really make sense from a buyer’s perspective. So it might make a good rental, but most buyers, most homeowners want at least two bathrooms.
In that case, you need to look at the bang for your buck. You need to decide if you do add a bathroom, how much is that going to cost?
And then how much is that going to increase your equity? How much is that going to allow you to sell it for?
So if it’s going to cost you $15,000 to add a whole new bathroom, but you can sell for $25,000 more, that’s a no-brainer to me.
But if you have to build a new bathroom for $15,000 and you can only sell for $15,000 more, that’s going to require a little bit more analysis because now you’re adding more time to the project, which increases your holding costs. And then you may not even get that money back.
So basically what I try to do is just keep the house as close to what it looks like as possible and just update it, bring it back to life, and make it look better than what we’re competing with down the street.
Andrew Chen 46:22
Got it. So now I’d love to turn to the intricacies or skills involved in working with and managing contractors.
Can you talk a little bit about best practices that you’ve learned for how to find quality contractors who charge reasonable rates in the first place and how to vet them effectively?
Erin Helle 46:47
Yeah, that’s a loaded question because I’ve done this before, I’ve gone through the whole process, and then hired somebody and they’ve not come through or walked off with some money.
I say that because there is no guarantee. People are people.
And there’s only so much you can know upfront or really know before putting the pressure on someone, which is really when things typically go south is when they get overwhelmed or there’s just too much pressure on them. And things just get ugly there.
So I think the best thing you can do is get recommendations. Get referrals. Find people that have used these contractors, know them fairly well, and can vouch for them personally.
I’ve learned that the most important thing when you’re vetting a contractor is that they’re a good person. I think that if they’re a quality person, they do what they say they’re going to do. And you can trust them. You can take their word. That to me is almost more important than the end state, their work quality.
And I think that because, like I said before, quality can change over time. But as an investor who’s got a lot of money invested in any one project, you need to know that what they’re telling you is true. And you need to know that you can trust them to give you the real deal of what’s going on with that property.
So the best way to do that is to find somebody who can vouch for them. And then that’s when your investigation begins.
You want to check all their reviews. You want to check the Better Business Bureau.
You want to ask anyone and everyone that you can about them. Facebook is a great resource for this. There’s a lot of investor pages.
And what I will do is I’ll put out there “Hey, I’m looking for somebody to fill a pool. Who do you guys know?”
And a lot of times, you will get the same person repeated over and over and over again. And then maybe you go back to the person who tagged them and you ask them their experience with it.
And then you look at the reviews that people have posted on their website and on their Facebook page, and you go from there.
And then you set up an interview, which for me is typically over the phone. But if you can do it in person, that’s a really great opportunity to get to know them.
I think that you can tell a lot about a person based on their physical appearance, if they look put together.
You can tell a lot about, in my experience, a contractor based on the state of their car. If there’s just trash all over the car, that’s probably what your project is going to look like.
It’s a little bit judgmental, but this is the person that you’re going to be entrusting with a huge asset. And so you need to be judgmental, and you need to really try to get to who this person is, what kind of workmanship they’re going to do.
If you schedule a phone call with them or an interview with them and they don’t show up, then I would throw that person out the window, figuratively speaking, immediately. If that’s how they’re going to do for their initial interview, it’s not going to get better once you hire them.
Andrew Chen 50:11
Right. Do you ever use these services like Thumbtack or Yelp for finding leads? And if not, what are some of the drawbacks that you have found with them?
Erin Helle 50:23
I’ve used them usually after I get a referral or after I find somebody. And that’s just part of me checking up on them, checking their reviews, seeing how they’re rated. But I’ve never actually used that to find a lead, I don’t think.
Andrew Chen 50:40
Got it. So after you make initial contact and you decide you would like to work with the contractor, what are some of the best practices that you have discovered for managing the project and managing them?
Erin Helle 50:57
This goes back to what we were talking about before where you just have that open communication. I think together you develop reporting requirements.
That’s totally a military term, but you have to decide collectively.
You have to let them know how you want to receive information, how often, and what format. And give them left and right limits for making decisions.
You might tell them, “Hey, if it costs under $500, go ahead and do it. But if it costs more than $500, I need to know right away and I’m going to make the decision on that.”
Whatever their limits are, their restrictions are, it’s just important that you both know that. And you want to encourage them to overcommunicate, especially if you’re doing it from a distance.
And then I have found, because I’ve had some issues with people sending me information, I will just send them an example of what I’m looking for.
I will say, “I want to know every Tuesday, Thursday, and Saturday what you’ve accomplished since your last report, with pictures.”
“And I want to know what your goal is and what you’re anticipating that you’re going to accomplish until your next report. And I want to know what issues you have and how I can help.”
And I will sometimes have to show them what that looks like. And that has been helpful for me to build a template.
Because sometimes I think they get so overwhelmed by the admin side of it. And you want to be careful not to do that because a lot of these contractors, they might be really good at what they do, but admin and paperwork and all that can be really stressful for them.
And so you’re not trying to add to their plate, but you’re just trying to make sure that everyone is on the same page. And you just want to make that as seamless and as simple as possible.
And so I think that bringing them into that conversation and asking them how they like to do it is a really good place to start.
Andrew Chen 53:00
Even if you build a template, have you found success in getting them to give you those status reports? I personally have never been able to do that, and I’ve managed my fair share of contractors too.
Erin Helle 53:12
Right. In the short term, yes, I will send that to them.
And then the next two times, they’ll do it. And then they’ll fall off the wagon.
And so what I’ve learned is when they do something that I am grateful for or approve of, I will make a really big deal out of it and really praise them for their efforts and what they’ve done.
And I find that that helps to encourage them to keep doing it, but it is an endless struggle. It is a vicious cycle. You do the same thing over and over and over again.
Andrew Chen 53:48
Yeah. At the end of the day, they’re tradespeople. So they’re good at the craft, but they’re not administrators, as you said.
Erin Helle 53:56
Andrew Chen 53:57
You mentioned you try to get them to sign a contract, which you would have reviewed with your lawyer. Have you been able to get them to do that consistently?
Even the ones who are really good at the craft, I find it hard to get them to even just articulate and state clearly by email, “Okay, these are the things that we’re agreeing to.” Even just in a simple email.
So I was curious how readily they accept a legalese written contract versus balk at it.
Erin Helle 54:36
I think it depends on the person.
Typically, they’ll come back with questions. They want to discuss it further. Maybe they don’t understand it.
But to me, it’s not an option. And I’ve learned the hard way what can happen if you don’t have a contract.
And so I tell them that right from the beginning. On the very first conversation I have with them, I tell them every single thing that we do will be contracted.
We’ll all sign it. My lawyer will review it.
And I always tell them, “You’re welcome to have your lawyer review this.”
Andrew Chen 55:09
Do you find that they have lawyers?
Erin Helle 55:12
No. Typically, no.
And that’s actually what happened with my last contractor that I had to cut ties with. He was recommended to me by my lawyer, who I trust, who I know.
He has a nice house and this contractor had done work on his house. And he recommended him to me and so I trusted him. I took his word for it.
He signed the contract and everything.
And then when things went south, I went back to my lawyer and I said, “I need to know what my options are. They’re way behind schedule. They’re not communicating with me.”
And he said to me, “Well, I’ve actually represented them before, so it’s a conflict of interest and I can’t help you.”
And so that was very frustrating. And I learned a lot in that process.
But the lawyer wasn’t necessarily representing them. He just had helped them in a tough spot in the past, which I wish my lawyer had told me that they’ve been in some legal trouble in the past because that might have changed whether or not I use them.
But anyway, they typically don’t have a lawyer.
But I think when you just tell them, “This is to protect both of us. And you’re also welcome to develop your own contract that I will review and we can sign as well,” that usually smooths it over a little bit.
Andrew Chen 56:40
And then you also mentioned that you’ll try to build incentives to get them to finish early or at least on time, and maybe penalties if they go late. Have you found that contractors are accepting of the penalties side?
Erin Helle 56:55
No. They always fight that.
Andrew Chen 57:00
So how do you get them to adopt, if you’re able to at all?
Erin Helle 57:05
I just tell them, “It’s really not an option.”
I say to them, “Put yourself in my shoes. How would you trust somebody with an asset that costs $400,000 if they’re not willing to commit to the timeline?”
And I just say, “How would you take that?”
And typically, they come around and they say, “That makes sense.” And a lot of times, they’ll ask me to push it out a little bit.
The thing is even when you have that in writing, it’s not even often enforceable. It’s really frustrating, but contracts can be meaningless sometimes.
Andrew Chen 57:52
It’s just not worth pursuing. But hopefully you at least get them into the right mindset to be more respectful of the deadline.
Erin Helle 58:01
And I think, if nothing else, it shows them that you’re not messing around. You’re going to have full control of this.
And as a woman in a male-dominated industry, I think that this helps me set the stage from the beginning.
I think that a lot of times, people expect me to be softer or just easier to deal with. And that’s not the case at all.
I’m very demanding. I’m going to hold you accountable.
I think putting all that upfront and letting people know that helps a lot and helps make sure that we’re on the same page.
And I also struggle a lot with a lot of my contractors who are from Tennessee or Kentucky, from the south, because I’m from New York and I’m much more direct. I’m much more upfront than most people, especially Southern people.
And it’s something that I’ve had to be very careful about and be really considerate of.
But I do try to tell people upfront, “This is who I am. This is how I’m going to manage this project. This is what you can expect from me.”
“And if we have any issues, you need to bring them up.”
Andrew Chen 59:13
In terms of paying an incentive to finish earlier or on time, how do you keep them from doing a crappy job?
Erin Helle 59:21
You don’t. I wish I had a better answer for that.
I think that’s where the inspections come in, and just keeping a close eye on the project and just trying to figure it out before it’s too late or before the damage is irreparable.
I’ve actually had to pursue an insurance claim against poor workmanship, but their insurance only covered accidental damage to a property or bodily injury to somebody on that property.
And it’s incredibly frustrating that a contractor can come in there and there’s no repercussions when they do a crappy job.
So having that check and balance, making sure that they’re not paid until you inspect it: I’ve had to have the conversation many times where someone tells me something is done or it’s done to standard.
And my stance is I am the boss. This is my property. I hired you. I will decide if this is done. I will let you know when it’s up to standard that we both agreed to in the beginning.
You can say that all day, but there’s only so much that you can do to enforce quality workmanship, unfortunately.
So the sooner you can figure it out, the better – and then the sooner you can take them out of the picture in whatever way you need to and start over with somebody else.
Andrew Chen 1:00:51
How do you handle contractors who become less than responsive but they’re doing good work?
If they’re doing bad work, it’s easy. You fire them.
But if they’re doing good work but their communication sucks, which I had dealt with that before, how do you handle that?
Erin Helle 1:01:07
In that case, I just have to get somebody else in there.
My sister lives in Nashville. And I have somebody who does my social media and stuff like that. She lives in the area too.
And then I have my realtor, my stager. And I might just have to have them go over there, just do a walkthrough and just take some pictures and let me know what’s going on with it.
Because I’ve found that in that situation where you are happy with what they’re doing and they’re doing what you hired them to do, you’re really just going to make them mad when you continue to push their buttons on something they’re not comfortable with.
And so I think them doing the quality work is what you’re looking for. That’s the end state.
So if you have to pay somebody $50 once a week or twice a week to go in there and inspect it, I think that that’s absolutely worth the money.
Andrew Chen 1:01:57
Do you recommend generally hiring specialists for every single task, or going with a generalist who can do a bunch of tasks, even if they’re not great at any one task?
Erin Helle 1:02:07
I think it depends on the project.
I think if you’re looking at a very high end flip in a really affluent neighborhood where the buyers are going to be very particular, you need to go with the specialists.
I think that if it’s a lower end flip that you have a pretty low budget on and the finishings don’t have to be perfect, then you can get away with a generalist.
I think you just have to gauge that against your budget. I would say hire the best that your budget can accommodate.
Andrew Chen 1:02:37
Yeah, makes sense.
And because you’re managing from afar, this may be less relevant to you. But when you have done rehabs where you have been closely involved in person, are there skills that you recommend learning how to just do yourself and get handy at?
As an investor, you’re always balancing ROI and your time versus saving money. In your view, when is it worth learning a DIY task yourself versus paying somebody else to do it?
Erin Helle 1:03:09
I think that totally depends on your situation and what your goals are.
When I first started out, the first flip that I did, my dad and I did the majority of the work. And it was because I didn’t have the money. I tried to hire a couple of things out, but was unsuccessful.
Some things I did hire out.
I had to have somebody do the electrical. I had to have some plumbing done. And I brought a painter in.
But I had a hard time getting people out there because I didn’t have relationships with anybody. I would schedule people to come out and give me a bid. And sometimes they would show up, but most of the time, they wouldn’t.
And then a lot of times, they’d come out, they’d give me an estimate, I would hire them, and then they wouldn’t show up.
So I learned that on my first flip, how important it is to have the right team and have the right contacts.
But I think now that I’ve moved away from being in the same town or in the same area as where I’m flipping, the time freedom that that has given me has taught me so much.
If I hadn’t have done that, I wouldn’t have been able to launch my coaching program. I wouldn’t have been able to do some online education. I just wouldn’t have had the bandwidth or the brainpower or the time to do that.
And I’ve also had to really learn to trust.
I’ve always been a pretty good delegator, but not on important tasks. So I’ve really had to learn to trust that it’s getting done and it’s getting done well.
And then also accept that your returns are going to go down a little bit if you’re hiring every single thing out.
And I actually had to just hire somebody to put two light switch covers. That would have taken me 3-5 minutes, but it cost me $150.
So that’s just depending on what you want to do.
If you want to be active, if you want to be managing the projects, you can definitely save a lot of money on those types of things and you’ll be in more control.
Andrew Chen 1:05:07
Maybe the angle I’m curious about is the rehabber who prefers to hire it out but would reluctantly do it, and has the ability to do it, or at least the ability to learn. It’s not somebody who’s like, “Oh, I can’t touch a hammer.”
Maybe the right way to ask it is what are the highest ROI DIY things that one can learn if you get in a jam and you need to do it yourself?
Erin Helle 1:05:37
I would say probably some of the finishing stuff. The light switch covers, the outlet covers, maybe installing some of the light fixtures.
Painting is harder than most people think. Being a good painter is more than just being able to open a can of paint. That’s not something I’ve ever been good at, so I would never do it.
But I would say some of the finishing stuff. That’s really been my experience with trying to wrap some stuff up.
Andrew Chen 1:06:11
Yeah. I tried painting my own ceiling once. I’ll never do that again.
Erin Helle 1:06:16
The ceiling is so hard too.
Andrew Chen 1:06:18
Erin Helle 1:06:19
Yeah, it’s brutal.
Andrew Chen 1:06:21
Yeah. Do you have any advice for how folks can save money when it comes to buying product and materials and supplies?
Whether it’s buying in bulk or buying synthetic, less expensive stuff. Do you have any tips for how to save money on actual product and materials?
Erin Helle 1:06:40
I honestly just go and try to find the sales.
If I need an appliance package, there’s almost always a major holiday when you’re doing a renovation. So you buy your appliance package when Lowe’s is having their big Memorial Day Sale or whatever.
And then when it comes to flooring or carpet, I almost always will just see what’s on sale.
Or something I’ve been really successful with is just buying what’s in stock that that store is trying to get rid of. A lot of times, it’s because they have a small amount of something.
Maybe they’ll have 400 square foot of this type of vinyl plank, but they’ll sell it to you for $1.25 a square foot.
And you can accommodate that in a small space that’s not going to make your house look really disjointed.
That’s where I’ve had success before is just buying stuff that’s already discounted or stuff that a store is trying to liquidate.
But I don’t think there’s a huge difference in material costs if you’re within a particular market. So unless you have a link to a source or you can bring something in from outside, I don’t know that it’s always going to be worth it for you to spend the time on finding that stuff.
That being said, you can find some really awesome stuff on Facebook marketplace. You can find some great brand new stainless steel appliances or you can find entire sets of cabinets that you can really save some money on that stuff.
Andrew Chen 1:08:19
Are you buying mostly from Home Depot, Lowe’s, or specialty stores, or wholesalers? Where do you buy your product from?
Erin Helle 1:08:27
A lot of my flooring comes from this tiny little town outside of Nashville. It’s a drive, but there’s no one that can compete with their prices.
Appliances typically would come from Lowe’s or Home Depot.
And then I think it really depends on who the contractor is.
We have a couple of different people that do glass and a couple of different people that do windows. But the prices are really not that much different.
And so sometimes you might go with somebody because they’ll deliver it for free, even if you pay a little bit more, because that can be really helpful.
I think it depends. I know it’s not a very good answer.
And it also depends on who your contractors have used too and who they’re comfortable with.
Andrew Chen 1:09:16
Got it. Well, listen, Erin, this has been super helpful and insightful.
And I think one of the takeaways I have, and it’s also consistent with my own experience doing a bunch of remodels, is that there is money to be made, but it’s not easy work.
And there’s all kinds of ways that things can go south. And you just have to be very vigilant and learn from experience and get better and get better the next time.
But it’s still good business.
I know there’s been a lot of cautionary, maybe even scary tales. But hopefully, it doesn’t dissuade folks from trying to learn how to do this stuff because it can be a good business, for sure.
Erin Helle 1:09:57
Andrew Chen 1:09:57
And thank you very much for taking the time to share with us. Where can people find out more about you and your work and services?
Erin Helle 1:10:03
I’ve got a website where all of my online courses and information about my one-on-one coaching is, and that’s bcglobalinvestments.com.
And then I’m on Facebook, Instagram, and LinkedIn. Just enter Erin Helle.
Andrew Chen 1:10:20
All right. Well, we’ll make sure to link to that stuff in the show notes.
And thank you so much again for sharing your experiences and insights and wisdom with us today. I hope folks get a lot of value from this discussion.
Thank you so much.
Erin Helle 1:10:33
Thank you so much.
Andrew Chen 1:10:33
Erin Helle 1:10:34