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Deidre Woollard: Hello, I'm Deidre Woollard, an editor at Millionacres. Thank you so much for tuning into the Millionacres Podcast. I believe that when it comes to talking about renovation people tend to fall into two camps. There are those who love HGTV. They want to dive in, they want to pick out tiles and do that. There are other people who are scared to start. They're afraid they're going to make the mistake that's going to cost them money and make the whole thing not pencil out. For both of those camps, today's podcast should help. I'm here with Van Sturgeon. I believe he's living the dream in terms of real estate. He is an experienced entrepreneur. He has created several businesses in the real estate industry. He owns over a thousand properties across North America. He's semi-retired from day-to-day operations of his businesses, but lucky for us, I think he's still got that real estate bug because he's here today, and he's passionate about helping real estate investors overcome their fear of renovations. Welcome, Van.
Van Sturgeon: Thank you very much for having me, Deidre. I've been looking forward to having this interview with you. We planned it out for a while now, so it's great to be on with you. I look forward to diving in and giving as much value as we can to your listeners about planning and managing that renovation and rehab project because there's a lot of apprehension, a lot of anxiety out there with folks when they take on something like that. Hopefully, through the number of years I have had experiences with over thousands of renovations, hopefully, I can help people out.
Deidre Woollard: So you are semi-retired, but you're still doing this. What is it about helping people with renovations that keeps you engaged in it?
Van Sturgeon: I've always been doing this, more or less throughout over my 30 years of being a general contractor, real estate investor. I have always had friends, family, neighbors come to me, looking for advice on their renovation projects, whether they're small, little doodads or pretty substantial ones wherein a whole house is gutted. I always loved the interaction. I have got a lot of experiences and knowledge, and I enjoy that. One of my gifts that the Almighty, the universe has given me is my ability of problem solver. I love getting into situations and renovations are these big pile of puzzle pieces that you got to put together. I'm really good at it, and I really enjoyed that. I've always have, and that's what's been, I guess, my reason why I've been so successful is I've been able to get into things that other folks will try to stay away from. In that process of engaging people, I enjoy it. I never was an individual that was a golfer or who would grab block wood and whittle it down to a coffee table. I've always been active in my life. Even though the road to the successes that I've accomplished in my life took a lot of toll on me physically, mentally, also on my family, I enjoyed it. I'm an active person. This whole thing I fell into by engaging people, and I really enjoy it. Like I said, I got a lot of stuff. I got some fuel left in the tank, and I'm out to really want to get out the good work because I see often so many folks stumble in the process of doing a renovation. It's one wrong move, and all of a sudden you can lose tens of thousands of dollars on a project. A great deal can all of a sudden disappear and turn into a bad deal.
Deidre Woollard: That is very true. You're a general contractor. Is it a bit like being a doctor where people find out that you're general contractor at a cocktail party, and then they want you to fix their renovation [LAUGHTER] or come look at their plumbing or something like that?
Van Sturgeon: Actually that's very funny that you mentioned that. Most places where I go, I feel the question like that, and I enjoy it. That's all great stuff. I'm passionate. I really enjoy what I do, and so folks came up to me and talked about real estate investing, and how do you do this, or how to do that, or a particular problem with their property, absolutely. Like I said, I've been very fortunate that I wear a number of hats in my life. I've had great successes, and I've had my fair share of failures as well. But it's been a learning process along the way, so I've got this experience that I've no issues going out there and helping people out there.
Deidre Woollard: When people call you, is it usually before they start renovating or do you get that mid project help call?
Van Sturgeon: It's a combination of both, to be honest with you, and the ones that are the most difficult to deal with, and most I feel so badly for are the ones that are mid project. Usually things have hit the fan, and there are issues associated with a contractor, perhaps, or a tradesperson who's disappeared, who has done such horrible inferior work. I've seen a lot of horror stories out there. Like there are TV programs out there, as I'm sure you well know, that channels are dedicated to these DIY disasters or these renovation disasters where contractors disappear. They do inferior workmanship. Just a lot of headache along the way. I get a combination of both. I really do, of course, enjoy getting into a project in the beginnings, the planning stages. It's a heck of a lot easier. I've developed a system over a little 30 years that I know, second nature to me, it's like me being able to look at that wall behind you and putting it, constructing it, it's nothing for me. It's one of the things I've done for a long time. Planning and managing a successful renovation for me is easy, so helping people out and getting them through the whole process and understanding the systems and the things that they need to do is easy. But when you get into things where, they're halfway through, three-quarters away through, and there's a lot of pain and anxiety. I get into them, but I'd rather not, but you do what you have to do, sometimes, to help people.
Deidre Woollard: On your website, you have this talk about needs and wants. I think that's important for people when, hopefully before they start the project, thinking about what is a need versus a want. Definitely it makes sense for homeowners, but how does that also play out for investors? Do you find that people are so eager to make a profit that they might over renovate?
Van Sturgeon: That's ultimately what I find, especially with new real estate investors who come into it. They're able to find a great deal, finally. There's a process in finding that great deal, but eventually they found out a great deal. Then they go in, and unfortunately, they over spend on their renovations and all of a sudden that great deal turns into a marginal deal, and there's been a lot of situations where I've seen a horrible deal. The whole purpose behind creating a needs and wants list is every property that we purchase on an investment side is what I like to call a diamond in the rough or an ugly duckling. There is some issues. There's problems associated with the property that we have to do something. We have to make an improvement to it in order to be able to raise value, and ultimately, profit from it. So when we're looking for these ugly ducklings, they are going to need renovations, some rehab work. It's very easy for a new real estate investor to fall into a trap to over renovate a property. That's one of the reasons why, before we even get to the needs and wants list, you really have to sit down and identify exactly what it is you're looking to accomplish in this particular project. If you're looking to renovate it, if you're looking to rent it out, or if you're looking to flip it, you're going to have a clear defined goal, what it is that you are looking to accomplish. Once you've been able to identify that, you literally write it down. I'm a big proponent of writing things down and having them stare at you slap you upside the face because that way, when you have that goal, everything that's associated with the project goes through that goal. So if I'm looking to rent a property up for $1,200, if I'm looking to do a flip and make $30,000 in profit, I need to make sure that everything that I do is going to correspond with reaching that goal. So part of the whole process of creating a needs and wants list is that we're going to go through the whole property, create an inventory list. We're going to identify things that need to be done and the things that we want to be done. Things that need to be done are things such as a hole in the roof, a broken window where the elements are coming in, and those are things that have to be done. They need to be repaired. But then you have situations where we're going on another side of the ledger. We have a wants list. These are things that don't necessarily need to be done but would be nice that they are done, if they can be incorporated within the budget we've established. The whole thing about over renovating is that, sometimes, as much as we want to replace the kitchen cabinetry that's dated from the 1970s, '80s, if there isn't money in the budget, then we need to void that or maybe just figure out a different process of trying to create that renovation that's more cost effective because we have a budget. The whole purpose behind the needs and wants list is that we do an inventory of things that we can do, should do, and that way, we can then move forward in the process of completing that planning side of the renovation.
Deidre Woollard: For every ugly duckling, you obviously have to have a great team of contractors. This year has been crazy in terms of hiring contractors. People have had to wait months. One of the things I worry about is that people are so desperate to get contractors that they might not check licenses and things like that. How important is vetting your contractors before you get started?
Van Sturgeon: Obviously, it's incredibly important because we put a lot of our trust into these individuals, and the amount of damage that they can cause to our property can amount to tens or hundreds or thousands of dollars. I have seen some real doozies where I've walked in their projects where a contractor or tradesperson has gone and cut a low-bearing rollout and the houses teetering, ready to collapse. I've been in situations where there have been clear negligence. There's a tile installer who will install tile that's up and down all over the place where, now, you have no recourse than to rip it all out and start all over again. Time, money out the window because you have to start all over again. So the whole process of vetting your contractors or tradespeople is incredibly important. But what I find is that a lot of newbie real estate investors, they rush and they run to find the lowest common denominator, the cheapest person. They go to Craigslist, the Kijijis, they go to standing in front of the local home improvement stores at 6:00 AM and try to write down every guy's phone number, and that's fairly the bastion of where you should be finding people. I strongly discourage it. I look at Facebook groups and these YouTube places where they give you recommendations where to find trades and contractors, and they make these recommendations about standing outside your home improvement center, the Home Depot, and finding your contractor, and I shake my head. You don't go to places like that. You don't go to Kijiji. What you do is you start from references. We all have friends. We all have relationships. Part of the process of being a successful real estate investor is creating that power team, creating relationships out there with your real estate agent, your mortgage broker, your accountant, your lawyer, fellow real estate investors. Those are the people that you should be having those relationships with and should be getting these referrals from saying to your local or your fellow real estate investor, if you got an electrician that you can refer to me to or your real estate agent. These are the places where you start to find those contractors and tradespeople that you then reach out to to see if you can get them to work on your project.
But even before you get to that point, Deidre, you've got to start with the scope of work, and I find that a lot of folks fail in that regard and that's probably one of the primary reason why you don't get good quality tradespeople and contractors to quote on your work, I'm speaking as a general contractor here. I'm very good at what I do, and there's a lot of contractors that are very good at what they do, or tradespeople that are very good at what they do. We're busy. Nevertheless, we still have an eye out for accumulating or getting more work. So when we get these requests from people, hey, can you price out my job? We first start from who are these people because it takes time and money for us to go through the process of quoting something. Then the next level up is, even if I don't know this person, I'm willing to give them an opportunity, but I want to deal with professional people because I'm a professional and I'm very good at what I do, so I want to deal with like-minded people. By virtue of how they approach me, detailed scope of work is how positive of a response you'll get from me in terms of me dedicating time to create a quote for your particular project. Always got to consider the other side of the equation when you try to create a win-win relationship.
Why would a contractor or a tradesperson devote time, hours, coming to your project, looking it over, putting a price together, what is the purpose of them doing that to gain your business? But they're busy, why would they do that? We want busy people. It's like that old adage, if you had to get heart surgery done, would you rather have it done by a doctor who drives around in a Cadillac or a trial doctor who drives around in jalopy, like a Chevrolet? Which one would you rather get it done? I'd rather get it done by a guy who drives around in a Cadillac. I want somebody who is good at what they do to come in because those are the folks that are going to come in there, provide the quality workmanship, give me the least amount of hassles, and get away because time is of the essence. Again, back to me as a general contractor, what I'm looking at is I've understood and realized that speed is important to me. I want to go in, get the job done, move onto the other job. I don't want being bogged down on projects where there's indecision.
Unfortunately, one of the major issues with new real estate investors is they don't know what they want. They expect the job of contractors to somehow crawl into their brain and pull and extract this information. They won't give you your budget because if they give you a budget, then you're just going to quote to that dollar value. This game has been played on me, and the professionals are very successful at what they do, and like-minded people, they will just say, hey, sorry, we're not interested. We're just going to move on because we're already busy as it is. Hopefully, that shed some light on the behind the scenes aspect, and that's the reason why it's important that all of these stages that I just listed are important that they're followed because they fall into one another. You need the first one here to get to the second one. You need the second one to get into the third one.
So scope of work is important, detailed. From there, you go to your references, people that you have within your community, within your sphere, and those are the people that will give you references that you will then take your detailed scope of work, and then you'll be amazed at how many contractors and tradespeople will be interested in quoting your project. So many times I get complaints from newbie real estate investors, just in general, there's old-timers too, that, oh, I've called 20-somehow tradespeople and only five actually returned my phone call and only three showed up to give me a quote. There's got to be a reason for why, and you got to dig into it. I know what the reason why is. These are the reasons why, just as I had explained.
Deidre Woollard: Interesting. What should the scope of work contain in order to make it understandable for both you and the contractors?
Van Sturgeon: Although your due diligence should be done beforehand, as much of it as possible, getting to the point where, actually, you've gotten specifications of the appliances, the tile, the hardwood, the color of the paint, the type of the paint, all of that stuff needs to be put into a detailed scope of work because, ultimately, those are the types of things that affect the price associated with a quote, so if you're going to go to a general contractor to quote it out, you need to have those details. If you're going to go to individual trades, then you're going to act as a general contractor, and you're hiring trades directly, then you need to have that detailed information. The way I construct my scopes of work are similar to what you'll find in commercial projects. Unfortunately, on the residential side, there's very few and far between the scopes of work, whereas, on the commercial side, they are commonplace. It's very rare to come across an extensive renovation without a real detailed scope of work. What that scope of work is is that it identifies what the work is supposed to be associated with that particular project. It provides processes, it provides the specifications I had mentioned, it provides drawings, pictures, measurements, as much information as possible to be included in that scope of work. If it's done properly, Deidre, essentially, when I send this document to any contractor or tradesperson, they can for the most part, provide a quote, based on the information that I provided in that scope of work. I've saved them a trip to come to the project and have to do their own measurements, their own analysis, to have to pick my brain about what to do or how to do it. These things have already been resolved. Again, that's another reason why you get more people interested in quoting your work because a lot of the work is done for them. It's just a matter of going through it and spending an hour and putting a quote together. That hopefully makes sense.
Deidre Woollard: Interesting. Do you recommend that people get multiple quotes? Rule of thumb that I always hear is, you're supposed to take the one that's in the middle because one will come in too low and that one's no good, the one that's too high is probably too high. What is your advice on that one?
Van Sturgeon: Whenever I hear that quotes are all over the place, I hear that all the time, there are two reasons for that. One, you haven't provided detailed enough information associated with what it is that you're looking for or one or some of the parties that are quoting it are not professional. I, along with my competitors, when we're pricing out work, we come in very close to one another. There is no collusion in the marketplace. We know what our costs are, what our margins are, and in order for us to be successful, to be in business, this is what we need. Our numbers will be very close, and when you find a number that is so far off on a high side or low side, then there's issues. There's problems. When you sent out the scope , and you got numbers all over the place, then you really need to look at the process, meaning how detailed is the scope of work or the information you're giving to these people and who are you attracting? Who are you actually inviting to the process? If you were to go on Craigslist and start giving out a detailed scope of work to them in comparison to somebody who's a bonafide operator, you will see most often the number coming back from that individual from the Craigslist is going to be significantly lower. It could be because they're not insured or they don't have overhead, but also it could be they don't know what they're doing. That's another reason why having a detailed scope of work is important because it scares away a lot of the riffraffs. There's a lot of riffraff running around, and when you approach them and say, hey, I've got a job, or they approach you to say, hey, can I price out your job? Sure, here's a scope of work. Price it out. You don't hear from them again because they're scared to. This person that they potentially could be doing business with knows a lot. They don't want to get involved in that relationship. They want to deal with people that are just muddled through and then they get paid and they disappear. But they don't want to deal with smart people, people that are on-the-ball, professionals. By virtue of having that kind of relationship, those types of things, you're going to attract better qualified individuals to price out your work or do your work. Less problems.
Deidre Woollard: Fantastic, that's great advice. Let's take a quick break here.
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Deidre Woollard: I'm back with Van Sturgeon, and we're talking about successful renovation projects. Let's get into some of the scary stuff. Let's talk about some of the specific issues. One of them that a lot of people are thinking about right now, especially we've had hurricanes recently, we're in rainy season on the East Coast. What about water damage and mold? What should people do when they find this in a project that they are looking to renovate?
Van Sturgeon: One of the cruel ironies is that we need water to survive, but water is probably the most destructive force out there. It creates such havoc in building structures. We try and we do keep water and moisture out of our properties or out of our homes, and when it gets in, it can cause a lot of damage. There are a number of things and mediation that can be done when you get into situations like that. A specific course of action needs to be initiated depending on where the water intrusion comes in from. When you have situations where you have water intrusion coming from your foundation, they are different from the exterior wall or from the interior Typically with water, you need to address it right away. If you don't, what will end up happening is that that problem will 10x itself where you'll have issues of deterioration of the actual structure itself, and you're going to have issues with mold. When you get into that, you're talking about substantial repairs that need to be initiated in order to get that property back to a normal state. Particularly, I feel so badly for these folks that keep getting walled up every once in a while, over down at that area, even Florida. It's a problem. I just hope that folks will be able to have the right to ship and get things back to normal as quickly as possible. But water is a big problem.
Deidre Woollard: What about wiring? One of the things I've seen whenever I look at an older house is you've got old phone jacks, you've got wiring where there probably aren't enough outlets for the way that people use electricity today. What's the course of action there? Do you have to take out old phone jacks and cable lines? How do you add in smart technology and make sure that the house can actually handle everything that you want to have going at once in it?
Van Sturgeon: That's a great question you've asked because it's an ongoing concern because our lifestyles have changed over the last 50 years. Fifty years ago, you could get by with that 80-100 amp electrical service for these properties. Actually, quite even less than that they were putting back then. All of a sudden, because we've decided we want pools, and heaters, and whirlpools, and saunas, and fitness rooms, and stuff like that, all of them, and all these appliances that we have, they suck up a lot of electricity. If you put them all on, you need to have more electricity available. So you got to go through the process of actually having to upgrade that, and it starts with the actual panel, and then sometimes it has to go into upgrading the actual wiring itself. That's substantial renovations that you're talking about. Usually, these properties have been built before the 1970s, '80s, where you have these problems, and those particular houses require some major gutting where you got to rip out walls. Then when you get into situations where in these older homes, early 1960s, you get into homes with plaster and lath, which doesn't allow you to be able to just do a little section because these walls are all made out of those plaster and lath, and there was a process back then where drywall wasn't invented, or they didn't exist, or was too expensive. You have these walls that are just this big sheets of this lath, like the steel mesh, with plaster or mortar on it. So if you did a little section, you disturb the whole thing, and so you're forced to have to do the whole wall from corner to corner to make it look right. These repairs can be pretty substantial. You got to have a level of experience and understanding of what you're getting into. Again, it goes back to experience, and new real estate investors really need to open their eyes and really refer to some folks who have gone through this process, who have that level of experience to be able to guide them in the right direction because you can get into some serious money pits because when you start opening up a little corner, all of a sudden, that corner turns into a whole big wall.
Electrical is a big one, plumbing as well. In particular, again, I've done thousands of renovation, literally, from apartments, to single-family homes, to commercial buildings, apartment buildings, so I've seen a lot of things, and every once in a while, I still get tripped up, but I've seen a lot of things. One of the things that you get to know when you walk into certain era homes are some of the things you should be looking out for in comparison to other eras. For example, in the 1910s, '20s, '30s, those types of homes that are still around and exist, you need to really do your due diligence on the weeping tile, the foundation, but in particular, the sanitary lines in the home because those sanitary lines are made out of clay. It's a natural substance, and over a period of time, it deteriorates. One of the things that I found many times is that these beautiful trees that we have, that we love to look at, they can be pretty intrusive. They spread out what you call roots. Those roots like to find homes where there's water. I have seen some real doozies where roots will go six feet down in the ground underneath the house to where there's sanitary lines and where there's joints between one clay pipe to the other clay pipe on the sanitary side or the storm side around your weeping tiles, there's these big balls of roots that are intertwined inside. You can take a pickaxe to it, and you can't break it. You've got to get in substantial repairs, or sometimes a whole line collapses. One of the things that happens that I got into because I've been burned before, I bought a property that seemed all great and good. I zoomed in, purchased it. I had an existing tenant that I assumed, and then two or three months later, all of a sudden, I get a phone call, the basement was overfilled with yucky water floating around. I had to now deal with this issue where I take the tenant, put them up in a motel, and I now have to rip out the whole basement floor and replace the whole sanitary line because the line had collapsed. How you prevent that is you need to spend a couple of $100 to get a camera inspection done in those lines so that you can ensure yourself that you don't have those issues or at least you don't have sags in the line to have these little gremlins that pop up that could really nip you in the butt because something like that can cost $15,18, 20,000, and you're doing your arithmetic on the back of an envelope, all of a sudden you get whacked with a $18,000-repair that throws the numbers off, and it takes a long time for you to recoup that. Those are the types of things that you've got to keep an eye out, and again, it comes with experience.
Deidre Woollard: A lot of investors, they might be tempted to be buying something at auction or buying something as is. Do you feel that they should always get multiple types of inspections, even if they're buying something as is?
Van Sturgeon: Of course, they should. I strongly encourage them to reach out and try to cover as much of the loose ends as possible. The problem is, and it's always been a problem, but in particular now, you have such an overheated real estate market, where if you are out there looking for a deal, and you're able to find a deal, lender deal is everywhere around us. But if you walk into a deal that's truly a bonafide great deal, you only have an hour or two or three to make that deal, to pull the trigger and put it under contract. You're not going to be able to get by with one of those, oh, give me seven days to think about it, no. If you're a serious player, you got to put down and put your money. You're interested or not interested. It's one of those situations where, which comes first, the chicken or the egg? You've got to have that level of confidence of experience on the renovation and rehab side to be able to walk into a property and accurately assess what it is that needs to be done, the time it's going to take, and amount of money it's going to cost, to be able to do your little quick calculations on the back of the envelope, and then be able to say, yes, this is a great deal, I'm going to buy it. Because if you don't have that level of confidence, you can't rely on your general contractor friend or the house inspector is going to come in two, three days to look at it. That deal is gone. I don't know how to answer that. This is the unfortunate dilemma, but it's always been like that. Whenever there's a great deal, even if the market is so-so, average, great deals get snapped up quick. They don't want to hang around. You don't have time to tippy toe and do a little dance. No, you've got to act quickly, or they're gone. They're going to go to somebody else. That goes with relationships that I have with real estate agents that have these pocket listings or wholesalers. Wherever you find these opportunities, they come quick. You've got to be in a position to be able to act quickly.
Deidre Woollard: Is there anything for you that's an automatic no, or is it just a question of how much money it takes to fix it?
Van Sturgeon: I come from a position where, again, I've got so much experience and knowledge and have the resources to be able to combat anything. I've built homes and subdivisions, so I've worn many hats. So for me to walk in, I like the houses that are uglier, I like foundations that are leaking, I like things that are falling apart, I like sagging walls. I like all that stuff because it scares everybody away, and I could get some phenomenal deals. Then internally, with my people, with my companies, I can look after them. That's where I found the greatest homeruns or greatest successes where people just walk away from properties. There are some geographical areas throughout North America that have issues with foundation seeking. It could be because of soil conditions. It could be the way that they were built. There's issues all across the country. Termites is another one. Whenever you come across a problem like that, most investors were, like, I don't want the deal. I don't want to touch it with a 10-foot pole. Meanwhile, I'm to say, backup the truck. Give me some. There's nothing really I won't take, as long as you do the arithmetic. This is a numbers game. This is unemotional. That's the beautiful part about it. It's a numbers game. You type in what you pay, you type in what your costs are, what your need is for in terms of profit, and he spits out a yes or a no. Is this a good deal or it's not a good deal? Obviously, you've got to build in some contingencies associated with some overruns. It's a wild and crazy game, this real estate. There are times where the market could change on you. There's also times where you will come across unexpected cost associated with the renovation and rehab, and that happens to me as well. But again, I'm much better positioned to be able to act upon it because of the experiences and the skill sets that I have in comparison to new real estate investors who go out there.
There's an analogy that I often use, it's with regards to, if you want to learn how to play a piano or guitar, you can go out there and try to figure it. Muddle along and try to figure it on your own, or you can go hire a teacher that's going to sit right beside you and show you how to play that piano or that guitar. Which is the option? Which is the better approach for you, because one, it's going to cost you money, but at the same time, it's going to save you a lot of time. If you're in the business of saving time, and particularly, with real estate, it's saving really big money because one wrong move can totally devastate you. It can knock you out. I've seen people being knocked out of a wrong move on a real estate deal, whether it's buying a bad deal or on the renovation side. But back to the analogy of a music teacher, do you see value in that person sitting beside you and helping you along the way, or would you rather figure it out? How long is it going to take for you to figure out how to play the piano? Or there's so many YouTube videos, and there's so many blah, blah, blah out there. That's great and wonderful, but can you ask questions off YouTube? Can you ask questions to the Internet site that talks about doing the three things to do in a kitchen renovation? No.
Every renovation, even though I've created systems and processes that I use repeatedly, they're also unique. There's things that pop up that need to be addressed. If you're not in a position to be able to address them, it's a problem. It creates a level of uncertainty, and that's where you start getting into anxiety and apprehension about the whole process. That's the reason why I'm out there preaching. There's two skill sets that we need to have as successful real estate investors. One is you've got to find a deal. Money is made on the buy, as they say. Absolutely. You need to be able to have an ability to be able to find a great deal. But I'm going to say that there's a second skill set that you need. As you better know how to evaluate and do a renovation, you better know how to plan and manage one because, as much as that great deal is a great deal, you can easily have that deals blow up in your face by a couple of wrong moves on that renovation side, where you decided to over-renovate, you've identified wrong contractors, tradespeople that rip you off or do inferior work, or they take too long. Carrying costs on hard money, things of that nature eat up into your profits very quickly. All of a sudden, a renovation that should have happened in a month or two, if it takes six or seven, that's a lot of money out the window. I find that sometimes, folks, these DIY-ers don't factor in the cost of their money, the time. I love going on the weekends or in the evenings to work on my little DIY project. That's great, but don't you have a life outside of that? Don't you want [laughs] to get this thing done quickly, so you can move on to another project, opportunity costs?
Deidre Woollard: You mentioned something that is true, which is that money is made on the buy, very concerning right now with prices being so high. It seems to me that in a lot of markets, a lot of those, what they call the cosmetic fixers, are mostly gone, and some of them are being stepped up by the iBuyers and the other services that are buying homes quickly. Is that what you are hearing from the people that you work with, that a lot of the projects that are still available are the ones that need that extra things done to them?
Van Sturgeon: I find deals every single day. My inbox is filled with deals from a variety of different sources. I don't go to MLS and pick through it to find a deal. In my humble opinion, there are no deals on MLS because there are millions of eyeballs that are looking for exactly what you're looking for, and you're picking it through. I find my opportunities through the relationships that I have with real estate agents, wholesalers, bird dogs, real estate, insurance brokers, a whole cornucopia of people that I created relationships with that know how serious I am as an investor, and they provide me opportunities, and they bring me in. They show me things that I have opportunities to be able to purchase or not. The things that I see, a lot of folks don't see, but that's because of relationships that I have.
I dispute the fact that there aren't deals out there. There's lots of deals. There are deals all around us. Right now as we speak, where you live, there is somebody who is struggling with their mortgage payment. There's somebody struggling with some house repairs they want to get out, and they're embarrassed to put their house up for sale because it's in a dilapidated state. There's people that are getting divorced. There are situations. We don't want to take advantage of these misfortunes, but at the same time, somebody else will. I don't look at it as taking advantage to these people, I look at it as helping them out because they need to get out, and they want to do it in a very clean and efficient manner. They're around us all over. You can find those deals and the opportunities. That's my opinion. I see it every day, so I don't agree with that.
Now, to answer your question a little bit further is that we have seen a compression of cap rates or returns on our investment. You've got the big boys now all of a sudden from the Wall Street who have poo-pooed the idea of honing portfolios of single-family homes. Now, all of a sudden, they're walking, and they're starting to step up these opportunities. They are going out there, and they're adding more fuel to the fire associated with this overheated real estate market. No question about that. That being said, small mom-and-pop operator, investor, can outmaneuver these big boys because they will not go into the weeds and find opportunities or create those relationships, they want big cajun opportunities. They like to buy portfolios. But you can be the one actually to work it to your benefit while creating a portfolio of 10, 12, 15 properties, and then knock on the doors to those guys cutting a deal. There's opportunities in doing that. I've gotten those phone calls from those folks. Again, there's opportunities all around us. Yes, it's a little bit maybe, perhaps, more difficult than it traditionally is, but opportunities still exist. I see it every day.
Deidre Woollard: When you're renovating apartments or quadplexes, how is that different than renovating a single-family? Do you have to think about doing the systems first and then tackling each unit individually?
Van Sturgeon: It usually, depends on the type of property and the level of renovation and rehab that you're doing to the property. The process exists throughout, whether it's single-family all the way up to a 250-unit apartment building. The process is the same. It's a matter of who you bring into the picture and the extent of the type of renovation and rehab that you're doing. For example, if you're looking at a renovation, a rehab of the common areas of an apartment building, especially if it's a AB property, you're going to go to refer to interior designers who are going to handle that component of specifying the whole scope of work associated, identifying the finishes, the way the tile are going to be installed, the doodads are going to be put in the hallways or common areas of the building, you're going to hire an interior designer and they're well worth it. you're best to do that because they're professionals at it. If you have a parking garage that's leaking or balconies that are falling apart because of the elements or a building's exterior wall has got issues, you maybe hiring a structural engineer. A structural engineer would create a scope of work associated with the step-by-step necessary to address that issue associated with the problems with that property. It's not any different than you owning a single-family home was looking to do a major gut rehab of a property. You got to go through the same process of identifying the processes, the specifications associated with each components, and then creating disciplines within that document so that it makes it very easy for the electrician, the plumber, the painter, or even a general contractor to be able to quote on it because all the information is there. There's nothing worse, and I'm speaking as a general contractor, nothing worse when you get a document and there's missing information in it. You want to be able to put an accurate price together, but you can't because it's missing this and missing that. So it's very important that you create a detailed document, and it forces you, the principal, the owner, to make decisions, and then you've got to abide by them because it's written down in the scope of work. That's another thing that's often, these newbie real estate investors all across the board, whether it's on the multi-family side all the way down to single-family, is that they get caught up in the process. It's very easy all of a sudden from the $100-toilet to go up to the $150-toilet. Then all of a sudden, the standard paint at $3 a gallon to go up to 45. All of a sudden, you're at a budget overrun. All of a sudden, these renovations cost you a lot more money. Then all of a sudden, there's change orders and issues, the time has elapsed. This is the problem that a lot of folks have when they get into renovations that they start to over-renovate, or they start to get into things that they shouldn't be by virtue of the scope of work, and you've got a budget that you've nailed down, it forces you to stick to it, and then again, remember what I said in the beginning, goal. Ultimately, everything gets back to the goal. If we're looking to rent a place off for $1200 a month, we're going to reach our goal if we follow everything. If we're going to flip the property, it's going to get us to that point of what we're looking to make.
Deidre Woollard: I think you made a really good point there because project creep happens to everybody, and it's so easy for it just to get out of control. You keep coming back to that scope of work which is, I think, really important for people. It's not the fun stuff. Nobody wants to write out the scope of work. It's time-consuming. Some of the people would think it might take the creativity out of it. But really, the end goal here is to make money, not to have a project.
Van Sturgeon: There's a time to be creative and all that kind of stuff, but that's before you actually have guys or gals running around with hammers banging on your walls. Another thing that I come across is the ironic part about doing this renovation and rehabbing to a property, whether it's multi-family, commercial, single-family, is that if you're the owner, there's a lot of anxiety apprehension in the whole process because the irony is that, in order to increase value of a property, you got to beat it up. You got to rip it apart. You actually have to decrease the value of the property. In the midst of you doing a demo and you rip out the kitchen, bathroom, all that kind of stuff, and if you were to call up an appraiser to give you an appraisal of the property, do you think it will be less than what you paid for it? Of course, you will. Then on top of that, to make restitution, to make it all go away, to make it all beautiful, you guys are writing check after check after check, pouring more and more money, and then all of a sudden, get into the point where you've increased the value. That process for folks, maybe, like me, it's like second nature, it's like water off of a duck's back. But for a lot of other people, it's a period of a lot of anxiety and apprehension. For those folks, I really truly recommend that you find some mentorship, some coaching, some individual that can shepherd you through the process because there's a lot of pitfalls that you can fall into that can create a lot of damage to these real estate investment dreams, and hopes, and aspirations that you might have.
Deidre Woollard: Then there'd be no HGTV channel [laughs] because then there would be nobody having these disasters. I want to ask you about how do you make sure that the neighbors around you don't lose their minds when you're doing a massive gut rehab like that? Do you reach out to the neighbors or anything like that ahead of time?
Van Sturgeon: We all want to be good neighbors. You need to reach out to have some direct lines of communication with these folks and explain to them that what you're doing is actually beneficial to everybody on the street. Because by virtue of the amount of money, and time, and effort that you're going to pour into this property, you're not only raising the value of that particular property, but you're raising the value of the properties on that whole street. A lot of folks poo-poo, and cry, and moan about that guy who's making all the dust, and debris, and the noise that you're creating, but they love the fact that, at the end of the day, the value has gone up on their property. How rude of them to be such complainers about that, don't you think? So I start with creating those lines of communication. Also, having speed, efficiency, professionalism, and being able to go in there, banging out, getting your job done, in that clear, and concise, and quick manner goes a long way to keep those people with the pitchforks and signs away from your property. Again, this goes back to professionalism. If you're able to do that, I think there shouldn't be that much of a concern associated with those folks about what you got to do.
Deidre Woollard: Excellent. Van, last question for you. What trend right now that's popular in renovating do you feel is overdone and that maybe people shouldn't be putting into their properties?
Van Sturgeon: That's a very difficult question because I invest in different areas across North America. Each of those areas has their own particular thing. It might be that crafty thing, or it could be the hospital look, white on gray. The things that will be popular in Tampa, Florida are not going to be the same in Detroit, Michigan, or Cleveland, Ohio, or in St. John's, New Brunswick. Those are a couple of places I invest in I just threw out there. In general, I think that we're going to see soon the white on gray thing, that thing, I think, is going to start to phase out because it's overdone, and I think we're going to start to see more of the warm color elements start moving in. That's just in general. But to be very specific, it's hard. Every geographical area has their little thing, and it's up to us. One of the things that new real estate investors or any real estate investors got to do is they really have to do some extensive market research in their areas before they do a renovation. That's part of the whole setting up a goal and validating it. You've got to get in there and just understand that if I want to get to the goal of renting my place off for $800 a month, what are comparable rental properties out there in my marketplace, immediate to my property, that are at that $800? What do they have so that I know what I have to do to my property? There's got to be some real serious due diligence you got to go out there and do to be able to get to that point of clearly identify the steps or things you need to do in your property to be able to get to that point where you could charge $800 in rent after you've renovated a property. If you do that, you should be validating your goal, ensuring yourself of success if you do that.
Deidre Woollard: I love it. Van, thank you so much for your time. [MUSIC] I think you've given people a lot to think about. Definitely scope of work, number 1, most important. Reminder, listeners, you can learn more about Van and how he helps people at vansturgeon.com. You can always email us at firstname.lastname@example.org to share your thoughts. Stay well, and stay invested.
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