Builders Contract - On Renovation, What to ask for ?

[FeverPitch]

Hi Investors

I'm about to embark on a first time large renovation of my investment property. Architect drawings are done , resource consent approved, neighbours happy.

We are now approaching builders (WGTN). What should we ask for pricing, guarantee, stages of work, progress reporting.

The job is going to take between four to six months. Any advice would be appreciated.

- How do we cost , per hour ? or one off fee ? or a stages fee ?
- How do we deal with insurance what do you ask for and who's responsible?
- How do you deal with an overrunning deadline , what clauses do you put in to the contract ?
- Can you specific that amount of workers on your renovation ?

Its good to be clear and up front and want to make sure the contract is water tight. Are there any reference websites worth reading advice etc.

Many thanks in advance FeverPitch.

[donna]

Wow - where to start!

We have just gone through it for our home. However it wasn't long before the builders worked out the home needed a rebuild so hopefully that doesn't happen to you.

The challenge with a lot of homes particularly in areas like Kapiti is that they started out as the family bach. Then the area develops and people choose to live there full time and as they need a larger house they do a bit of good ole DIY. Our house had 3 renovations with varying levels of competency and sign off. We knew this might be the case when we bought it 14 years ago, so it was no surprise that the home had borer in the frames, it wasn't straight and (this we didn't know) it turned out to be highly dangerous as a load bearing beam had removed during one reno and the ceiling was held up by just the iron roof.

So my point is, you don't know what you don't know and a reno will find curly obstacles. And it's not just homes like ours, even 'nice' properties have hidden crap. I know someone who thought it would be great to reno their bathroom - put in wall and floor tiles etc and they found a huge amount of issues and the unfinished bathroom has tripled in cost and the workmanship is poor.

1. Have a HUGE budget. Builders will quote way under to get the work - e.g. we were quoted $8K for a Kitchen (the cabinetry alone was twice that much). So where we went wrong is we never fully analysed all the costs and asked the question: what we get for the $$$? If we'd done this at the outset then we'd have found out what we'd get for $8K.

2. Renos are almost never fixed cost - so it's time and materials due to the unknown and this is where a good quantity surveyor comes in - see no.3

3. When you're flush with cash at the beginning of the project - this is when you need to carefully critique the invoices. Don't wait to do this when the funds are running out. I know it seems obvious but when you're working and life happens you don't analyse every hour worked - plus if you're not on site how do you know they have worked the hours? Are they on site or down in the Mitre 10 cafe? They needed to get some materials for the job or so the excuse goes. If you're concerned about the hours etc you will need to be on site all the time. Plus they can be on site but not actually do anything. Productivity is a challenge - your expectations versus theirs - plus they're human and stuff happening in their lives affects their work.

The list goes on and on. I thought we were very well prepared having done lots of research etc but it's a steep learning curve. I can say we are happy with what we've got but we went 20% over budget, had to manage our stress levels and focus on what was important and let the rest go, even when you knew at times you're getting a raw deal.

I have seen really shoddy workmanship on other properties, thankfully not with our rebuild - in fact we're really happy with the product and the cost was appropriate for what we have. And this is what matters in the long run so you will need to know what to fight back on and what to let go - with your tradies etc.

Hope this helps and also read this.


cheers,

Donna

[absoluteproperty]

Great post Donna, great reading from someone who has walked the walk recently. Very helpful.

[FeverPitch]

Hi Donna

Great information thank you so much for the write up. The property we have is a villa 1908 so there's a high chance of surprises. I'm thinking borer at least. We have to start with repiling so this could give us an insite. Life does happen and I can see the importance of being on site each day. I've project managed small renovations and I was always needed for questions. Currently the problem is finding a good Wellington builder who is interested. Very common to hear we are busy for the next eight months to a year so no thank you. I almost feel like beggars can't be choosers right now. I'm doing my best to break the renovation in to stages but hard to do on this one.

When receiving a quote for a large renovation how detailed should one expect. The whole house is being changed so would I expect pages and pages , eg bathroom this amount kitchen that amount. Or is a builder just going to put one figure to be paid in six instalments.

The main thing to remember is have a large contingency.

Many thanks Fever.

[donna]

With quotes we mostly got just one page which seemed okay as they were all doing it however when we went to a larger outfit and we got a thorough cost schedule spreadsheet and timeline it was a game changer. The one page quote builders wanted payments every 2 weeks, whereas the one we chose (with the detailed quote), invoiced monthly in arrears.

We also believed if we went with the builder that can cope with just one project at a time, the waiting time to get them would be longer and towards the end of the build, they would just want out to get onto the next one. It's at the end of the build that you really want them engaged so it doesn't drag on and delay the handover. However maybe this can be managed with the payments. A builder we came into contact with during our project said his contract always keep a third of each invoice payment in a Trust - and paid out at end of the job.

With the bigger outfit they definitely had more resources, and great influence over their tradies. E.g. with us when they were a bit behind schedule they just put a lot more people on the job. Plus they could get their plasterers, plumbers etc on the job exactly when they needed them including weekends. It was slick and professional.

Someone else I know, can not get their builder to come back and finish the job.

cheers,

Donna

[BlueSky]

yes, the joys of building. i should have kept all mine that we built!

As a matter of fact , which one would you do Build new house to sell or renovate existing to sell ?

i guess the latter is a lot less risky - potentially. the section price is circa 650k alone !

[jimO]

E.g. with us when they were a bit behind schedule they just put a lot more people on the job. Plus they could get their plasterers, plumbers etc on the job exactly when they needed them including weekends. It was slick and professional.

Someone else I know, can not get their builder to come back and finish the job.

cheers,

Donna

they were probably there hoping to get paid for the job 3 jobs ago , big firms are notorious slow payers, thats why when they go tits up they owe various subbies a couple of mill