In this instructional video, Dr. Toby Potter, a veteran real‑estate investor and hard‑money lender, shares a cautionary story about a student who almost lost $87,000 because their rehab budget was dramatically understated. Potter explains that the root cause of such costly errors is an incomplete, vague contractor bid. He introduces his proprietary “18‑line‑item” bid framework, where each major scope (demo, HVAC, framing, windows, kitchen, plumbing, electrical, roof, etc.) is broken down into sub‑line items with dollar‑by‑dollar detail. He warns against lump‑sum bids, emphasizes the need for inspection‑based, post‑completion payments, and stresses that no money should be paid upfront. Potter also outlines essential red‑flags: missing start dates, absent timelines, undefined permits, and lumped MEP (mechanical, electrical, plumbing) costs. By walking the property with a contractor using this detailed contract, investors can verify that every component is accounted for, preventing hidden overruns. The video concludes with an invitation to a live Tuesday‑night webinar (6 PM CST) where Potter will demonstrate his AI‑driven analysis tools and show how to protect every rehab dollar.
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Hey everybody, I want to share with you a story of one of our students who almost lost their shirt, lost everything on a mistake on the rehab. If you are losing money on your deals, I can guarantee you this is because your rehab hasn't crossed all T's and dot I's. Hey everybody, I'm Dr. Toby Potter, The Unshakeable Investor, 30 years in real estate, over 7,000 transactions and $1.8 billion funded as a lender, I want to share with you the common mistake I see with all our clients when they lose money. And if you are losing money, this is going to resonate with you the most. So let's stop losing money. Let's start making a profit. One of my students almost lost every dollar they had on one flip. and I'm gonna show you what they did wrong. They walked it in person and they still missed over $87,000 in their rehab estimate. Their estimate came in around $113,000. And when we got down to the nitty-gritty, when I coached them, when I ran it through our system, our tools, my understanding, my knowledge, we saw that the rehab is closer to $200,000, which is an $87,000 gap. That's significant. Here's the deal. When you're putting a budget together, you have to have absolution in your numbers and there can be no variance of that. We know what a property retail valuation is, what the ARV is. We know this. When we walk a property correctly, we break down the scope of work line by line. and then we know what our max spendable is for the rehab, and it cannot be almost $100,000 off. It can't. That is almost 50% of the cost. That's too soon. Now, if it was $1,000, $2,000, you've got some wiggle room there. When you're looking at almost doubling your rehab cost, that breaks your pocketbook. So I need you to understand how important it is. And here's the common mistakes. The contractor bid must have all 18 of these line items. These are line items. And then inside each line item is a detailed explanation of what that scope of work is going to look like. So you have your demo. How long are they going to be on it? What are they demoing out? And when a demo is paid, is it completed? So many times it's not. Well, I had to have Johnny go back out and tear this wall out later, these cabinets out later, or rip out this bathroom later. I just needed to get this started. That's a common mistake. One and done. Stop going back and forth. It was a whole lot out there. Your HVAC system. Is that just the compressor? Is it the blower unit? Is it both? Is it all the ventilation lines? What does that entail? Here's the other deal. Your contractor will put a blanket number in there. You're assuming because it was $7,000, $8,000, $10,000, it's a complete rebuild. And he said, oh no, that was just for the compressor. You're like, well, what about the blower unit? It's 200 years old. What about all the vent lines? They're all tore up. Well, I didn't bid those. See, there's where we're missing the communication. You've got your framing, what's being reframed, what's being rebuilt. You may have to draw that out. If you're doing a complete gut-out to where you're moving walls, there has to be a clarity of conversations because I can tell you this, your contractor's only looking to make a paycheck. You're looking to make a payday. And so you need to understand the difference of what you need accomplished. He's only going to do the minimum. I don't care how long he's been with you. He's only going to do the minimum. And if he thinks for one second he can cut a corner, he will. It's just human nature. Quit taking things for granted. Windows, doors, bathroom, all the fixtures. What kind of fixtures? What kind of mirrors? What kind of vanity? What kind of sink? What kind of toilets? Break this down so there's nothing to be assumed. And go through all 18 of these. I'm not going to read them all, but these are your line item, subject line item. Underneath that is a sub-line item spelling out dollar by dollar what's going to be spent so you know exactly what happens. If your contractor is below these numbers, they're missing. So on your electrical panel upgrades, anywhere from $5,000 to $15,000, depending upon am I replacing the whole 200-amp panel, or am I just replacing old breakers? The panel is good, I just need newer Square D breakers. I need new aluminum wiring. I gotta do— what does that entail? HVAC, $6,000 to $15,000. Is it the compressor, the blower, the vents, or is it just the compressor? Just what is that consist of? The kitchen remodels, ladies and gentlemen, this is where most people fall short. Your contractor is telling you we're gonna put new cabinets up. You're like, great, that bid works. And then they go in there and they sand and paint 'em. You're like, wait a minute, this is the same crap we had from 1972. See, people know the difference. Just 'cause you painted it doesn't make it best. I understand it. Full plumbing, re-piping, line by line, roof replacements, bathrooms, so on and so forth. Those items are the ones you must fully understand. Walk the property with your contractor With this contract in hand documenting these 5 things: foundation, the roof, MEPs— mechanical, electrical, plumbing. That's what MEP is, mechanical, electrical, plumbing. Does it have it? Is it broken out into each section? Mechanicals, HVAC, electricals, electrical, plumbing, plumbing. Simple. Are they broken out by their own categories? Demo scope, And then the interior finish. What's the grade look like? Walk it, write it down, spell it out. That any person can walk in there and understand what's being done to that property. The red flags that I reject on day one: lump sum numbers. We as a hard money lender won't accept it. How do we pay on a lump sum number? My electrical is $10,000. Great. Here's what happens. They go in there and they run all new electrical, and all they've done is wire the house and they want paid on it. I'm like, well, it's not done. Nothing's hooked up. Outlets aren't set up. Switches aren't set up. Appliances. All you've done is done the electrical rough. Well, then pay me half. I'm not paying you half. I don't know that half is done. See, you do yourself a disservice when they're lump sum numbers. As a hard money lender, we don't pay on that. I want absolutions. So I can inspect what I expect. MEPs, all lumped in. So my MEPs is $15,000. What does that consist of? Come on. No start date. Oh my gosh. Our system shows you when you must start to where you must finish. And if you're in that line, you're profitability. If you're outside of it, you're losing. If you're in front of it, you're winning. See, we build all this out for you. Demo timelines, permits listed, all this. If these aren't on there, it's a red flag on day one and we make you redo it. Never pay anything upfront, ever. We pay everything after work is completed and inspected and approved by all parties. Okay? Always. You can't negotiate down. A contractor's bill after the walls are opened up. You have to understand that you cannot negotiate down on a contractor's bill after the walls are all opened up. Once that day is done, everybody's stuck with that property. Okay, we run this through our analysis, we run this through our AI engine, we give you Absolution. So join me Tuesday night 6:00 PM Central Standard Time, and let me show you exactly how we protect you from ever losing a dime from this day forward. Dr. Toby Potter, I'll see you Tuesday night.
