How to Keep Real Estate Construction On Time and On Budget

You found the deal, you ran the numbers, you negotiated, and you closed. Now the biggest challenge begins. How are you going to keep your construction project on time and on budget?

In today's episode, we're going to break down what you have control over and what you don't. And I am interviewing Liz Faircloth, who is currently building a ground-up construction value at $5 million. We're going to tell you exactly what she's doing with the delays that she's facing so you also duplicate that if that happens to you. Let's break that down.

Welcome to the Real Estate InvestHer podcast, a top 1% show helping women achieve financial freedom by investing in real estate. And now your hosts, Liz Faircloth and Andresa Guidelli.

So Liz, you are building right now a ground-up new construction project of value at $5 million. So let's break that deal down. How did you find it? What's the construction budget and where are you at right now? And we're going to go over the, the challenges, right?

All the specifics. I love it. So my husband and I, Matt, wanted to do a local project for, for quite some time and we're in a luxury market. So there's very low supply of property and a very high demand. You have a lot of people coming into the area that are, they're looking for second homes, they're looking for vacation homes, they're looking for kind of weekend homes. And And so we started networking with a local realtor. Literally, she's the top-producing realtor in our community, which is New Hope. And we just started networking with her. We had a couple of meetings with her, kind of sharing some of our criteria, some of what we were looking for. And we wanted to do something that was going to add value, right, to the community and add value to the supply and demand issue, which we know is a good place to be. And so a couple of weeks after we had our last meeting with her, she shared a project, an opportunity. It's along the Delaware River and it's a property that was sort of obsolete, if you will. It's 1,900 square feet. When you walked in, literally your head hit the ceilings. It just wasn't a property that people wanted to probably live in any longer. It was an opportunity to tear it down and then rebuild. We're rebuilding on the, on the river, be about 5,000 square feet, 3 floors, you know, 4 bedrooms. The value though is that you're providing a luxury home in a community that desperately wants more of those types of properties. There's about 6 homes on the river right where it's, you know, in line. And there's just an opportunity. It has, you know, has a great view of the river and has a great view of the towpath, which people bike on and everything.

So let's talk about the challenges that you're currently facing. $1.5 million and the ultimate goal, right? I always say that time and budget go hand in hand. If you screw up one, you screw up the other. They go really parallel to each other. So when it comes down to being in control of the time and budget, there are two different ways that we can look at it: what we can control and the things that we can't control. So for this particular project, what have you put in place to be on time and on budget?

Yeah, I'm going to share that. And before I do that, the challenge for us in moving ahead with this, even though it was a great opportunity— there's a lot of demand for second homes— the biggest on Dressa was that Matt and I, our skill set, we're visionaries, right? And we tend to be more visionary, which, you know, in our— as we run projects, as we run different areas of our business. And so I knew that was a gap. So I knew that if this project was going to be on budget and on schedule, I needed to build like an A+ team and I didn't need like average people. I really needed an A+ team. So that was— I knew that going in that that was a liability, if you will, or an opportunity that I needed to watch and manage. So the team that we built starts with your obviously your realtor because they're the ones— she was the person who sold us the property. She'll be selling the property for us. She's also leading the design of the project as well. And that was critical. I didn't just want to go with a realtor, though. Andresa Guidelli was the kind of person that was very friendly and bubbly and like, quote unquote, smiled a lot. And I'm not trying to be mean here, but it's more about her personality style, because if I'm more of a visionary and I'm going to be more, you know, bringing a team together, etc., I want to see how she drives. I want to see how she drives just her next steps. I want to see if she's more of a driver, if she's looking forward, kind of like a no-BS person. And I really like surrounding myself with no-BS people. Quite honestly, I don't smile. I know that seems like a simple thing, but that was something I was really looking for. And she has that exact personality and she has that exact way of being. She's ahead, she's driving. And that was a really positive thing with our GC. I also needed— I needed a team that was a comfortable, you know, building on the river. It's not the easiest project to get to because it's literally down this little road of the towpath. So certain construction vehicles don't even fit to get there. Right. So it's not the easiest project from that perspective. I needed an OBS GC who had experience building on the river, luxury homes, and also wasn't deterred from the challenges that he was gonna face. Oh, this is gonna take longer because of the fact that I have to go down a small road. His same type of personality as well. He's much more straightforward, detail-oriented, and driving the project along. I needed that in my core team.

I think when you, when you are dealing, when you are building a luxury project or any kind of project, to be honest, really understanding your gap, where you're good at, what you bring to the table when it comes down to personality, skills, and experience, Where are the gaps and what the role needs? So for example, in your case, a GC or a realtor, what type do I need there? Because if you have a GC that it's more people-oriented and not process-oriented, you're going to have an issue with the time and the budget for sure, right? And that is something that I think people underestimate. Investors underestimate those things and they were like, oh, we get along very well. We're very friendly. I don't need to be friends with everybody that I work with. No, I will become very friendly if you finish my project on time and on budget.

Yeah, it's the way of being, and it's also the experience level. The fact that my GC built a home on the exact same river that I'm building a home, that's a huge advantage, right? That was a criteria that I had. The realtor built 3 condos. It's not necessarily 5,000 square foot home, but she was literally the developer/realtor on her own projects closer to town. So again, from an experience level, she's not, oh, I heard this from another realtor. She's the realtor and the developer, again, along the same river. So high experience, strong personality, and really make it happen individuals was my like bulletproof, to be honest. I don't wanna have one miss in that if I'm not bringing the experience or if I'm not bringing the, you know, the strong timeline and budget type of approach, which I have learned. However, you still wanna see that in your team.

You remind me of a project I, I built two, two townhomes in South Philadelphia. And one thing that I completely forgot, but it, you remind me.

I'm bringing it back for you. I'm bringing it back.

You're bringing it back. I forgot about this lovely project. It was a very cool project. When we saw it, there was a house and a lot and we tear down the house, but right next to it there were three brand new construction, new construction townhouses. And I went ahead and I looked at who was the architect and who was the GC. Yeah, that's great. Because I really like how they did the project. Not that we were gonna copycat, because that would not gonna be cool for the resale. However, they knew exactly what worked, what didn't work on those projects. We bypassed so much time. We bypassed so much there. and it allowed me to create a project that was complementary to the next door, same level of finishes. And I got an opportunity to make it a little bit better based on the tweaks that we did. So working with people that have experience already on literally on the same market that you are looking to build, you bypass so much when it comes down to the learning curves. All right, so those are the things that are controllable, right? However, in real estate, there's so many things that are out of our control, or it happens, and then how we react to those to be back on control or continue the progress, I would say, despite any types of delays. So if you can share with me, what are the current challenges that were out of your control and how you are mitigating it?

Yeah, and there's been a few, right? We had one that earlier in the project that we didn't think we'd have to get— go to the zoning board because it was pretty much you're using using the same footprint of the property, literally taking it down to the studs, rebuilding. We were told that we wouldn't have to go to zoning and involve the township from that perspective. And that was completely wrong. We ended up having to do that. So that was a solid 2 to 3 month delay that I had not necessarily enjoyed or liked. However, I did bake in when I originally looked at the project and said, okay, what is the worst case scenario? And I think that's the key to Andresa, that right now because there's certain things you're being told or that you're not going to need to go to zoning. I like to have the worst-case scenario timeline because if the project works with that timeline, because it's going to include money, then you move forward. So I was really conservative. We were really conservative in our underwriting. It gave a lot of buffer time. So although I wasn't expecting to have to go to zoning, those months were actually baked into my actual projection. The other biggest kind of delays that had been really frustrating— my kids have enjoyed the snow. However, the amount of snow, ice, rain, etc., that has, you know, the Northeast has found in this lovely season has certainly delayed our team in getting through framing. And so that's kind of— we are done with framing now, just so it can give context to everyone. However, getting people out there, it was hard to even get out there because of the towpath. And then the, you know, getting the roof on, all the things that are real delays that I cannot control being in the Northeast.

Real estate projects are full of putting out fires, managing cash flow, and making sure you're on time and on budget. But things happen, and when you are out of control, what do you do? So Liz, tell me exactly what you're doing when you know what shit hits the, you know what, the big fan. And what exactly are you doing? Because it's That's, that's what we want to know in order to make progress, continue the progress of your project.

Yeah. And I think the biggest mistake that investors make is that often when there are delays outside of our control, we just kind of pause the project or we stop communication with the key people on our team. I increase communication when there are delays. And so strategy number 1 that I want to recommend is that your meetings with your realtor, meetings with your GC, they don't stop during delays like, oh, there's nothing to talk about. So we're just going to meet when we have something to talk about. No, I don't. I don't think that's effective at all. So number one, always have a recurring meeting with your GC. I have the same time, same day of the week. So that's number one. Number two, during that recurring meeting, you go through your agenda even if there are delays. And here's a quick, simple agenda. I know, Andresa, we talk to a lot of women in our community, like, what do you guys cover? What is your agenda? Right. You could take my agenda. You can leave it. But these are the things that I cover. With our GC. Number 1, what overall progress has been made, right? What, what's the overall kind of snapshot of where the project is? Obviously, if there are delays, he or she might be saying the same thing week after week. I don't really care. I wanna hear where the project is and what we can do, right? That's number 1 on the agenda. Number 2 on the agenda is bottlenecks. We use bottlenecks a lot with InvestHer, and I typically teach and use that with other teams that I work with. So bottleneck is something that's where people are getting stopped. So if they're getting stopped, obviously a delay is a stop. What are we doing to move through that bottleneck? Are there any ideas? Are there any solutions? The other thing that gets covered during bottlenecks is any decisions that we as the owners have to make, anything that we're holding up a decision or a process. So those are the things that we cover there. And then the third thing is always like, okay, what are the goals for the week? What are the goals for the next 2 weeks? Where are we headed in the next 2 weeks? So if there is a current weather delay, there's a snowstorm, something happens, I at least know what's on this GC's head and he has a plan for the next 2 weeks. Again, the beautiful part is that you should know what should be happening in the next 2 weeks. You're asking every week because you want to make sure they are very clear on their next 2 weeks. Does that make sense? It's, it's not just for your own knowledge. You should have a project plan. However, it is to keep your GC honest and also be on the same page. Well, I thought we were gonna be doing this. Why are we delayed there?

Can I throw one more thing?

Sure.

Where you're agreeing in writing. In writing does not need to be, but it needs to be like a, a minute meeting.

Yes.

Or say, well, we have agreed or not, because I don't know about you, I have a good memory and I remember what people say.

You have the best memory of anyone I've ever met.

No, I don't like to have that, 'cause then I can say, you know, on 1999.

I have the worst memory, so we really work well together.

You were wearing this clothes, you were sitting this side, right? I— exhausting. But I think that the goal here is to say, this is what we had agreed with, this is where you did say that you're going to order the windows. What happened there? Yes. Does he or she need a place where to put it? Because you're gonna find that GCs amazing at their craft, not so good at running a business itself.

Correct.

So it's always make sure that you're not like, oh, being like the mom of the situation, right? I want a leader and what comes out of their mouth needs to match with their action. It just doesn't work when they say one thing and do something else. And I'm totally fine with delays in the sense of it's out of their control. They couldn't have predicted the ordering the windows because you know there is going to be a delay on the window. It's just no-brainer, right? Everybody knows that, that is in, in construction. So it's always a way to be on the same page when it comes down to communication. One of the biggest mistakes that I've seen is when I understand one thing, they understand something else, and then it's a recurring matter. It cannot be a recurring matter when it comes down to communication. Otherwise the project, it's no doubt it will be a delay and it will be over budget.

Yeah, that's a great point. What we have done is we have a shared folder. So as my contractor is updating a budget or requesting a draw or there's something, right, action that's needed to be taken, he's updating that document in the Google Drive. The other thing that we do have is a shared doc of meeting minutes. So that is something we have put in place as well. And that's just helpful. So we're all on the same page and we're not having to regurgitate things. So we've been talking about underpinning the property for the last month. Something's off, right? If you're literally talking about the same thing with no progress, something is always off. And so then you have to get to that root cause of what, what's happening here, that why we keep talking about the same thing. You shouldn't— you should be talking about new things. There should be new challenges. There should be new problems to talk about. New problems.

Not same problems. One thing that I always do when I am— I have my phone open on the Google Drive. So as we are going through the meeting, I start taking notes there inside the document versus what did I talk about? Listen, I, once I'm out of that project, I will not hold space in my head about all the, the line items that we discussed it. So for all of you having on the cloud, you can access immediately and just like put a bullet points there. What is the task? Who owns a task? By when? That's all you need.

When you face a delay that's out of your control, here's what you can do to still move the project forward. So the biggest thing that we've been spending time on, Andresa, is the design side. This is a 5,000-square-foot property, luxury property, that the design of this property is critical, right, to the success of selling this property to the end user. That was another gap I had, to be perfectly frank, Andresa. I'm a lot of things, right? I have a lot of wonderful qualities. I have so many we can go on for the rest of the day. But, you know, designing a luxury property wouldn't be probably top of the list. Would you say that, Andresa, is a fair thing to say about your friend Liz? I don't have like the best, like, oh my God, this needs to go with this. I usually put things wrong together. Now you'd be like, Liz, you're the developer of a luxury new build. Doesn't that concern you? It's a gap I need to manage. And that's how you have to think of it as a leader. So I knew I would need to hire a design team, if you will, to really help with that piece of it, which is critical. The good news is that when I did a lot of walkthroughs to hire my GC, I wanted to see the design and I asked him, who designed this? Did you— was this your idea? Was that the designer's idea? He's like, we didn't have a designer. I designed this house. And it was, you know, a fairly well-put-together, even larger project than I'm doing, luxury build. So I knew my GC had some design experience. However, this is a $5 million home. I didn't want to just lean in only that my GC was going to design this house. I want another flair. I want another team member that's literally— that's their job. That was important to me. My realtor also has a design company, so it was her and another person that, that was the team. And so what they started to do and what they're going to be presenting with us is they've been working hard behind the scenes. It's not just finishes, Andresa. It's not just appliances. That's important. But there's certain layouts that are getting constructed because we're, you know, we're just about done with framing. So there's the kitchen layout. How's the kitchen going to be laid out? You know, obviously we have architectural plans, brands, but there's some room for kind of design, if you will. The second thing of the puzzle is obviously your appliances, your finishes. And you taught me this, Andresa. What are other people— you know, you don't want to just copy finishes or copy appliances, but there's a certain level of appliances that are expected in a $5 million home than there is in a $200,000 home. That's pretty obvious. However, you need to know what is going to be useful and helpful for an end user that I don't know yet. I'm not custom building this house for an owner that I'm working with right now. So I have to make something that's going to appeal to a lot of people, but make it unique enough and special enough that it feels and is luxury. That's a balance. And that's why you need a team to help you to get to that piece of it. The other critical thing that I want to mention is that so much of, of luxury you know, design, and I'm learning this, even our cabinets are going to be custom made, right? We're not just buying Home Depot cabinets. We're going to have a custom builder make our, you know, or have our cabinets installed and everything and made. That's something that we're actually on the schedule for 3 months from now. We're already on the schedule. And it's the time where we would be ready for that. That's how busy that this custom builder is that we're on his schedule already because he's in high demand. He's not the cheapest, not the most expensive, but very, very well-respected. They've done work with him before and he's like, yep, I have one opportunity here in May that I can put you in and it works out with our project schedule. That is critical. Had that not happened, you're then waiting potentially 3 more months just for cabinets. Obviously you can't. That's just delays that are in your control. So all of that's being scheduled now ahead of the time, right? The other thing I want to just quickly mention your, your designer is going to go in, especially with luxury, like, what's your budget? What's your budget? You can spend a crazy amount on appliances. You don't want to— you want to spend the appropriate amount on the appliances that the property needed and wanted. You also need to be mindful of your budget. So because the GC is managing— we're managing it with him— we're all in communication. So there's communication going back and forth as we build out kind of like a template plan between the designer and the GC. I'm not part of all those conversations. However, that connection and that relationship is important ahead of the time where I get something presented. I don't want to work through all those questions during a meeting. I want that kind of out of the way so we can really make some decisions and move the project forward. That's all I care about. And I think that's important that your team members work well together and that you make those connections. So the GC and the designer are in constant communication because he knows He knows our budget, they know design, and that's a balancing act in a big, you know, new build that we're doing. So that's really the design side and what the work we're doing right now so that everything's on schedule and we're moving forward effectively and efficiently. So that's strategy number 2. And then strategy number 3, I want to mention too, and this is the one that gets missed a lot. Andresa, I don't know about you, and I know you've done so many projects and we've done so many projects together. Is that so many people get so inundated with certain parts of the, you know, project that they realize next week they're gonna be outta cash. That's like, you're behind then, right? That's a problem, especially if you're outta cash. We're not talking $2, we could be talking something in 6 figures. And I see it time and time again that, you know, women that are doing fix and flips or new construction are realizing these things too late. And that's a lack of cash flow projections. Hands down. And so what does that look like? And I think that's the other thing that you could be doing during delays or during your project planning piece. And I'm constantly looking at because of the delays, you're adding months just to carry my construction loan, to carry my different holding costs is at the full amount that I'm borrowing, it's going to be close to $20,000. So now you break down $20,000 per week, per day. Quite a bit of money. That's really, it's an expensive nut. However, I need to think that through. I just now got 2 months of delay. It's gonna add 2 months. What is that gonna do to my cash flow projections? So if in 5 months I have a gap, I know that now and I'm managing that. Okay, where are we gonna get the gap? That's conservatively this, and we're, we're managing that right now.

I think a lot of, a lot of, let me just break it down. A lot of thoughts came to my head here. When it comes down to cash flow projections and management, a lot of real estate investors don't know exactly the cost of a delay. Many will understand the cost of the delay when the property sells and there is a, a line item left there for their property. What I encourage all of you to do, it is to understand What is the cost of one running a project per week? How much you're paying to all your lenders, and then you add taxes, you add insurance, you add everything that is recurring. So you understand how much a week, a single week costs you. That will give you a very clear understanding of how important it is to plan ahead, to mitigate risk, and a high sense of urgency. When you don't know that number, 1 or 2 weeks might not mean a lot versus when you know exactly how many zeros each week costs.

Absolutely. And even just— this is a single project, right? This is not like 10 condos or 10 buildings. It's a single-family home. And I still have a bookkeeper that's supporting me on this project. That is not something I need to be doing, looking at income and expenses and all of the above. However, having her on the team and having her update our QuickBooks and our kind of project plan is critical. And I look at that every time that something is in motion. I don't look at it every day. That's not necessary. Definitely on a weekly basis. And especially when the contractor is saying, okay, we're here, we're requiring XYZ for, for the next phase. I'm going back to the spreadsheet and I have found 3 mistakes on the spreadsheet that he sends me. I've given him too much. One week it was too little. It's looked all different ways. And so I need to keep— and it wasn't like he was trying to do anything purposefully, but he put the wrong number in the doc. And I said, well, this is wrong. I didn't give— this says I gave you $20K extra. I think that'd be great, but that doesn't make any sense. My books are showing this. You're constantly looking at that. Now, my bookkeeper, right, she's inputting the right data for me now to say, okay, where, where are we and what have I paid him and where, where's the gap? So even if you have a bookkeeper, a GC that knows what they're doing, professional people working with you, there is a checks and balances as the project manager, which I see myself, that is critical on a weekly basis. So your numbers are exact. You just can't be general. I don't care if it's a $200,000 rehab or if it's a $1.5 million construction, you know, budget. You got to be exact and know where your numbers are.

Trust and verify. So for all of you that are listening, keep in mind there are two things that always happen in every single project. One are everything that you can control in an event. And second, the things that you cannot control. And when those happen, The 3 things that we shared here: increase communication with your team members. Number 2, decision-making. What can you make a decision on that will help you move the project forward? And number 3, a pulse on your cash flow. Thanks so much for listening. Please share your golden nuggets or one thing that you got out of this podcast with our community and share with a woman that you like, trust, and respect. Thanks so much.

Thank you.

Thank you for listening. I hope you found today's conversation valuable. And don't forget to subscribe so you don't miss any future episodes. And share this with the women in your life that needs to hear it. I'll see you next week. Mm-hmm.