The BRRRR Investor Podcast
The BRRRR Investor Podcast is a dynamic resource for aspiring and seasoned real estate investors, focusing on the Buy, Rehab, Rent, Refinance, Repeat strategy to build generational wealth. It offers expert insights, practical advice, and real-world examples to guide listeners through every step of successful real estate investing.
The BRRRR Investor Podcast
Avoid Common Investor Mistakes: Tips for Hiring and Vetting Contractors with Sean LaPointe
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Get ready to learn from seasoned contractor Sean LaPointe as he joins Alex Nahle on The BRRRR Investor Podcast. Dive deep into practical advice for investors and builders, including contractor vetting, effective communication, and maximizing your investments.
- How to identify red flags when hiring a contractor
- Importance of thorough vetting and background checks
- The impact of new housing laws like SB9 and ADUs on investments
- Tips for clear communication and documentation with contractors
- Strategies to balance quality and budget in construction projects
#RealEstateInvesting #ContractorTips #BRRRRInvestor #ConstructionManagement #ADUs
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Welcome back to the BRRRR Investor podcast, where our mission is to empower aspiring real estate investors in their journey towards building generational wealth. So on today's episode, I have my good friend Sean Lapointe from LaPointe Brothers. He's a local business owner in the La Crescent area. He's a contractor that covers all of Southern California, and him and his brother have been in business for over a decade. Sean, thank you so much for being on the podcast today.
No, thanks for having me.
Awesome. So tell us a little about yourself, your business, and Lapointe Brothers.
So we are general contractors. We like to call ourselves builders and developers. We take on primarily residential construction work. We do a lot of work with homeowners, multifamily owners, investors, and we also do our own projects as well. We purchase land, develop it. We've also purchased existing homes, added onto them, renovated them, and yeah, that's kind of what we do.
Okay, awesome. So what inspired you to become a contractor and like start your own contracting business?
Well, I've always been interested in the building trades ever since I was younger, watching. You know, my dad was a blue collar kind of worker and I would always see him take tinkering and that kind of inspired me to building things, basically. After college, I moved here to Los Angeles. One of my first jobs was working for a real estate developer as an assistant. And then eventually he put me in the role of a project manager. So I began interacting a lot with contractors and subcontractors, seeing how a large condominium project would be conducted from start to finish. And at some point I said to myself, well, I could be doing this. So my brother and I partnered up and we've been working as contractors and investors ourselves for years now.
Okay, that's awesome. So I know you mentioned a little bit about the project you do residential maintenance on multi units. Can you, can you elaborate a little bit more about some of the specific projects you take on? Like is it only additions, is it adus or kind of touch on a little bit of the variety of projects that you guys work on or that you see very common nowadays?
Well, you know, when we first started out, obviously when you're starting out, your jobs are going to tend to be on the smaller side. So we would have smaller jobs at first. But nowadays most of the jobs that we're doing are, are going to be pretty much more extensive in that we're maybe renovating an entire house all the way down to the studs, or we're doing a large addition to an existing House. We're doing a lot of ADUs lately as well. We've probably done half a dozen in the past year or two. Those are very popular right now and for good reason. I mean there's a lot of potential for additional income on the investment side and there's also a lot of potential for homeowners that just need more living space, whether it's for in laws or their parents or for kids or whatever life situation they might have. So yeah, they tend to be larger residential projects that we're mostly involved in these days.
So you are noticing like the ADU craze is really picked up and you know, a lot of people are kind of looking to either convert their garage to an ADU or build a new ADU from ground to ground up.
Yeah, absolutely. One of the, one of the ADUs that we just completed actually was for an apartment owner. So there's a lot of, a lot of potential there as well. We have a client who owns a four unit building in south la and she had a unused basically parking lot behind her four unit building. And we built a brand new 1200 square foot, three bedroom ADU behind the, behind the existing building. And yeah, she's getting a lot of additional rental income now and what was just an empty parking lot basically. So yeah, seeing a lot of ADUs both for homeowners and for apartment owners.
Okay. So yeah, some people think that you can only do an ADU on a single family residence, which obviously you just answered that it's not the case. There's a lot of new laws out there, especially with density increases in certain areas that allow you to add ADUs to like smaller multi unit properties and so forth that can maximize, you know, rental income and so forth. Right?
Yeah, absolutely. And the thing about adus is that although the law is very fluid and it is changing from year to year, what's important to note is that it's changing in a way that it's making things more permissive. So for instance, when first ADU regulations were coming out, you know, it was maybe maxed out at 800 square foot and it had to be an existing structure that was on the property. Now we can do up to two detached units depending on how many units you have in the main structure, with up to 25% additional units with existing structures. So there's a lot of variables involved. Each situation is kind of unique. So. But yeah, people are definitely using it to their advantage with their properties.
It definitely has evolved because now you can also use it as a rentable unit, initially, when it first came out, it had to be for primary use in law suite kids coming back from college and so forth. So there's a lot of leniency there, and I think a lot of people are taking. Maximizing that benefit. So it sounds like, you know, you work with both, you know, the end user or the homeowner and like, investors, developers, builders, correct?
Yeah, we work with both homeowners who are just looking to maximize their space or make their existing home more livable, as well as investors who are trying to maximize their income.
So do you feel that now with interest rates so high, you may, you know, that may be something you observe or not. But do you think, like, is that, you know, promoting people to, like, remodel their homes rather than sell them or buy a new one? Like, just, you know, I'd rather spend the money, maybe pull out a heloc, remodel my home and increase the value of it. Are you noticing that a lot people are just holding onto their properties longer because of that?
Yeah, we're definitely seeing that a lot of people are sticking to where they're at, you know, as far as their primary residence and kind of maximizing the space that they do have. I mean, I could speak to my own experience. We've been living in the foothills for a while now, and we were looking for some more living space maybe up in Santa Clarita or another place where it might be a little bit. A little bit more attainable, if you will. But now we've come back to the drawing board. Now we're actually thinking we should just do an ADU and get that additional living space right here on the land that we already own. So, yeah, I think mortgage rates are definitely influencing people's decision as whether they want to leave their existing property. That being said, with the ADU laws and now with SB9 coming into effect, people have a lot more opportunity to get the living space that they need with their existing properties.
Okay, so let's talk about some current trends, because you mentioned, obviously, you talked about ADUs. What are other trends that are impacting your work in a positive way? So you mentioned SB9. Can you maybe. Is that something that you feel is starting to be talked about a lot? Can you touch on that a little bit? How is that affecting, you know, impacting your work in a positive way?
So It's. To me, SB9 is very much. It's still early in the process. Not too many cities have fully adopted all the rules that are required for it. But essentially, what SB9 allows a property owner to do is, is to either split their lot in half and develop up to two units on both halves of the lot, or alternatively, it gives a property owner a right to build a duplex. And this doesn't have anything to do with the ADU regulations that are already in place. So you could, for instance, build a duplex on a lot and still build up to two ADUs on the same lot. So it's just giving property owners more flexibility as far as what they can do with their properties. It's trying to build more dense housing. Basically, a lot of the land here in Southern California is zoned for single family. And what the governments are trying to do, the state and the local governments, they're trying to make it so that we have more density in our single family neighborhoods. So SB9 is just another vehicle to achieve that. But as I said, it's still pretty early in the process. A lot of folks are still trying to figure out how exactly it works and how the process is going to work. Even the cities are figuring it out. But there's going to be a lot of potential there once all those rules are finally hashed out.
And as one project, or a couple projects that I'm familiar with, or some that you're working for my clients on, one of them in particular that we're working together on is that SB9 and Altadena. So as we've discovered, it's a little bit slower working with the. In this case, it's the county. Correct. But they're very communicative, they're very, you know, it feels like they're embracing it, they're promoting it. However, they're informing us that, you know, we don't know much about it, but we're kind of going through the motions. And it was nice to have them all at the time. When we had a zoom call with them, we had everybody from each department on the same call kind of going through the process, going through our idea, our plan. And they were pretty accommodating, I would say. Would you disagree?
No, absolutely. It sounded like they wanted the project to happen. You know, you mentioned we were on a zoom call. We had everybody, we had the health department, we had the fire department, we had building, we had zoning planning, we had everybody involved on a zoom call. What I got out of that conversation with the county is that that they wanted this project to happen and they were willing to work with us to make it happen. So it's really, it's just a matter of reaching back out to Them and kind of finalizing how we can make certain elements of the plan work to their standards. I think parking was one of the issues that we had to work on, but as a whole, it sounded like the project would be given the green light.
Yeah, we gave out some ideas and suggestions, and they felt like they were open to exploring that. So. So that's a very good thing. So with that said, what are the common challenges that you face when communicating with clients, and how do you address that common challenge? You have some misunderstandings and so forth. So can you tell us a little bit about some challenges that you experience?
You know, not to sound like the perfect contractor, but we don't really have any disagreements with our clients or misunderstandings. You know, I've learned over the years to be very detailed on my estimates and on my contracts on the front end, and also to communicate, you know, always be transparent. Always stay in communication with the client so that there are no misunderstandings to begin with. If there's going to be any sort of, you know, disconnect between myself and the client, I'd rather that come up way before a single hammer start swinging. It's really the importance of making sure that everything is written out and detailed and we're on the same page as far as fixtures, finishes, kind of the level of finish that they're expecting, and time frames. And I try to communicate as much as I can with the client to avoid any misunderstandings to begin with. So I'm happy to say that doing things the right way up front really helps out in the end, and I.
Can attest to that. I mean, you know, working with you on some of the projects I'm involved in or with some of the clients that I've referred you. One thing that I do like is how you do a lot of the work upfront, a lot of the communication, rather than just worry about getting the deal and then dealing with the issues later. I feel that you are very thorough. You elaborate with your communication. You do set the expectations correctly that there may be issues that we can expect. And these are the issues versus hide them and deal with them as the issues come up. So that's something, you know, I commend you on and I do appreciate because, you know, it makes my job easier when, you know, it's a project, one of my projects, or it's a project I'm involved in, or if it's someone I referred you, because then they'll pick up the phone and it'll come back on me. So I appreciate that. What you do. And I don't think everyone does does it the same way because, you know, with my experience with contractors, again, nothing against anyone, but, you know, some people are great at what they do, but they're not good on the administrative part of the business. And I feel you have a pretty good balance and I think it's because you have a good team with you. Right? You have your brother, you have yourself, you have all your other subs. So kudos to you.
Thank you. Yeah. On that note, one of the things, one of the things that I like to do when working on a larger project for a client is I like to come up with a Gantt chart, a project schedule that will basically show how each step, each phase of the construction project is going to go for the client. So everybody's on the same page. And you can see from our chart that if we're building an addition, for example, the first thing is making sure the property is fenced off and we've got all our temporary site services in place. And then the next phase is digging for the foundation and so on and so forth. And, and the client can see how long each phase is supposed to take and where exactly we're supposed to be on each part of the project. And like you said, I always like to overestimate just a little bit because stuff always comes up in construction. You know, it's just the nature of construction. We were rained out this past winter almost every other day throughout December and January. And that pushes things out, which is why I like to tell the clients on the jobs that I was working on during that time period beforehand that it's going to be a six to eight month job or it's going to be a four to six month job. So they have a good understanding of kind of where we're going to fall. It's going to be somewhere in that range. Rather than give them a set single point to focus on, especially like on.
The Olive project when it was time to do the foundation. It's really hard to do foundation work when it's raining pretty hard. So. Yeah, no, I totally understand that. Now, if we want to talk to new investors or aspiring real estate investors, what do you think, you know, one should look for when hiring a contractor for their projects? Like what are the things that you would give them? What advice would you give them?
Probably the number one.
Other than calling you.
Yeah, other than calling me. Probably the number one bit of advice that I would give an aspiring investor or rehabber is beware of the lowest bid. I think That's a crucial one because even though I'm well established as a contractor and I've worked with a number of subcontractors over the years, every once in a while I'll get a bid from a vendor or a subcontractor and it'll look suspiciously low. And something's going on there. Either the contractor hasn't properly estimated the amount of work that's entailed, the amount of materials that's entailed. Maybe they're underpaying themselves, which is possible. Maybe they're not doing things exactly the right way. As far as taxes or insurance or what have you or licensing, that's kind of a red flag. The classic advice to anybody who's about to do work is to get three bids from three contractors. So if you've got three different bids, one is for 10,000, other ones for 12,000, and then you've got a third bid that's for 2,000 or 3,000, that's a huge red flag. Something is definitely off. So I would say that's the number one thing to look out for. Number two, just make sure that they have all the basics in place. Make sure they're licensed, make sure their license is in good standing, make sure they have all the proper insurances and they're able to provide you with a certificate of insurance. And then ask for references. Ask for references, Ask them for photos of their past work. You know, if a client asks me for any of those items, I'll be happy to provide them. I mean, that's proper vetting for any contractor. But if you're in the process of finding a contractor yourself and you're having issues getting any of those things, then that could be a red flag too.
So you feel that if someone hesitates to provide such information to a client, that's a red flag right there.
Absolutely.
Okay. And if someone does want to validate or verify a license, if it's active, if it's expired, or if there are any maybe delinquencies or any lawsuits against that particular person, is there a place where they can go and check that out?
Yeah, here in the state of California, they could go to the cslb, which is a contractor state license board. They have a website open to the public. You can type in either the license number or business name of a contractor that you're interested in looking up and you'll be able to see whether they've had any disciplinary actions, whether their license is still active, whether their workers comp insurance is in place and in effect. Yeah, you can do all that stuff online. Yeah.
Okay. So I wanted to get to like, common mistakes that you see, like, new investors make when it comes to renovation or like construction and want to see how they can avoid them. But it sounds like, you know, one of them would be, you know, maybe taking. Hiring a contractor just for the pricing and not really, you know, doing a thorough evaluation of their background, their actual license, whether it's active or not, or maybe getting some references. So is that. Would you agree that that's one mistake that is a common mistake that a new investor may do?
I think so, yeah. I mean, I've seen it a few times where a relatively new investor will have started a project and is working either with a handyman or somebody who gave them not a very inexpensive bid and calling me or someone else to kind of take over. And I've seen that more than a few times. Another thing also is, before you ever get started, is make sure that the project that you're planning to do, that you're planning to work on, whether it's a rehab or adding on to an existing home or developing a piece of land, make sure that everything's been well examined as far as the existing property well inspected, and also that, you know, there aren't going to be any hiccups along the way from, from the city or from any utilities in getting permits. That's a little bit of a big ask for a new investor because unfortunately, a lot of that you just learn from experience that I'm aware of, single class or single source that's going to teach you everything you need to know. Every single, you know, potential pitfall stuff is going to come up and you'll just have to cross that bridge when you get there. But try to be as prepared as possible and do as much research as you can. Evaluating a site and evaluating a property before. Before you even get involved.
Yeah, to minimize the pitfalls. Right. Because like you said, issues are going to happen. You got to be prepared for that and embrace that. However, do the best you can up front to minimize it. Right.
Correct.
Correct me if I'm wrong, but it's probably very frustrating to take on somebody else's project, especially if they're deep into the project. Then you're called and you're like, shooting. It's probably a challenging thing to do. Right. Other than doing it from the beginning.
It is. Because unfortunately, a lot of times when it's someone who's unlicensed or someone who's doing cut rake work. Yes, it may appear to the client and to the owner that they've gotten a lot of the stuff done. Like, you walk into a property and look, all the wiring is done and all the plumbing is done. We just need it to get finished. And. Well, actually, the problems begin before that because this is not the kind of wiring that should have been used, is it? Not the kind of pipes that should have been used, just as an example, or the foundation is off by, you know, a couple. Couple feet, you know, things like that. So it is frustrating because a lot of times what will end up happening is we have to go back and redo things. Redo the work. Yeah. And I've actually been a few jobs where I've had to do that to fix the mistakes of other contractors. But that's why. Do your research upfront and find someone who you trust and who's been referred to you before you start working with them.
And it ends up costing a lot more in the long run because you have to redo what they started. One issue that I've noticed is inadequate or lack of communication amongst the. The homeowner or the investor and the contractor and really getting detailed on the scope of the project, you know, and the expectations and so forth and the timeline. And then the other thing is the pay schedule. Right. You know, working with you, you're pretty detailed about that, right? You're very detailed about that. Actually, you break it down initially and then throughout the different stages of the project, you send out communication to the all parties involved. This is what we promised, this is what's done, this is what's due and so forth. So that's something, again, I do appreciate about you very much. However, I don't see that with a lot of other contractors, and I do see a lot of investors falling into that trap. Unfortunately, there's an investor that recently reached out to me seeking some help and advice as to what they should do next. They started a project and, you know, they're on studs and they've ran out of money and they don't know what to do. So you don't want to be in that situation.
No, you don't.
It's not a fun situation to be in.
Yeah, no. And then. And as far as communication with the client, like you mentioned, I like to be very detailed as far as what's expected of us and what's also expected of the client. That being said. So establish a payment schedule up front with your contractor. That's very important, with specific amounts and specific benchmarks, milestones that need to be accomplished before that payment is due. I've seen a lot of times with subcontractors and with homeowners hiring other contractors that they'll hire someone not really knowing, like, when they're supposed to get paid, how much is due, when. And what I like to do is I break it up into, you know, different phases. So I'll have the down payment, and then once the foundations are complete, this amount is due. And also if you can get your contractor to tie that in with a passing inspection as well, that would be really beneficial. Once you pass rough plumbing, rough electrical, here's this. This is the next milestone. Once you pass rough framing, here's the next milestone. That way everybody's on the same page as far as who's going to be getting what and when, what we need from the client and what's expected of us as far as getting things approved by the city or county.
Okay. And I'm sure, you know, having a good relationship with the contractor, client, contractor relationship is very crucial because, you know, it could be, it could work both ways. Either the client will never hire the contractor again or the contractor will not want to work with that client again. Right. Because of that experience. So what advice would you give to an investor regarding building or maintaining a good working relationship with their contractors?
Number one, I think any contractor would say, be up front, be transparent, be timely with payments. That's a big one. Because construction, it's a cash flow business. There's money in, money out, materials, labor, it's constantly flowing. So if there are long delays, know, between billing and getting paid, that could really mess up a contractor's business. I think those are, you know, important, important items to touch on. I mean, we've never really had any issues as far as, as far as clients in that respect. You know, I could see it happening in other projects in some cases. Yeah.
So, yeah, I hear you saying, you know, trust, communication, being upfront and honest, not having your own agenda and, you know, obviously paying on time. Right. So. And I think that goes both ways, right, for the contractor. Trust, transparency, you know, not taking on more projects that they can handle and so forth, and, you know, doing the work according to the pay schedule. So, yeah, those are great points. That's, that's awesome. Now, how can an investor have a good balance between quality workmanship and, you know, staying within their budget? Like, what would you advise around that?
There's really no way to cut cost on workmanship and quality, safety, you know, all the stuff that's. All the stuff that's important in any construction job where you can try to get your budget to come down is maybe reduce the scope of what you're trying to do or maybe pick fixtures and finishes that aren't, you know, the finish.
Right.
High end luxury, you know, finishes maybe something that gives the look and appearance of that, but is maybe a little bit more inexpensive, really easy example, instead of doing real honed Carrera marble, you know, for your countertops, which look looks beautiful, don't get me wrong, you could do a nice quartz that has the same pattern, the same design, same durability. You know, honestly, you know, unless you're looking really, really close, you won't be able to tell whether it's marble or quartz. Little things like that over the whole scale of a project make a big difference. Because I've worked on some projects where architects will call out $500, $600, $800, you know, little light fixtures that you could get the equivalent at Home depot for under $100. So why, why throw your money at that when you can do something that's an alternative and it looks just as good? Yeah.
So basically not over building the project, you know, using the right finishes to be fair with, you know, the particular project that you're working on, that really suits that area too. Right. Because from one area to the other, it has different, you know, different finishes would be more suitable and fitting for it.
Right.
You know, some are more trendy and so forth. So unless you don't have, you know, you have an unlimited budget, then, you know, and you can kind of go all out and so forth. So, so I want to go back to trends. So, you know, it sounds like, you know, some of the biggest trends, you know, to kind of inform our listeners to are, you know, adus. Right. That's one big thing that, you know, people can maximize. It not only like primary residence, but you can maximize as an investment. You can gain appreciation that way you can gain rentable income. And now with the new law in 2024, they can actually sell the ADU as a condo. Right, right. So that's, that's going to be very, very cool. It's going to probably, you know, get people to be calling you a lot more for ADUs. And then, you know, also SB9, which, as you mentioned, you know, it allows you the two forms of the lot split. One is just to build another unit, another one is to build a completely separate unit, be completely independent, sell it separately, and then add ADUs to each one of them. Right. Anything else you want to add to that?
No, I mean, that's the great thing about, you know, being here in California and Southern California in particular, is that there's just so many opportunities. There's so much opportunity as far as what homeowners can do, what investors can do, it's out there. All you have to do is find the right people to work with on the real estate side, on the construction side, and then you can get great things accomplished here.
All these laws, you just have to know these laws. Right. A lot of people are said, oh, I don't want to invest in California. I want to go to other states.
Right.
But it's like, you know, are you not aware of what's going on? Right. I think a lot of it is awareness. Know the laws, know how to benefit from the laws, and, you know, make the best of it, right?
Yeah, absolutely.
So what is the best way if someone wants to reach out to you? Whether they have a question about a project they thinking of doing or a current project, or, you know, they're in a pickle where, you know, they're working with a contractor, that's not really being helpful. If somebody has a question for you or if they want to hire you or get an estimate, what is the best way for them to reach you?
Well, you could give me a call. I mean, that's the quickest and easiest way. You can call me or text me. We can give out my cell phone number. I think at the end of this email works great as well. And once you get in contact with me, I'll put you in contact with the other members of our team that can help you along. We have someone in our office that specializes in putting estimates together for clients, and I can go out there and see your potential project, kind of go over what you're looking to do and how we can get it done, and we can go from there.
Awesome. And that's one thing about Sean and his team is you guys are very communicative, very responsive. So. So that's something I really appreciate. We're going to leave Sean's contact information, his phone number, email in the comment section below. Please reach out to them if you have any questions or if you need an estimate on your upcoming project. Sean, thank you so much for being here, man. I appreciate you taking the time on your busy day and sharing all the knowledge with our. With our listeners.
Yeah. Thank you for having me. Thanks.
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Thank you all for joining us on the BRRRR Investor Podcast. If you found today's episode helpful, please hit like and subscribe to our channel for more real estate. We love hearing from you, so please leave your thoughts, questions or topics you'd like us to cover in the comments section below. Be sure to check out our website, thebrrrrinvestor.com and follow us on social media @thebrrrrinvestor keep learning and investing and we'll see you in the next episode. I'm your host, Alex Nale. Stay invested.