How to Avoid Costly Contractor Mistakes: Lessons from Ray Sasser
Scope of Work: The Foundation of a Successful Rehab
If you’ve ever tackled a rehab project, you know that managing contractors can make or break your deal. Ray Sasser, a seasoned real estate investor and contractor, shared his decades of hard-earned wisdom in the latest Lone Star REIA podcast, Real Estate Scope of Work (Watch it here: YouTube Link).
Ray doesn’t sugarcoat the truth—he’s made plenty of mistakes in the business, which is exactly why he’s the right person to help you avoid making them. Here are some key takeaways from his talk on getting rehabs done right, staying on budget, and keeping your contractors accountable.
“The scope of work is bigger than anybody understands,” Ray says. “If you don’t get it right, your project is going to go off the rails.”
A detailed, clear scope of work ensures that contractors know exactly what needs to be done and eliminates any “I thought it would look better this way” surprises. Here’s what Ray emphasizes when creating a scope of work:
✔ List Everything: Every task, material, and finish should be outlined in detail. “If you don’t specify the grout color, don’t be surprised when your contractor picks something crazy.”
✔ Time Estimates: Define how long each part of the project should take. If a job should take 45 minutes, and your contractor thinks it’s a full-day job, that’s a red flag.
✔ Material Costs: Have a rough estimate of what things should cost. This keeps contractors from overcharging or underbidding and bailing out halfway through.
“Every hour of planning saves five to ten hours of labor and cost,” Ray stresses. “Figure things out before they become problems.”
Qualifying Your Contractor: Ask the Right Questions
Not all contractors are created equal, and hiring the wrong one can lead to nightmare scenarios. Ray shared his go-to questions when vetting contractors:
How many jobs have you done? “If a guy says he’s cut down three trees in his life, he’s not your tree guy.”
How do you determine how to install a product? The correct answer? “By code and manufacturer instructions.”
Do you have references? Past work speaks volumes. A good contractor should have proof of quality projects.
Are you licensed and insured? If the answer is no, move on. “One bad accident can wipe you out.”
Ray also advises running background checks. “IDI Core is great for this. I found out too late that a guy who took my money had been charged twice before for the same thing.”
The Right Way to Pay Contractors
One of the biggest mistakes investors make is paying contractors too much upfront. Ray lays out his strict payment process:
✔ No Big Down Payments: “Never give a contractor a huge down payment. If they disappear, good luck getting that money back.”
✔ Progress Payments Only: “I pay for work that’s been completed, not work that’s promised.”
✔ Set a Payment Schedule: Ray only pays on Fridays. “If they want to get paid, they turn in their invoices by Wednesday. No exceptions.”
✔ Watch for ‘Banking on the Next Job’ Contractors: Many contractors use your deposit to finish their last job. “If they’re desperate for money upfront, that’s a bad sign.
Knowing Your Product and Exit Strategy
Contractors shouldn’t dictate the finishes or scope of your rehab. “I do the comps. I know what my buyers want. The contractor is there to execute, not decide.”
Ray emphasizes understanding the value of your property and knowing when to stop spending. “Sometimes, you don’t need to take it down to the studs. Sometimes, cleaning and minor updates bring the best ROI.”
Want to Learn More? Join Ray at MAREI’s Master Class on March 8th!
If you found these insights valuable, you won’t want to miss Ray’s upcoming Master Class: How to Find, Hire & Manage Contractors on March 8th, hosted by Mid-America Real Estate Investors (MAREI). He’ll be going even deeper into contractor vetting, scope of work, budgeting, and avoiding costly rehab mistakes.
Register now: MAREI Master Class
With the right planning and strategies, you can take control of your rehab projects, keep contractors accountable, and ensure a profitable outcome. Take it from Ray—learning these lessons before you make the mistakes will save you thousands!
Ray Sasser
Ray Sasser is a seasoned real estate investor with over 40 years of experience in buying, rehabbing, and managing investment properties. As a former general contractor and past president of one of the nation’s largest REIAs, Ray has helped countless investors navigate the challenges of working with contractors. He specializes in creative financing, project management, and investor coaching. Ray is a co-founder of Lone Star & Alamo REIAs and regularly shares his expertise through workshops, podcasts, and live training events.
Visit website: https://www.alamoreia.org/
