Welcome to the Seattle Investors Club podcast
Rehab specialist Donna Gronvold of KD3 Home Solutions
Questions asked in the podcast
1. What is your background and Kirk’s background? How did you start investing?
We can pick whatever title we want…but that’s the idea. Donna, these are loose questions to guide us if we need it. There will be a lot of freestyle discussion between friends in between these questions. Some may get answered just while we freestyle it. Just relax, go with the flow, be yourself and all is good! This will be recorded, so not live.
2. What is the focus of your business? Can also say life balance stuff here…..
2a. How are the roles split between you and Kirk at KD3 Home Solutions?
3. Let’s jump into talking about rehab costs and break things down into a few categories. 1) Must do things on every project 2) Most common rehab costs on each project 3) Wish list items if budget allows…..Donna, tell us about your process when you first visit a property. What do you look for?
4. How have construction costs changed in the last 6 to 12 months? Which line items are now costing a premium, which types of contractors seem hardest to find?
5. You also run a retail remodel business with Kirk. What do you hear from your retail clients on what they are looking for these days…such as they all want white on white design plan or tell us what you are hearing from retail buyers?
6. Do you put aside a portion of your proceeds to buy more apartment projects?
7. What are your hobbies outside of RE investing and KD3 Home Solutions?
8. I know you are always looking for good deals, how can people reach you to send you deals and what is your buying criteria?
Full transcript of the show
Joe Bauer: Welcome to another edition of the “Seattle Investors Club” podcast. My name is Joe Bauer and I’ve got my lovely cohost Julie Clark. How are you doing today, Julie?
Julie Clark: I’m doing good. Hey, hey, everybody.
Joe Bauer: Yeah, yeah. If I sound like I’m talking a little bit slow it’s because I just got back from Hawaii so you’ll have to forgive me. I’m still a little bit relaxed here.
Julie Clark: Yeah, jealous.
Joe Bauer: Oh yeah. Trying to keep this tan going on.
Julie Clark: What was the number one most rockstar badass thing that you did on your trip?
Joe Bauer: Holy smokes, we did this hike called Helicopter Ridge and you went out to it and it was two and a half miles and at the end you were on basically this pinnacle cliff with 360-degree views of Jurassic Park style foliage and mountains and stuff.
Julie Clark: This is in Kauai.
Joe Bauer: Yeah, Kauai.
Julie Clark: Dang.
Joe Bauer: It’s super cool. I recommend anybody do that hike, Helicopter Ridge I believe it was called. Enough about that. On the podcast today we have a awesome, awesome [rehabber 00:01:25] named Donna Gronvold of KD3 Home Solutions. Donna, how are you today?
Donna Gronvold: Hey, how are you? Sounds like a nice trip.
Joe Bauer: Yeah, it was-
Julie Clark: Okay, Donna and Joe. I’m sorry but nice trip. Donna, why don’t you just tell us where you’ve recently been and how long you’ve been gone?
Donna Gronvold: Kirk and I took a three-week trip to the Bahamas on our boat and-
Julie Clark: Our boat. Yeah. Our boat. Yeah.
Donna Gronvold: I got lots of sunshine so I know what you mean about the suntan there, Joe. Got to keep up this brown going on.
Joe Bauer: Yeah, especially since we have a little sun.
Donna Gronvold: Yeah. We had an amazing trip, 85 degrees out, the water’s about 82 degrees and we went down to the Southern Bahamas called the Exumas, which the water looks just like down in Fiji. It’s the bluest water you’ve ever seen. We went [inaudible 00:02:27] at Staniel Cay. We went and dove and played in Thunderball Grotto which is where they filmed one of the “James Bond” movies, one of the really early ones, super early. The trip was day after day best day ever.
Julie Clark: Got it.
Donna Gronvold: Best Monday ever, best Tuesday ever.
Julie Clark: Outrageous.
Donna Gronvold: Good work life balance.
Julie Clark: Work life balance. Yes. Look at this, guys. Just listen to what we’re saying here. How long were you gone, Donna?
Donna Gronvold: Three weeks …
Julie Clark: Three weeks gone.
Donna Gronvold: … and I sold [crosstalk 00:03:06].
Julie Clark: Joe just got back from Kauai. The week before Joe went to Kauai, I went to Maui and Donna and I have been talking about next time they go on one of their, I’ll call it yachting adventures across the globe, that I’m going to fly in with the girls and meet them there so they can pick us up in their, as Donna calls it, boat. Yeah, life is good, guys. Here we are, we’re supposed to be talking about real estate but the truth is work life balance and it can get really fun if you get into this game and you follow the systems and educate yourself and network with the right people and get hyper local. Donna is local with us here. She’s one of my favorite invest clients. I absolutely get goosebumps every time I get to stand in one of her houses that I list for sale as her broker while I’m listening to my Colbie Caillat or my John Legend, right?
Donna Gronvold: I got to switch that up. I know. I just need to find a new one.
Julie Clark: No, I love it. I love it. I play music in the houses, guys. If Julie Clark lists your house, it’s like a party. I play music. We have fun but let’s get to what we’re here for today so everybody can be as inspired as we all are and get out there and enjoy themselves. Joe, I’ll let you kick it off.
Joe Bauer: Yeah. Like Julie said, let’s get into this. Donna, what’s your and Kirk’s background and how did you start investing?
Donna Gronvold: Kirk is a third generation builder. He has been in building and construction all of his life. His grandfather, his father and now him and now our two sons have joined the company so they’ll be fourth generation. He’s always built in Ballard so that’s always been our home base. Our office is there. He’s always had this construction background, usually in multifamily, though. A few years ago, I’ve kind of had a diverse background in a lot of different careers, food and beverage, hospitality, everything’s kind of built up and up and up.
Donna Gronvold: I decided I wanted to leave that industry and do something totally different and work more closely with [inaudible 00:05:33] because I’ve always been interested in design. The opportunity kind of came up and it’s like, all right, let’s open a new division, a new LLC that will take care of the acquisitions and the designs and then we own a construction company so we’ll have our construction company do all the work and then we’ll partner with various wholesalers and brokers. I used to do my own marketing but not anymore.
Donna Gronvold: It kind of just all came together like a little puzzle.
Julie Clark: Let me circle this back up so everybody’s clear. You guys have a construction company called …
Donna Gronvold: Blue Water Design Build.
Julie Clark: Blue Water Design Build, right, and you guys do retail jobs as well for the average person. Then you guys have KD3 Home Solutions which is your flip business.
Donna Gronvold: Yes.
Julie Clark: Then you own a bunch of apartment buildings and other properties that are probably single-asset entities or whatever.
Donna Gronvold: Yeah, that’s in another company.
Julie Clark: That’s in another company so you see it all. This is the goal, guys. Once you start rolling, there’s no reason that all of you cannot also do this. You don’t necessarily need to go to design build. The reason why they’re design build is because, I think, Donna, your passion about the business is the design part, is that correct?
Donna Gronvold: Oh yeah. For sure. For sure. Yeah.
Julie Clark: Yes. Boy, are you good at it so …
Donna Gronvold: Thank you.
Julie Clark: Yeah. It’s an awesome, we’ll call, climb to … I’ll say you guys have now reached the top of the mountain, that’s for sure, and are able to start reaping the benefits and rewards and lifestyle that all this brings with much envy from the rest of us.
Donna Gronvold: It’s not without hard work.
Julie Clark: That is for sure. I can attest. I know that. I know you guys [crosstalk 00:07:33].
Donna Gronvold: It’s not as easy as what they make it look like on TV. This is not an HGTV world.
Julie Clark: Right. We’re talking, what? 30 years of doing this, right?
Donna Gronvold: Yeah, I don’t want to give away Kirk’s age but [crosstalk 00:07:46] that.
Julie Clark: What’s the focus of your business at this point? Where are you guys at with all that, percentage wise? Is 50% retail or 50%-
Donna Gronvold: Oh, okay. That’s with Blue Water so then that’s kind of talking about Blue Water. Blue Water, I would say it’s 75% of KD3 projects and 25% of … Now, I would say probably 60% KD3 and 40% retail work.
Julie Clark: Okay.
Donna Gronvold: Yeah. That’s [crosstalk 00:08:27].
Julie Clark: Which is awesome because that gives you insight into what retail buyers want or retail people want.
Donna Gronvold: Exactly and, you know, when you’re working with retail clients, they’re like a new idea source playing off what you just said. We have one client that we’re building a modern farmhouse in Ballard and she’s very active and she’s very visual in what she wants. It’s great to see from her what people are looking at in that farmhouse style and it’s a great idea source, too, because sometimes she’s sourcing things that I’ve never seen. It’s like, “Oh great, I got to save that. I got to save that.” You can get them from anywhere to incorporate them into your own projects.
Julie Clark: Design tips. I’d say the same if you’re a real estate broker for you people out there that all should get your real estate license. I always say somebody on the team should have a real estate license for savings and I think we just put out another podcast today that covers that topic a little bit as well but as a real estate broker, I’ll tell you I get to see from just retail clients what they’re interested in. It all ties together so I think everybody will find that they start as one thing and they evolve into just a global real estate entity with all kinds of plugins, I guess I’ll say, which is the fun part. I love the plugins to this business in general.
Julie Clark: On whatever your part of the business you love or whatever part of the business you do, I always would say to challenge everybody to think globally. What streams of income or what streams of information can you get easily to plug into your business to just kind of push you up and give you intelligence about what it is that you’re doing, right? It’s all fun. I love that kind of stuff.
Julie Clark: We know that you have great life balance because you just spent three weeks on your boat in the Bahamas so we know you’ve got it covered there. Awesome that your boys are getting involved. How do you guys split the roles between you and Kirk? This is another awesome topic for another podcast. We actually have it on the books to do with some of our other friends that are husband-wife teams but how are the roles split between you and Kirk, just so everybody realizes they’re married so family-
Donna Gronvold: Yeah. It’s very cut and clear. I handle all of the acquisitions. I do all of the running all over town. I work with the wholesalers and brokers who are bringing me properties to work on the pumps, the budgeting, how much it’s actually going to cost to do it because a wholesaler and a broker really I don’t think have a full understanding of construction costs if they’re not involved directly with construction costs. You always have to make sure you do that yourself.
Julie Clark: Because construction costs are continually changing these days.
Donna Gronvold: Yes. Yeah.
Julie Clark: Even myself, I’m full time involved with all you guys and still … I just got shocked on one of our deals on the costs for a full flip that we did and you’re right. Unless you’re on top of that stuff all the time, even if you’re a broker or a wholesaler in the bubble but not in the field, it can be … The numbers change all the time.
Donna Gronvold: I take care of all the acquisition and pre-acquisition. Once we have the property under contract, I hand that over to Kirk because he’s very good at … He takes over with that part as far as dealing with the closing. I have all the financing set up. If we’re going to be using any kind of private or hard money, I get that lined up and then it’s like a package I hand over to Kirk and it’s like, “Okay, here’s everything you need,” or hopefully everything he needs and then he takes it from there through closing. Then it comes back. Now we have the keys.
Julie Clark: He’s the paperwork guy, you mean, on that closing process.
Donna Gronvold: Yeah. He’s very detail oriented and it just seems to work best that he takes that part over.
Julie Clark: Nice.
Donna Gronvold: Then the property comes back to me and I set up, along with Kirk, we start a calendar on our phones or actually our son got us started doing this so it’s great to have that new blood in the company.
Julie Clark: Right.
Donna Gronvold: You just print up a calendar and do it the old school way but now we have an app. It’s called Time Tree and we use this app and you can share it on everybody’s phones that it pertains to and you can have multiple calendars going on. We get that started, we get everybody hooked into on the construction side, the foremans hooked into that calendar.
Julie Clark: Yeah, who’s all in the Time Tree calendar?
Donna Gronvold: Our foreman Cameron, who is a project engineer, Kirk and myself. Then we start with [as-builts 00:13:59] because in practically every project we do, we have a full set of as-builts drawn because this just makes it easier for your crew. You got a big huge plan up there on the wall. Everybody’s moving in the same direction so we have a-
Julie Clark: What’s it cost you to get an as-built done about roughly?
Donna Gronvold: Oh, probably 3 or $400 depending on your [crosstalk 00:14:26].
Julie Clark: Do you guys realize-
Joe Bauer: Forgive me, what is an as-built?
Donna Gronvold: An as-built shows the existing structure how it lies. What the city is going to want to do, if you have to go for any kind of permits, whether it’s your full building permit or maybe you’re taking out a structural wall, they’re going to want to see the as-builts and they’re going to want to see the proposed plans. The as-builts tells the city this is the structure we’re working on and the proposed plans shows them what we’re going to do so that when we take those plans up to the counter, Kirk is very good at getting over-the-counter permits, they just go up, they look at the two variants, they ask a couple questions and then they give you that big old stamp that you want.
Julie Clark: Do you guys realize the intel you just got there, all you people in podcast land listening? That is the quick and dirty, fast way to get what you want to get trucking. I’m sure there’s more than $300 or $400 costs because there’s time involved and there’s all that stuff but even if it was 1,000 bucks, for god’s sakes, time is money, right? If you have a smooth process for how you approach these things from the start, what she says right here is get the as-builts on the existing as-builts and the proposed plans from the very, very start. That’s worth listening to this right now for those people who are been in the game and kind of muddling through everything. You just right now so let me just go. I just tried to do a mic drop but I was using a pen so it didn’t sound that good.
Julie Clark: [inaudible 00:16:11], you guys get it? Virtual high five around [inaudible 00:16:16] here. Nice job.
Donna Gronvold: Then after that, I worked on the design, the spatial design part and then if it’s a house that I’m really … Spatial design probably isn’t my biggest forte so we do have a go-to person that they are a master at re-visualizing a space. If I have a space that’s really kind of, I can’t figure it out, I’ll have the spatial concept done by somebody else and [inaudible 00:16:48] propose.
Julie Clark: Is that just an architect or is that like-
Donna Gronvold: No. I don’t use an architect, no.
Julie Clark: [inaudible 00:16:51].
Donna Gronvold: Don’t waste money on an architect. [inaudible 00:16:56]. Then [inaudible 00:17:00] proposed plan so that goes back to Kirk and he takes that over as Blue Water goes into full motion as far as getting the space designed the way it needs to be, getting our [inaudible 00:17:15] HVAC, our plumbers, all that behind-the-wall stuff that has to happen, they’re constantly working on progressing this house forward and then I step over to, we’ll call it the pretty side. I’ll be pulling all of my hard finishes for flooring, tile, flooring, cabinets, back splashes, carpets, vinyl flooring, wood flooring so I’m pulling all that together while they’re actually in construction.
Julie Clark: Some big rehabbers or volume rehabbers have three plans or two to four plans, whatever they have that are kind of preset plans, finishes that they go to and they use on every house for their … What do you want to call it? Their list of what they’re going to do. I don’t know why I’m drawing a blank on what I want to call it right now. Their …
Donna Gronvold: Scope of work.
Julie Clark: Scope of work. Yes but you guys, I know you guys don’t do that because your joy is the design spot or do you do it a little bit?
Donna Gronvold: I have taken components and repeated them because I found that they were cost effective. If I find something that’s cost effective and it looks really good and sharp and rich, then I’ll probably take that component and reuse it and I’ve done that a lot with my engineered hardwood floors. I’ll find something that’s a good value and that’s a good product. I don’t always look for the cheapest item because that can come back in a few years but if you find something that’s really good, you can repeat that component. I am not a fan of repeating the same house over and over and over. I know Kirk would love it if I did that. In fact, in the very beginning he tried to get me to do that. It’s like, no, that’s so boring. I wouldn’t be doing this anymore if I had the same design in every house.
Julie Clark: That, like we’ll say, you guys out there listening, that might be different for you. When you’re in the real estate business or any business, just life in general, you have to find your joy and whatever it is that you’re doing. If you’re not a nut for design like Donna, maybe it does make sense for you to be … If you’re a nut for systems like Joe, right? I’m just playing nuts so we want talk about me but if you’re a nut for design like Donna, then that’s why she does these things this way, because that’s her joy in the process. We have other friends that are more systematized and do that stamp the same thing. Of course some of my hedge fund clients or they do it based on what’s on sale, which can be in my opinion yucky a way to do things but it is what it is. Everybody has their way.
Julie Clark: Awesome. You got your design side going while they are taking care of moving the behind-the-wall stuff after they’ve had their spatial design done and everything like that. You guys are working on parallel levels moving forward.
Donna Gronvold: Exactly.
Julie Clark: Yep.
Donna Gronvold: From there. Fast forwarding through, I typically do jump in around the middle and I work kind of closely with our tile guy because we discuss tile sets and everything so I do have contact with the subs as well but I do try to limit that so there’s one voice. It can get kind of confusing, especially in a [inaudible 00:21:03] situation with contractors not knowing who the go-to person really is.
Julie Clark: Yeah, who do they take their direction from?
Donna Gronvold: Yeah, you have to make sure that there’s one voice, otherwise things are going to get done wrong and it’s going to be she told me this, he told me that. I’ve been a victim to that. I’ve done that and I just really work hard to have Kirk be the voice of the scheduling and then any questions I have, I route them through Kirk so he routes them through the contractor. We work with the same guys all the time. They know my role. They know Kirk’s role.
Julie Clark: I know you guys use subs and you have some employees.
Donna Gronvold: Oh yeah.
Julie Clark: Do you feel that there are … What would be the first employee for a [crosstalk 00:21:53]?
Donna Gronvold: Your foreman.
Julie Clark: Foreman. Basically project manager, you call it a foreman or is that something different?
Donna Gronvold: Project manager’s different than a foreman. A foreman is a bags on foreman. He is actually doing the work as well as working directly with the subs and inspectors. He’s your on-point person. A project manager, which is also a project engineer, they’re people that are the right hand to the foreman as far as foreman calls project manager and says, “You know what, I need a load of this kind of lumber, this many sizes on Tuesday.”
Julie Clark: The foreman stays on site.
Donna Gronvold: Yes.
Julie Clark: The project manager, project engineer does all the running and …
Donna Gronvold: Yep. Yeah, the delivery schedule and all that stuff because you don’t want your foreman to get swamped with that kind of work.
Julie Clark: Who approves payment to the subs?
Donna Gronvold: Pardon?
Julie Clark: I know Kirk probably does but what’s your process of …
Donna Gronvold: [crosstalk 00:22:57] …
Julie Clark: Who-
Donna Gronvold: All the quotes and the invoices come to the office, so they come to Kirk’s email. They’ll send all the quotes and all the invoices and then that gets routed through our accounting.
Julie Clark: I mean doesn’t somebody do a spot check to make sure the work’s done on progress payments and all that? Who does that, foreman or project manager?
Donna Gronvold: That’s your foreman.
Julie Clark: Okay, got you. What’s Kirk’s role, since you have a foreman and a project manager?
Donna Gronvold: Kirk oversees everything. Kirk, he works hand in hand with the foremans as far as making sure the foreman understands the jot and how it needs to be done. You have to remember Kirk’s been building large buildings for over 30 years so a lot of the times, the foreman may say, “You know what, these stairs aren’t going to work. How are we going to do this?” The two of them will work through the solution together since Kirk is wired that way. He’s a great problem solver. Sometimes we’ll have a foreman come to us and it’s like, “There’s no way we can do this,” and he’s like, “Yeah, there is. We do this and that. We make these adjustments.”
Julie Clark: Right. What do you think Kirk’s favorite part of the business is? Yours is the design.
Donna Gronvold: His is the actual construction. He loves construction.
Julie Clark: Yeah.
Donna Gronvold: He visits the job sites every day or every other day. Keep in mind, right now we have six active jobs going, both retail and KD3.
Julie Clark: Right.
Donna Gronvold: He typically spends his morning going to each job site and checking progress on each one. Then he spends the afternoon in the office doing everything else because we have other companies, too, four active companies.
Julie Clark: Somehow you were able to figure out how to leave for three weeks to the Bahamas.
Donna Gronvold: Yep. You have good people working for you.
Julie Clark: Right.
Donna Gronvold: Then you [crosstalk 00:25:03].
Julie Clark: What do you think might be … Everybody has their own opinion but what do you think a salaried foreman or project manager would be these days, like for a solid [crosstalk 00:25:21]?
Donna Gronvold: [inaudible 00:25:25] depends on experience so in a foreman position, there’s a lot of variables. You look at how much experience they have, your tools, that’s a big part of being a carpenter and a foreman. You got to [inaudible 00:25:41].
Julie Clark: They’ve got to own their own tools.
Donna Gronvold: Yeah, yeah and that’s just part of the trade.
Julie Clark: That could be something easily overlooked by people, that all of the sudden you hire somebody and they have no tools and you got to go buy them a bunch of tools.
Donna Gronvold: Yeah. There’s not a lot of people in this position that are going to hire employees. They’re usually going to hire a GC, which they have to with state law. They have to have a GC, a licensed GC building the properties that you’re going to flip.
Julie Clark: Has that been back and forth over the years on if that’s a requirement or not?
Donna Gronvold: It is, though. It currently is and the master builders association fought hard for that and it’s important because if you put yourself in a buyer’s position and they’re buying a house that has been renovated to flip, wouldn’t you want to know that a licensed bonded contractor is behind that?
Julie Clark: Yeah, as a real estate broker who lists flips of our own and of others of our Seattle Investors Club members or anybody else, the brokers, there’s so much flipping going on these days, the average broker who’s outside the bubble of our world asks a lot more questions than they used to. I will say something interesting from the broker standpoint is that if I have a client, a flipper who has remodeled a house and not gotten permits, which that’s their choice. Of course if they ask me I would say hell yeah, you need to get the permits and we aren’t going to cover that topic today because I know that when I say that to you, you’re starting to get your blood boiling so just let’s not go there. Permits are obviously some people do, some people don’t and that’s not the topic today.
Julie Clark: When I list somebody’s house, a flipper’s house who has not and I don’t know until we get in there, that it’s amazing that people are still buying it. I will tell you from the broker’s perspective, I know people who pull permits don’t like to hear that and I don’t recommend it and I wouldn’t say that there could be serious problems that happen after the fact but the buyers in April of 2018, which is when we are right here, are still buying those damn houses even if on the form 17 it says no permits. It’s weird and it’s not good news. Like I said, I’m not saying that that doesn’t mean there isn’t sometimes problems after the fact but-
Donna Gronvold: I’ll just say one thing.
Julie Clark: Control. Control, Donna. I know.
Donna Gronvold: If you are doing these projects without permits, just wait until you get caught because the city will have no empathy for you and they will make your life hell.
Julie Clark: Agreed and I do know a general contractor, actually he’s even a general contractor that wasn’t getting permits. That’s even the crazy thing is some general contractors don’t get permits even though they know better and he just basically lost everything. That’s the second story I’ve heard of that in the last, I’ll say, six months. You guys, we’re not here to talk about that today so we’re going to move on. You guys, I always say honesty and putting your best foot forward, I just want to sleep at night. That’s all I care about is I don’t want to have any worries and I want to sleep at night and follow the rules.
Donna Gronvold: Oh yeah.
Julie Clark: Hallelujah, amen, we’ll put that one to bed right now. Let’s move on here to the next question that I have for you and that’s let’s talk about kind of rehab costs and breaking things down. I’m not a contractor. My basic mind about these things is that on every project, there’s things … I know enough to be dangerous, guys. You know what I’m saying. On every project, there’s every project has things the are just like must do, basics. Obviously life safety issues are a pretty obvious choice. Then there’s the must do things. Then the most common things that you’re going to do on every project and then maybe there’s the wish list items like you want to do these things if your budget allows because hopefully everybody’s paying attention to their budget and has built in a line item for overages, which I’m sure Donna will tell us you have on every single job. You have a percentage line item for overages and change orders.
Julie Clark: Let’s talk about, Donna, on that thing, on costs, not necessarily the process of we got the as-builts and the spatial design and then we have your team taking it into actual construction behind the walls while you’re doing the design. That was awesome sauce but now let’s talk about what costs you know you’re going to have on every project. We’ll start with that.
Donna Gronvold: Okay. Essentially everything.
Julie Clark: Yeah.
Donna Gronvold: When we go into the project, the houses that I’m buying, they haven’t been maintained. They’re pretty junky. I’ve never gotten to do a house where it was lipstick, paint and carpet. I’ve never got to do that but that’s okay. Typically something I know we 95% of the time we’re going to have to do is a new electrical panel because the old panels are just too small for the kind of power that these houses need now. You’re probably going to have to upgrade your panel. Sometimes I’m able to save the furnaces. If they’re in good shape and I have it serviced, you can sometimes save the furnace so that’s one that can go either way. If it is-
Julie Clark: Let me just back up. When you say new electrical panel, you’re just talking about the panel, not necessarily …
Donna Gronvold: Oh no, full rewire.
Julie Clark: … a whole rewire of the house.
Donna Gronvold: It’s always a full rewire.
Julie Clark: I know you guys like to do a full rewire of the house but-
Donna Gronvold: If I didn’t have to do it I wouldn’t do it but when you walk in and they’re old outlets. Don’t let it fool you if you look on the wall and you see the three-prong because people can put a three-prong outlet on an old system so they can get their vacuum cleaner to plug in. Make sure that if you want to unscrew those three-prongs and look back there and see if that wire is there, that third wire to ground it. That’s the only way you know if it’s properly grounded.
Julie Clark: All right. You need the third wire.
Donna Gronvold: Yeah. Nine times out of 10 you’re going to have to rewire the house if you’re buying an old house. If you’re buying a house that was in the ’70s or ’80s, you might just have to do the panel. [inaudible 00:33:08].
Julie Clark: What’s the, these days, what’s the cost? I know you guys, again, are hiring professional qualified contractors so let’s preface that, everybody. We’re talking about not like contractor in the truck. Some people use those guys. We’re not talking about Chuck in the truck. We’re talking about more qualified contractors today on this podcast because that’s who Donna uses. You guys do whatever you want. You roll however you want but that’s what we’re talking about today. For a qualified person to install the panel, just a panel, what is that these days? Is that-
Donna Gronvold: About 1,500, 1,500 to 1,800.
Julie Clark: What about a full rewire? I know that’s kind of a broad question but range.
Donna Gronvold: Right. That’s based on the qualifications for that is obviously the square footage of the house, how many can lights you’re going to be putting in because cans are more expensive than surface mount. If you’re going to be doing any kind of special electrical. Let’s just say you’re going to go into a 1,500-square-foot house. You’re going to have to put a new panel in. You’re going to be putting five cans in the kitchen and everything else is going to be surface mount. You got two bathrooms, three bedrooms, a dining room, a living room. 1,500-square-foot house with the panel is probably going to cost me 11 to $12,000.
Julie Clark: Okay, got you.
Donna Gronvold: Then if I start throwing in a bunch of cans and I want them to add cable TV and I want all these extra things that I do in my higher end houses, it’s going to cost more. If I’m just doing your typical 1,500-square-foot rambler first or maybe even second time home buyer home, I’m not going to be adding those things. I’m going to be giving them the five cans in the kitchen, which is kind of my standard, the chandelier in the dining room. I typically don’t do cans in the living room. I can kind of save that way and I do surface mounts in the …
Julie Clark: Bathrooms.
Donna Gronvold: … bedrooms. I do wall mounts of course in the bathrooms. Those electricians are also going to be putting in your bathroom fans and your full house fans so that’s also in that bid.
Julie Clark: Okay.
Donna Gronvold: The cost of the permit is depending on what municipality you’re in. Typically your electrician will get the permit so if you’re in a smaller municipality like Shoreline, they go through [LNI 00:35:59]. If you’re in Seattle, they have their own electrical inspector who will come out. If you’re going to do a heated tile floor in the master bath, your electrician’s going to add a little bit on for that because that’s another run he has to make. [inaudible 00:36:15] electrician actually does a lot. There’s places where you can cut back. Don’t put the heated tile floor in. It’s so many variables depending on the house and who you see that end buyer being.
Julie Clark: The bottom line is is that on every house, you are pretty much, especially a house in the Seattle area, you guys might be off in somewhere like Las Vegas where maybe homes were built in 2000 or some other market where the homes are newer, you’re not necessarily going to have the electrical costs. In Seattle here we have houses from the early 1900s. Everybody loves our mid-century modern homes, right? Everybody loves that so we’re talking more along those lines here in the Seattle area. We got electrical. Furnace can be yes or no, right?
Donna Gronvold: Yes. Yes or no on the furnace. Of course if it’s oil and gas is available on the street, you should spend the money and bring it in.
Julie Clark: What is the cost to bring it in? Is that …
Donna Gronvold: Typically, I do that through PSE and I pay for them to do the trenching so it’s like 500 bucks to have them trench and then there’s probably another 15, 2,000 on top of that. You just have to let them know what gas appliances are going to be in the house so they know what size of line to bring it.
Julie Clark: So worth it, though, right? Obviously.
Donna Gronvold: Yeah but keep in mind it’s a 10 to 12-week lead time. The minute you get the keys to that house, you better be calling PSE.
Julie Clark: That’s a good question. What are the things that have the longest lead time? There’s one of them. If you’re going to …
Donna Gronvold: If you’re doing custom cabinetry, you’re looking at six to eight weeks. If you’re doing more of like the lower end cabinetry that the install is included with, you can usually get that in a couple weeks. We have a unique situation because we keep our subs so busy with our own projects that we don’t have a lot of lead time with our plumbers and electricians because typically they’re just working on another one of our jobs. If you slow down a little bit and then you start getting out of their schedule, you’re looking at two to three weeks to get people in, especially in the Seattle area.
Julie Clark: At what point in the process, let’s say a wholesaler calls you with a deal. As soon as you have mutual and you know you’re going to close and you have mutual, do you start calling people to line them up before you even close? Maybe you get to close in two weeks. The closing timeframe, timeline once you get a deal under contract could be a quick couple weeks out or one week out-
Donna Gronvold: Typically after I get the keys, I got two weeks with CAB design and as-builts and all that stuff to do. I usually wait until I have the keys and then Kirk and I kind of have a plan in mind and we get all that design process done. Then he’s calling and getting people lined up at that time. [inaudible 00:39:40] have to do the demo, too.
Julie Clark: It all kind of works out. You guys start planning what you’re going to need before you close and then once you close, you just start-
Donna Gronvold: It’s off to the races. Call on the utilities that day. I get all the utilities turned over, get all the spreadsheets started, make sure I have all the budgets on the shared drive at work so that Kirk has access to them, too. Inevitably he’ll ask me, “How did you budget for plumbing? How much did you budget for sheet rock?” It’s never right.
Julie Clark: It’s never right. What kind of app or software do you use to manage each project?
Donna Gronvold: We use a good old Excel spreadsheet and I typically end up having to update them almost all the time because I’ll take … Prices of labor and materials is going up in our area so fast that I’ll just have to go back to another job and say, “Okay, I budgeted 15,000 in sheet rock. How much did it actually cosT?” Then I’ll reconfigure the price per square foot and I’ll make notes in there as far as what kind of work was that. Was it texturing? Was it full blown new sheet rock throughout the whole house? That [inaudible 00:41:03] change numbers a little bit. You can’t just use a square foot number for everything. There’s variables with each job so it’s like your best guess. If I’m within a couple grand, I consider that to be pretty good.
Julie Clark: Speaking of, because you just made a point, so everybody’s going like, “Oh my god, I don’t know this stuff.” Everybody who’s listening, maybe they’re not obviously as experienced as you and they’ve got to take their best stab at it. Hopefully they’ve gotten an actual bid from a contractor before they close if they’re newer on the block or newer to investing or even if you just do a few a year. If you aren’t constantly doing deals, the construction costs are changing so fast, you can’t use something cost that you know about from six months ago necessarily to bid a job that you’re going to be doing in the next month because the numbers are changing, right?
Donna Gronvold: Yeah.
Julie Clark: If you’re not doing deals every month, your lag time’s longer. Your costs are longer. Your costs are higher than they were the last time you did the job. You guys got to be on top of this, right? As a catch-all, though, you’re going to need to … In case you’re in that position, you’re going to need to have a change order, kind of a budget for reserve to go over …
Donna Gronvold: [crosstalk 00:42:35].
Julie Clark: … [crosstalk 00:42:35] going to go over. Yeah. You think that’s like 10%, 15%?
Donna Gronvold: Oh god, no. Like 20.
Julie Clark: Okay. Yeah.
Donna Gronvold: You might as well build it in there and if you don’t use it all, good for you.
Julie Clark: Right. I think some people would be like-
Donna Gronvold: [crosstalk 00:42:47] scenario.
Julie Clark: Right. The tough part is getting deals these days and everybody’s got to be so tight on the numbers or you can’t get the deal because the guy next to you is going to be Donna. The gal next to you is going to be Donna and she’s tight on the numbers so there’s two ways to battle that. How do you get leads that have no competition? Another topic with Seattle investors club and I’ll just insert it right here, is that you open your mouth in your personal sphere of your everyday life and you tell everybody you know that you’re looking for property to buy and that you’re connected with an experienced investor if you’re new that took you under their wing to give you that confidence to speak up but you guys got to find a way to get leads that you don’t have to compete with the Donnas out there who will smush you. That’s why you can’t really buy off the MLS. Donna can buy deals off the MLS because she has lots of tools in her tool belt and savings and private money and construction company to beat you.
Julie Clark: The rest of you that don’t have those things, you’re going to be finding your deals off market from wholesalers and I’ll tell you those wholesalers are showing their property to more than just you so in order to get those deals, you’ve got to try and look to your own sphere. You’re going to go the networking events and clubs and say, “Hey, yeah, I want to buy properties.” Guess what, so does everybody else in the room. If you’re talking to your neighbors and your family and your parents at school or your social circles and you’re not in a full of a room of investors that are looking for the same thing that you are, now I’d say that’s some good networking. That’s some free leads with no competition if you guys just get the confidence to speak up. I’m telling you, it’s so competitive out there, you’ve got to understand how important that is these days, right?
Donna Gronvold: Yep.
Julie Clark: The other thing I’ll say, guys, if you’re like, “Oh my god. How am I going to … I’m not Donna. I’m not even half of Donna or I’m not even Donna’s little pinky toe,” there’s still hope for you because guess what. You guys can go bring your skillset and that’s look for Seattle Investors Club podcast and tips of the day on YouTube that cover this but you should partner with a more experienced investor until you do get the knowledge to understand what we’re talking about here today. You should not be in New Beach trying to go alone. You just should not, period. I’m going to do another mic drop. This time, ready? Do you guys hear this one? How’s that? Is that better?
Joe Bauer: Better. Better.
Donna Gronvold: [inaudible 00:45:33].
Julie Clark: I got a little closer to my mic that time. These are all things that you guys should aspire to learn if you don’t already know what we’re talking about here with Donna today. This could be pretty intimidating if you’re just getting started and the answer is go partner with somebody like Donna. Go get those free leads by opening your mouth, saying you partner with experienced investors. If you don’t know who that is right now, you just use me, Julie at SeattleInvestorsClub.com. I got your back. The point is you can partner with somebody like Donna or you can bring deals to Donna and get paid and learn from people like Donna but wherever you are, in whatever market that you’re in, wherever you’re listening from, there are investors in your local real estate investment clubs that you guys should all be joining that are willing to partner or willing to teach you these things so you don’t go alone or feel like you have to know all this from day one yourself. Anybody who has a lead is going to have a lot of friends so focus on getting a lead, right?
Donna Gronvold: Yep.
Julie Clark: I’m going to keep going here because we’re going long. We’ve talked about maybe electrical panels, furnaces, bringing gas in. Obviously from my point of view, things you must do on every house, also not being a contractor but you don’t want any water in the house, in the basement. If you go into a basement that has a leaky basement, to me that smells like money. Smells musty to some people, smells like money to me because I know that that is fixable and maybe scary for some people but that’s a good thing. No water in the basements, no life safety issues. Those all need to be fixed. No [inaudible 00:47:24], that kind of thing. What would be some wish list items, Donna, because we’re going to run out of time here, that you would-
Donna Gronvold: Okay. Extra things I like to do when I have the money or I think the end user is going to want it, I like to do heated floors in the master bath. If I have enough room, I’ll do maybe a heated floor in the main bath, too, but I really like to do the master bath. Those are the people that are writing that big old check for that house so I like to treat them with that. If I have extra money again, and the house is worth it, maybe I’ll do a custom walk-in closet.
Julie Clark: Yep, what does custom walk-in closet mean?
Donna Gronvold: It’ll have all the shelving kind of like the California closets [inaudible 00:48:19] California closets, though. Those are some other things I’ll do. I’ll put upgraded lighting in. I’ll do some really nice lighting. Some inexpensive things that I do but look high end but they don’t cost me very much, I like to do accent walls that are three-dimensional. I’m not talking about just putting paint on a wall. I’ll put a grid pattern on it and I do different grids and sometimes it’ll be all one color and sometimes my grids will be white on a darker wall.
Donna Gronvold: I’ll put in tile mat floors. It doesn’t cost a lot. My tile guy doesn’t charge any more for it but it’s a good look. I’ll put in large mosaics in a tub shower surround. Doesn’t cost me more but it looks good. I’ll put mosaics behind the stove. It’s all these things that if you work with it, you can make a first-time home buyer house, you can make them feel like they’re in a million-dollar mansion. You just add small things. THey don’t cost a lot but they have a big impact when that person walks in the house. That’s what I always look at. When they walk into the house, what special thing are they going to see in this room? What special thing are they going to see in the kitchen? What special thing are they going to see in the master bedroom and the master bath? I try to put something special in each room, typically not like the extra bedrooms. The master, yes, but the other three bedrooms, probably not.
Julie Clark: Right.
Donna Gronvold: You have to keep that buyer in mind and what they are going to be thinking when they first walk in that house and they open that door.
Julie Clark: Is there anything that you try to avoid like if possible you stretch to try not to have to do something? Would that be like a roof or do you pretty much always put a roof on, you feel?
Donna Gronvold: [crosstalk 00:50:35]-
Julie Clark: I know it depends on if it needs it but …
Donna Gronvold: Yeah, if the house doesn’t need a new roof, I’m not going to put it on.
Julie Clark: Where do you stretch, like push yourself to not spend the money? Does that make sense, what I’m asking?
Donna Gronvold: Yeah and I actually did a house like that last year and it was really hard for me not to spend the money on the-
Julie Clark: This is a topic you and I talk about all the time, right?
Donna Gronvold: Yeah.
Julie Clark: This is me, I’m always trying to challenge you to do less. You in particular, you have a brand, right?
Donna Gronvold: I do.
Julie Clark: It’s your joy as well.
Donna Gronvold: It is. It’s our Blue Water name on it, too. With this particular house, the neighborhood didn’t need it. The house didn’t need it. I would’ve wanted it. That’s my thing. In the kitchen, I didn’t put a back splash in. I only did the four-inch back splash that runs up the same as the countertop. I only did that and-
Julie Clark: Another thing I know that you save on sometimes, which I also arm wrestle about, is doors.
Donna Gronvold: I know.
Julie Clark: I’m telling you buyers, you guys from a broker’s perspective, you guys can get away with a lot of stuff and doors is certainly one of them, reusing existing doors.
Donna Gronvold: Yeah, put new hardware on it but you can only do it if they’re not fringing up on the bottom.
Julie Clark: Right. You want to know what?
Donna Gronvold: [crosstalk 00:52:07]-
Julie Clark: Heres my twist on that for you that I actually … I think you can get away with interior bedroom doors. You know where the ones that always make me pucker up a little bit when the buyers are walking through is the bi-fold doors, when there’s not the best bi-fold doors, that’s really where the buyers I feel notice like … The actual bedroom and bathroom doors and stuff, I think you can get away with but those damn bi-folds, you guys. Brokers [inaudible 00:52:40] a lot of listings and does a lot of rehabs, those bi-fold doors if they’re flimsy and cheap, that is such an easy thing. Reuse all the rest of the doors but make those bi-folds a little sturdy. That’s my wish list. Does it really matter? No, they’re going to buy it anyways, I’ll tell you that much.
Donna Gronvold: Another area that I cut back on on that same house is the tub shower surround. I did the prefab, the three-piece remodeler kit. I put the prefab in and then in the master shower I did the prefab in there, too, so I saved costs by not paying for the labor and materials for those showers. I did do the floors in tile because the counter was quartz so I felt I needed to do something. In the laundry room, I did a a really nice vinyl and in the downstairs bathroom, I did a vinyl floor. Sometimes people cringe at vinyl but there’s some really nice …
Julie Clark: There is.
Donna Gronvold: … higher end vinyls out there.
Julie Clark: Yeah, there is.
Donna Gronvold: It’s kind of like my new downstairs thing right now and there’s some really cool ones to use and there’s kind of like that, oh, vinyl. You think back to the 1970s but they’ve got some cool looking stuff. You just have to look hard for it.
Julie Clark: Right.
Donna Gronvold: That’s how I cut back that really, it’s not my design. It’s not what I would’ve wanted to do but in that particular house, we had to spend so much more on life safety, all that stuff behind the walls that needed to be done, that it ate up a lot more of the budget than I had anticipated. In the long run, these home buyers will be able to put in the tile surround if they want because it’s easy to pop those prefabs out. I gave them all the important things behind the walls and to the house and the floor plan and those other maybe upgrades that they want to do further down the road is so easy for them to put a kitchen back splash in. It’s so easy for them to do those other things that they can do that when they’re ready to and they don’t have to worry about replacing plumbing or upgrading the electrical.
Julie Clark: Let me say something on that point because Donna’s making some great points there. You can’t see that stuff necessarily behind the walls. When you guys are off wherever you are using a broker or if you’re … I call it silly enough to do it yourself if you’re MLS for owners. I don’t know. That’s another debate for another day. You need to be working with a broker that understands how to market and discuss and put, we’ll call them silent talkers even around the house that says new panel or all new plumbing. That is so important to the buyers, coming from the broker side, to know.
Julie Clark: Yeah, you might not have got that … I could easily say to somebody, “You could easily put that back splash in or you could easily change that carpet to wood or whatever you want,” but you can’t easily rewire. You can’t easily do the plumbing or some of the, like we said, behind the walls. Even a new roof, people walk in and you need to point out to them that it’s a new roof because that creates the sense of value now with that buyer who might just walk through and they kind of take it for granted. There’s a roof on there, it looks but they don’t realize that. You need to tell them brand new roof, right? You need to tell them.
Donna Gronvold: New electrical.
Julie Clark: All new panel, new electrical. Those need to be communicated. In fact, even attached to the listing maybe as a feature sheet of the upgrades to the home. Even if it’s attached to the feature sheet on the listing, that’s for the brokers to see, not for the buyer to see.
Donna Gronvold: Right.
Julie Clark: The buyer needs to be having that put in their face, not only on a silent talker but a good broker will talk to them, talk to the buyers about this stuff because-
Donna Gronvold: That’s why I always love having you at my houses because I know it’s getting done.
Julie Clark: Right on. I appreciate that but that’s taken for granted of how important that is because Donna’s talking about doing these things and people are like, “I don’t want to spend the money to do that panel.” How about thinking about in the reverse, everybody? That it’s actually a feature that can be marketed if you’re not just throwing a listing on there and figuring somebody’s going to buy it because it looks like it’s been upgraded. There’s an art and a science to all sides of the transaction. Some people might approach this thing like I’m going to do as little as possible.
Julie Clark: My opinion is if that’s the way you’re going to roll with your rehabs, then you should consider a different business model and that’s called prehab. One of my favorite, it works really well right now. Donna and I also talk about this and what that means in today’s 2018 hot market, which isn’t just in Seattle. It’s across the country and zeroing in. There’s a way to zero in on a niche for only looking for prehab homes. If you don’t want to spend $8,000 with a drywaller or you’re new and you’re going to be in the back of the bus with all your timelines and you can’t get contractors to show up, maybe you guys should be focusing on the prehab model and not the rehab model where you don’t have to deal with the mountain of things that comes with these full remodels, right?
Julie Clark: These days, I say people aren’t just flippers. They’re not rehabbers. What category of rehabber are you? Are you a rehabber that wants to do and are you a category that wants to become an expert at what Donna does, which is the big projects and full remodels where you’re spending 100 to 140 or more.
Donna Gronvold: More [crosstalk 00:59:11].
Julie Clark: More, a lot more.
Donna Gronvold: [inaudible 00:59:16].
Julie Clark: Yeah or do you want to go with focusing on the prehab lane? Maybe that’s a good way to start because you don’t have a crew. You can’t take advantage of keeping a crew busy and keeping them showing up. Something to think about, peeps. With that said, we’re going to have to wrap up because buddy’s looking at me funny.
Donna Gronvold: He wants a walk.
Julie Clark: He’s got to pee. I got to pee. Sorry to … That’s kind of gross. I didn’t … whatever. You know what I mean, guys?
Joe Bauer: I got to pee, too. It’s cool.
Julie Clark: You got to pee, too.
Donna Gronvold: I’m just going to go to work.
Julie Clark: We all got to pee and go to work. Donna, how can people get ahold of you? You pretty much invest in the Seattle area right now. Do you have a criteria?
Donna Gronvold: Seattle, North Seattle, Edmonds, Shoreline, Kenmore, all that good stuff. If I have to cross a bridge, I’m not going to go there so I don’t do [crosstalk 01:00:15]-
Julie Clark: She’s spoiled, guys. She spends three weeks on her, quote, boat in the Bahamas.
Donna Gronvold: [crosstalk 01:00:24].
Julie Clark: Deals outside of those zones you can send to me and I will disperse off to whoever I know in our area wants deals or we might want that deal but for Donna, how can they reach you?
Donna Gronvold: They can go to my website KD3HomeSolutions.com, so it’s the letter K, the letter D, the number 3, Home Solutions dot com. I have a lot of my projects there so you can go through and you can look at some of my ideas.
Julie Clark: The design ideas right there, guys.
Donna Gronvold: You can check me out on Facebook, so it’s KD3 Home Solutions on Facebook. You can instant message me. You can reach me through the website.
Julie Clark: How can they … Do you want them to email you a deal or do you want them-
Donna Gronvold: Yes, of course.
Julie Clark: What would that-
Donna Gronvold: I’d love the opportunity to connect and see if we can work together.
Julie Clark: That’s right. Lay it on us.
Donna Gronvold: It’s Donna@KD3HomeSolutions.com.
Julie Clark: Awesome.
Joe Bauer: Easy, easy. Just so you guys know, all the show notes, if you’re driving your car or whatever and you want to get to this information that Donna’s been talking about, can be found at SeattleInvestorsClub.com/30. That’s SeattleINvestorsClub.com/30.
Julie Clark: Excellent. Thanks a lot, Donna.
Donna Gronvold: Thank you for the invitation. It was fun.
Julie Clark: We’re due for a cocktail if you know what I mean.
Donna Gronvold: Oh yeah, I do.
Julie Clark: Joe.
Donna Gronvold: Next Sunday.
Julie Clark: You’re invited.
Joe Bauer: Oh, I’ll bring a protein shake. It’ll be awesome.
Julie Clark: I figured. Of course. Right on. Thanks, everybody, and we’ll see you on the next one.
Donna Gronvold: Have a great day. Bye-bye.
Joe Bauer: Bye.
Links from the Show
KD3 Home Solutions