Construction Management Academy

JD Esajian explains all the steps involved to permit a house his team is renovating in La Jolla.

This post originally appeared on the Hermit Haus Redevelopment website on 2016-08-03.

As Sue Ann mentioned the other day, I spent the weekend in San Diego at a class called the Construction Management Academy. It was two full days under the tutelage of JD Esajian, formerly of Flip That House and one of the founders of CT Homes and Pacific Builders.

There were a lot of details to pick up on, but we didn’t spend as much time on management systems as I would have preferred. Instead, JD used several of their current projects to call out the things you have to be aware of in a construction project, many of them unique to projects that sell for more than a million dollars in California.

Here are a few of the chestnuts I brought home for the Hermit Haus team:

Here I am on a rooftop deck of a $3.2M renovation that turned a 2K square foot home into a 4K.

• It is cheaper to fix problems uncovered in planning than in construction. Spend the time needed to thoroughly plan every project instead of trying to minimize the time between closing on the purchase and the start of demolition.
• Some neighborhoods have lengthy delays for permitting. (We know this is also true of Austin, where two of our projects have taken more than a year to permit.) That’s okay so long as you know it going into the project and take the appropriate steps:
  • Factor the extra holding costs into your purchasing decision. Usually, this means negotiating a lower purchase price, but it may mean leasing the property out for a year while you work on getting the permits.
  • Make sure your financing plan takes the lag into account. You don’t want to have to repay the purchase and renovation loan(s) before your have started your project. Also, you probably don’t want to be paying high private- or hard-money interest rates for a year before you start work.

I’m going to have signs like this one made to post at all of our job sites. Not all adults behave as such.

• You can’t count on appreciation to help you out if you buy wrong. Run your numbers many times before you fork over the cash.
• There has to be a transparent, workable system to facilitate communication and accountability among all team members, including yourself, contractors, lenders, and anyone else involved in the project.
• Always have a contingency in place. There is a truism that you never know what you’ll find when you open a wall. Or a floor, for that matter.
• You’re not alone in this business. Network with your peers. Chances are someone else has already solved the problem that has you stumped.
• Every company should have a mission statement and a code of conduct. Make sure yours are prominently displayed on every job site.

Home Again

The Hermit Haus team: Carol, Russell, Suna, and me Suna is ready to go home.

Here I am with Than Merrill of Flip That House, CT Homes, and Fortunebuilders Grand Coast Capital took a few investors to see the San Diego Chargers play. Suna is in the front. Paul Esajian stands behind her, and I’m peeking over his shoulder. I blurred all the face except for us and employees of GCC.

Traveling at night, the headlights were bright

And we’d been up many an hour

And all through my brain

Came the refrain of home and its warming fire

— Karla Bonoff

We’re finally home. It was a long weekend in San Diego, but we survived and we learned. A lot. I’ll be posting about what we learned on the Hermit Haus blog over the next couple of months.

More importantly, we came together as a team and had a good time. Thankfully Russell and Carol rented a car, so we were not stuck eating the dreadful hotel cooking. We were able to get away for a few quiet meals, including on nice sushi meal somewhere in SD proper.

Fortunebuilders put on a mixer for those of us who joined the “Inner Circle,” which gives us better access to the big three: Than Merrill, JD Esajian, and Paul Esajian. From what I can tell, Than is the CEO of Fortunebuilders and its subsidiary companies. JD runs the renovation business, and Paul runs the financials, including Grand Coast Capital, a national hard-money lender.

Because Suna and I invested in Grand Coast, we got invited to see the San Diego Chargers play a home game and network with other investors. They put us on a bus and led us up to the Fortunebuilders skybox, where they put on a board of finger foods and booze. We had to leave before the game was over, but that’s okay. I wasn’t really interested in the Chargers. Apparently, nobody else was, either.

But the important thing is that I survived flying there and back again. I’ve never been a fan of airports and airlines, but now TSA seems to be actively everyone to drive to their destinations. If only Suna had the time. I love seeing the country at ground level. What I can see now may all be overly familiar, but that is comforting. At least I don’t have to worry about “special screening” at home or in my car.