The key to being a successful investor is to manage expenses. Big profits often hide in small corners, so expenses need to be accounted for, monitored and managed. This article is part of a two part series, intended to help real estate investors look beyond “best price.”
Big-Box stores such as Home Depot, Lowes and Walmart advertise savings and warrantees to pull in investors, promising to be a one-stop shop for all their needs. But for many investors “buyer beware” should have been considered before letting savings be the only consideration to manage rehab costs.
Take for example one client in Utah. After comparing quotes, Home Depot offered a kitchen countertop at lowest cost, and their ten-year warranty sealed the deal. What followed is a two year nightmare, still ongoing with no end in sight.
The first thing to know about Big-Box stores is that they use sub-contractors for most of their labor, such as installation of windows, garage doors, kitchens and even appliances. When a crack appeared a few weeks after installation of the kitchen countertop, Home Depot pointed the finger at their sub contractor, a large Utah firm. They in turn pointed the finger to a manufacturer, who had no direct contact information.
You can see where this cautionary story is heading. But it got worse. Much worse.
After about six months of trying to solve this issue the client resorted to hiring an attorney. Home Depot countered with an attorney of their own. So much for a warranty on something relatively common as a crack in a countertop. Next followed a series of intimidating home inspections and a pattern of delay tactics that seem designed to wear out a claimant.
It has been two years since the installation. So far Home Depot’s offer is a settlement that would barely cover attorney fees, plus an offer to replace only the materials. This offer would result in more costs than the original purchase, since installers will charge a premium if they cannot work with their own materials. In other words, Home Depot’s proposed solution only offers more costs and more stress. We will keep an eye on developments in this case and update you in part two of this article.
This experience is of course not unique to Home Depot, and is probably more an exception than the rule. Overall you get what you pay for, and if you get what you expected, lower pricing at Big Box companies can result in more profits for the flipper.
The alternative, working with smaller, local providers, might not be any better and can result in a whole new set of issues. The point is to go beyond pricing, consider all angles, and be aware that a large footprint does not guarantee quality or reliability. Do your home work, ask around, get multiple bids and then choose the best route for rehabbing your property.