What is it??

As real estate investors, we have all had a laugh or two about a contractor being on time. Deadlines are missed, deliveries late. How can you keep your project and contractors in line? One very important aspect of a successful flip is the creation of a Statement Of Work (SOW). Every project must have one, and if it is not done properly could cause you big delays and even bigger problems. So what exactly is a SOW? Let’s examine the concept and show why doing one is a must.

The SOW is the detailed description of the work to be done during the life of a project, a written agreement that stems from your Property Repair Estimate Sheet, specifies the end result sought by all parties, along with a detailed description of the resources required to finish the project or job. It is an essential part of the flipping house process

Basically it answers the five questions of Who, What, Where, When and How. Failure to address these basic questions can lead to failure of the project as a whole.  The project scope gives a detailed identification of exactly what will be accomplished. It also defines what will not be performed during the project – either explicitly or by omission. The clearer you can be with the scope of work, the more successful the flip will be.

Importance of a SOW when Flipping

A statement of work sets the ground rules for all parties involved in a flipping project, especially when third-party vendors become involved. We have mentioned before that subbing out to contractors is our preferred method with rehabbing. The SOW becomes especially important during the implementation, monitoring, and evaluation of the flip. At anytime you can refer back to it in order to help refocus your team and/or and contractors.

It’s impossible to accurately predict the exact amount of time and resources necessary to complete a project. However, a statement of work can be crafted in such a way that it supports flexibility and evolution for both the project and the team’s participants. When a SOW contains statements of purpose and scope with detailed descriptions of the desired end result and the resources deemed necessary for completion, it keeps the project flowing smoothly. Cost and budget statements should reflect the agreed price of the project, any contingency plans, and penalties for failing to reach specific milestones. Lastly, the SOW should identify the dates and times of all significant events that will occur like project kick off and expected completion.

Be sure to have your contractors sign your SOW

A SOW will become the baseline level of communication for all parties involved in a project.  Be sure to ger your contractors to sign off as well. Should a project evolve beyond the original statement of work, referring to the core SOW can help with amendments.

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