Saving $1k (Almost) Cost Him $800k
and why you need to know what you don't know.
Real-world example, with names, places, and dates changed for privacy.
I had a client with a small multifamily property who performed a rehab with his in-house crew.
The property was in a B neighborhood, but the prior owners fell on hard times, and the deferred maintenance accrued was both real and financially insurmountable for them.
Budgets were tight - as always - and the upgrades needed were extensive.
We’ve all seen it before…the plumbing was 70 years old, with pinholed copper pipes and rusted cast iron drains, none of the fixtures had working stop valves, and there wasn’t a ball valve to be found in the entire building.
The electrical sockets were two-prong with no ground, the smoke detectors were from 1992 - but still beeped when you pushed the button - and the light fixtures were circa 1973.
This place was in need of serious mechanical upgrades. Pre-2000 forced air furnace, 9-year-old hot water tanks, central air from 1989…you get the point.
I provided the list of products I recommended and the approximate costs they should be paying from their suppliers, which is a pretty normal day in my world.
When the time came to start work, my client did some shopping on his own after reviewing my list and substituted some items that he was able to find cheaper that fit the bill.
Except, they didn’t actually fit the bill.
The best laid plans
He had the best of intentions.
Modern fixtures, plumbing, and electrical updated to code, new mechanicals, the whole nine yards.
It was a nice neighborhood, so he threw in smart thermostats he got for free via the local utility company grant, added electrical sockets with built-in USB ports at the kitchen counter & in the bedrooms, and a few other quality-of-life items that fit the local comps for that neighborhood.
Here’s where things went sideways.
He ordered a mess of products on Amazon because they were cheaper than my estimated costs and what he got from his suppliers.
Smoke detectors & USB sockets in particular were 30% less.
The install went great, everything looked good, and while they still went over budget, it wasn’t by much, and they were able to get the units to pass inspection and get them online within their ideal timeframe.
A few uneventful months passed…until the unthinkable.
The 2:14 AM call from the police
The building was fully engulfed, and the fire department thought there might be people still inside.
The call had come from a neighbor across the road who noticed the smell of smoke through their open window in their bedroom and made the call to 9-1-1.
Two residents and a household pet died, two more were hospitalized for smoke inhalation, and the Red Cross ended up providing shelter for the displaced family that did not have renters’ insurance.
Every landlord’s nightmare scenario.
What made it worse?
At least two of the Amazon products failed, but I want to be clear as you read the rest of this story - understand that correlation does not imply causation, and I do not have the answers to the questions that will remain as you finish reading.