Presentation at https://www.meetup.com/Bay-Area-Multifamily-Moguls/

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Kamal Hyder
January 22, 2020
Succeeding in your
Construction Project
* All pictures are from my projects in the Bay Area

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Agenda
• Background
• Projects: Past and Future
• Common Issues in Construction
• Planning Your Project
• Dealing with City Departments
• Contractor Red Flags
• Building Yourself
• Building without Permits
• Protecting Yourself
• Q&A

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Kamal’s Background
• Worked in Bay Area high tech since 1990
• Cisco, NetApp, Oracle, Amazon
• Education:
• BS EE/CS: University of Massachusetts
• MBA: Santa Clara University
• Authored three technical books
• Involved with Bay Area real estate for 26+ years
• Home-owner
• Real estate investor
• Builder

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Recent Projects (2016-2019)
• Homes from the ground up:
San Rafael, Los Altos Hills, Hayward
• ADUs: San Bruno, San Mateo, San
Jose, Cupertino, Fremont, Palo Alto
• Condo Upgrades: San Francisco
• Multiple Home Additions
Over $18 Million of Market Value

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Projects in Design / Planning (2020-2021)
• 8-condo complex
• 18-home complex
• 3 Homes from the ground up
• 8 ADUs

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Common Issues in Construction Projects
Minimize impact by understanding root causes
• Inadequate Planning
• Incomplete budgeting
• Not understanding specifications and costs upfront
• Not drilling down into project schedule, payment schedule, advances
• Over budget, and lenders will not lend on a project that has already started
• Hiring the Wrong Contractor:
• Underbidding on the job
• Taking large advances / not tracking budget and schedule
• Not Tracking Progress:
• Scope creep
• Improper change management
• Customer not knowing laws around change mgmt, advances, payments, mechanics liens, etc.
• Delivering agreed-upon material?
• Meeting budget and Meeting schedule?
• Meeting city requirements / building codes?
• Not knowing how to identify red flags / recover from issues

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Planning and Tracking Your Project
The better you plan upfront, the lower the odds of surprises down the road
• Align Scope and Budget
• Plan upfront, to reduce surprises
• Understand Costs:
• Architect / designer / engineer fees
• City fees
• Construction costs
• When funds will be needed
• Applicable contingency funds
• Understand and meet City Requirements
• Select a Reliable and Capable General Contractor:
• Check background
• Agree on scope, budget, payment schedule
• Verify Progress of your Project:
• Budget and schedule
• Check for red flags, and mitigate risk

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Planning the Dollars and Cents
The better you plan upfront, the lower the odds of surprises down the road
Purchase Price + Taxes
A&E Costs
Permit Costs
Builder Costs and Insurance
Construction Costs
Down Payment + Interest on Borrowed Funds
Selling Price + Commissions,
Based on Recent Comps
Return on Invested Capital

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Working with Planning / Building Departments
Do’s:
− Make sure you follow city rules
− Try to work with folks who know similar projects
− Show all relevant details in the plans
− Understand city requirements at each stage
− Understand lists of documents for each stage
− Understand fees for each stage
− Expect inconsistent answers
− Expect city departments to not know the latest laws
Don’ts:
− Don’t ask for exceptions
− Don’t lose your patience
Common City Costs:
− Site development review
− School / Sewer / Park fees
− Deposits: Geotech / Utility connections, etc.

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Planning Your Project: Project Timeline
Contact us to optimize at every step
2-3 Months with designer/ architect
~ 3 to 24 Months to Permits
Construction Time

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Contractor Red Flags
Some of the things that can cause trouble for you and your project
• Under-bidding on a project, just to get the job
• Asking for large deposits upfront
• Financial Trouble / Always short on money
• Doing too many jobs at once
• Trying to push you into high-priced suppliers
• Trying to push you into change orders
• Not paying his subs – may result in mechanic’s liens
• Subs abandoning the job (job site sitting idle)
• Not showing up at the job site / Not returning calls
• Unorganized with the project and with the paperwork
• In trouble with the city or the court system (county superior court) or the state (CSLB)

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Why not Hire an Unlicensed "Contractor?"
• It’s a warning sign if that’s how he conducts his business
• It’s a warning sign that he’s been knowingly breaking the law
• He has nothing to lose by cheating you, abandoning the job, etc.
• If he hurts you financially, his status may limit your remedies
• His presence is a threat to your project – the city may come after both of you
• In case of an accident (injury, fire, etc.), your insurance claim may get denied
• You will be liable for issues, even after you sell the property
• Potential criminal charges (misdemeanor plus fine of 20% of contract price or $4,500, whichever is greater and 90
days in jail for repeat offenders) and Administrative Penalties. Business & Professions Code §7028
• An unlicensed contractor is exposed to treble damages up to $10,000 plus attorneys’ fees and costs. Code of Civil
Procedure §1029.8

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Why not Build Yourself?
The State allows you to be an Owner / Builder, but you may face challenges
• Finding, Vetting Subs, Driving Subs
• Getting subs’ Interest and getting the Best Price
• Scheduling Labor and Materials
• One-time vs. Relationship with Subcontractors
• Working with City Inspectors
• Dealing with City Departments / Utility Providers
• Keeping Yourself out of Trouble

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Why not Build without Permits?
That’s yet another way to get into trouble
• If the city catches you building without a permit, you and your project would be in
trouble
• If you have a dispute with workers / neighbors, they can get you into trouble by
reporting you
• When you refinance / sell the property, the added square footage may not be counted,
and the buyer may get suspicious of the work. You may turn off potential buyers
• If the property gets damaged through fire or water damage, the insurance company
may not cover you
• If a renter / buyer of property gets injured due to shoddy work, the insurance company
may not cover you
• You will be liable for construction-related issues, even after you sell the property

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Protect Yourself
A professional general contractor will work hard to protect you, and to minimize surprises
• Work only with a Licensed General Contractor
• Have a Written Contract: Scope / Payment / Schedule
• Check background of the General Contractor
• Get “Course of Construction” Insurance
• With Payment of each invoice, ask for Lien Releases
• If you fire the contractor, use a Termination Agreement
• After completion of project, file a “Notice of Completion”

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Working with a General Contractor
Do’s:
− Engage as early as possible
− Be transparent / realistic about budget
− Understand major costs upfront (foundation, trenching)
− Specify material upfront, to tighten budget
− Plan upfront, to reduce changes
− Make timely decisions - consider lead time
Understand that:
− Contractor has to make a profit
− Changes cost money, and when to change
− Your indecision will likely cause delays
− The lowest bids are most likely to get you into trouble
Payment Models:
− Fixed bid: cost + profit
− Time and material
(read this: https://www.markupandprofit.com/articles/cost-plus-contracts-time-and-material-contracts)

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We Reduce Costs
• Low operating cost = savings for clients
• Ready-made floor plans and designs
• Competitive prices + no deposits
• We help you save on materials + no mark-up
• Plan/ Operate/ Report like a technology company
We Reduce Risk
• Constant review of every phase of the process
• Proven network of engineers, Title24, etc.
• Proven network of subcontractors / suppliers
• We get paid only after city inspections
We Make it a Good Experience for Clients
• Progress reports at every step
• Written approvals for all the work – no surprise
charges!
How We Operate
We align our incentives with our results and our operations with customer obsession!

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Next Steps
We’ll be happy to:
• answer questions
• provide additional detail on any aspect of your project
• help you get out of a troublesome situation
• help you get started with your project
• help you in every phase: concept to final inspection

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Thank You
http://www.breakthroughbuilders.com/
info@breakthroughbuilders.com
408-582-2066
CA License #1023342
YouTube Channel: KamalTheBuilder

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Backup

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Construction Laws to Know About
Just a simplified summary is presented here
Law Section How it Applies to the Project Reference
Contractor
License
A contractor must be “duly licensed” at all times during the performance of the work BPC §7031
Down Payment Pay no more than 10 percent down or $1,000, whichever is less BPC §7159
Written
Contracts,
change orders,
etc.
Requirements for written contracts, down payment restrictions, start and finish dates,
written change orders, specific achievement benchmarks for progress payments, a three
day right of cancellation and a warning notice regarding mechanics liens
BPC §7159
Stop Work
Order
Applies when the payment is “undisputed,” and is more than 35 days late. Notice states
that unless the payment is made within 10 days work will be suspended.
CIV §8830
Lien Laws Conditions for filing a mechanic’s lien, and what happens after a lien is filed CIV §8412,
§8460, §8480,
§8482, §8484,
§8486, §8488
CIV: Civil; BPC: Business and Professional Code

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Useful Links
California Business & Professional Code (Division 7, Construction Law):
- https://leginfo.legislature.ca.gov/faces/codes_displayexpandedbranch.xhtml?tocCode=BPC&division=7.
&title=&part=&chapter=&article=
California State License Board (Checking a Contractor’s License and Bond):
- http://www.cslb.ca.gov/
Homeowner’s Guide to Preventing Mechanic’s Liens:
- http://www.cslb.ca.gov/Resources/GuidesAndPublications/HomeownersGuideToPreventingMechanicsLi
ens.pdf
Lien Releases:
- http://www.cslb.ca.gov/Resources/GuidesAndPublications/LienReleaseForms.pdf
“Notice of Completion” form:
- http://porterlaw.com/forms/private/16Notice%20Completion.pdf