119 – The Relevance Of A Quantity Surveyor For Renovators

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Quantity Surveyor

Meet Marty Sadlier, a property investor and cost estimation specialist who joined me in today’s episode as my special guest. Marty will share his passion for ensuring that developers, renovators, and investors alike gain a comprehensive understanding of all construction costs and potential risks on their developments. On top of that, Marty is going to give us some tips about when a renovator would need a quantity surveyor and the scariest thing he experienced in this venture. 

Listen to Episode 119: The Relevance Of A Quantity Surveyor For Renovators

Podcast: Download (Duration 40:43 — 37MB)

Episode Highlights

  • [00:00:34] How To Replace Your Income With Renovating
  • [00:03:54] Client focused service
  • [00:05:52] Seven offices
  • [00:07:00] The path to becoming a quantity surveyor
  • [00:09:47] Trade price: workload vs what it should cost 
  • [00:11:32] The difference between building prices per location 
  • [00:13:41] You need a couple of people to help drive the price down
  • [00:14:20] The recorded index
  • [00:16:05]  Time is money
  • [00:17:06] Opportunity in depreciation
  • [00:18:03] The big chain 
  • [00:18:52] How to get the depreciation report done? 
  • [00:20:29]  Age-old argument
  • [00:21:32] Inspecting  the property
  • [00:22:43]  Scrapping schedules
  • [00:24:19]  83% of Australians that are underinsured  
  • [00:26:30] You can’t rebuild all 10 sheds at once
  • [00:27:31] Insurance assessments
  • [00:29:28] Paying the wrong person
  • [00:30:45] When do you use a quantity surveyor?
  • [00:32:17] Working document
  • [00:33:42] A story from a long time ago 
  • [00:34:22] An expert witness 
  • [00:34:41] Scariest story 
  • [00:37:10] The handshake agreement is still extremely prevalent

Transcription

“I just think that for some of the insured things that we get I hear people say, ‘oh, I’ve added my iPad to the contents insurance, or I’ve done this,’ but have not even considered what their properties should be insured for. 

Intro

Hello, hello, renovators! This episode is sponsored by a brand new training entitled How To Replace Your Income With Renovating. So it’s for you if you’re on a mission to go from a hobby renovator to a professional renovator. To either replace a dull day job, to retire, or downsize profitably. To pay off your mortgage, to help the people you love, and to have more money and more fun in your life. It’s been a while since I’ve done one of these and I’m pretty excited about it. 

What I’m going to cover in this training is the process you go through. I will cover the three core steps to going from pretty much where you are now, to a point where you have the capacity to generate income at will, and how you can replace income with renovating. Lots of people have this as a dream but actually haven’t figured out how to get there. So that’s what I’m going to be walking through in this training. 

I’m also going to be sharing with you my top tips for getting fast results. I have really nailed this and what I’m seeing now is that the students coming out straight from the Bootcamp, going into a project, and absolutely killing it. Because the alternative is going into analysis paralysis and doing nothing, which doesn’t get you what you want. So I’ll be talking about that. 

Also, I’m going to be talking about my proven fix for the biggest challenge that newbie renovators have. We all know what that is. It’s a missing ingredient. I’m going to be talking about how we approach the joint venture process. I’ve been working on this for probably almost 10 years. I’ve done a lot of joint ventures, can’t remember really how many, they’ve gone from being sometimes a bit painful to a beautifully elegant process. So, I’ll share that with you and the part that we play in that.

This is our entry-level training to our Bootcamp. Of course, there’s no obligation to join the Bootcamp. But in order for you to really understand what’s involved, if this is something that’s on your agenda, this is a really good way for you to get those distinctions.

The other thing I should let you know is, it is a meeting and not a webinar. The difference is that with a meeting, you can actually see the people that you are communicating with. You can talk and be heard. I cannot stand the facelessness of webinars. We’ve outlawed them in The School Of Renovating because I really love to get up close and personal. So that’s the way we roll.

If you would like to join, you can come over to www.theschoolofrenovating.com/theleap and if you can’t remember that, you’ll find it in the show notes.

So let’s get into the episode.

Quantity Surveyor For Renovators

Bernadette Janson: Welcome Marty! And thank you for joining me today. As I said, I feel like I’m in the presence of quantity surveying royalty. I’m sure you are very proud of your efforts. We met probably six or seven years ago, I think it would have been when I first started my business and I have to say yes it was very green and you were very gracious. So we’ve both come a long way.

So we’re going to be talking about the relevance of a quantity surveyor for renovators. I’m just wondering whether you would mind just telling everyone a little bit about yourself? 

Marty Sadlier: Yeah. Sure. I co-founded with my business partner, Mike back in 2011, MCG Quantity Surveyors. We saw a need that the industry was really after expertise and a client-focused service consultant. We would be working for a bigger company, like a lot of consulting firms become a little transactional just with size. And that’s not necessarily a negative of that firm, but it’s just more of a culture of big consulting firms that tend to lose sight of the coalface client-focused service.

So that’s where the original idea came from and it’s manifested into us now being a nationwide service with various offices. We’re very humbled to say we started from a bedroom and now, we’ve got seven offices. It’s been a really good journey.

In 2018 we’ve got the Australian Financial Reviews, the fastest 100 growing companies. And then this morning, we were just announced as 2021’s Client Choice Awards for Quantity Surveying, the number one quantity surveying company in the country.

So it’s something that those little things that have nice little pats on the back, but I think it’s more of a recognition that you’re heading down the right track. That’s our general wrap-up.

Bernadette Janson: Great! Yeah. I’d say that’s a massive pat on the back.

Marty Sadlier: Yeah.

Bernadette Janson: Brilliant! Thank you for that. The fastest 100 companies and it’s amazing! So congratulations on that. The thing that I love is the fact that you do have seven offices because a lot of our audience is Australia-wide. It’s really good that you service areas other than Sydney.

Marty Sadlier: Yeah. And that’s property investing. We’re seeing it changing. We did a study of the last thousand jobs that we’d worked on and worked out, where the client lives cause their addresses in the report and where the address of that investment property is.

And it’s quite interesting to see the distance that people now live from investment properties and renovation type jobs because of the rise of buyer’s agents. And different national presences of those things that people aren’t necessarily buying a property around the corner anymore.

Bernadette Janson: No, they’re not. Do you mind just letting me know where those offices are? What cities are they in?

Marty Sadlier: Yeah our officers are in the main sort of metropolitan areas. And from those we service out into the regional areas of that state. So I’m saying from the North coming down, we’ve got Brisbane, Newcastle Sydney, Canberra, Melbourne, Adelaide, Perth.

Bernadette Janson: Great. Excellent. Okay. How do you become a quantity surveyor what’s the path?

Marty Sadlier: Yeah the path that there are a couple of different degrees that you can do. The main institute that sort of heads up is the Australian Institute Of Quantity Surveyors, which I’m a council member for the New South Wales chapter. And I’m a fellow of the Australian Institute Of Surveyors. That’s really the governing body of that institute.

To become a quantity surveyor, there are a few different degrees you can do that have recognition status. The main one is the bachelor of construction management. It is a four-year degree typically. And from that, it’s very much a hands-on basis outside of your degree. You can be working with a building company as an estimator and then sit on the panel to become a qualified or certified quantity surveyor. You need to be able to hit off those core competencies of cost estimation right through to feasibility.

Bernadette Janson: Yeah. Brilliant. And you came to it through your trade?

Marty Sadlier: Yeah, so I went from school to a trade, carpentry. And from there went to Uni, did my degree, and then progressed through working with a quantity surveying company at the time and then starting MCG.

Bernadette Janson: Great! And so what are some of the situations where we as renovators might need a quantity surveyor? So we will talk about depreciation reports in a minute, but what other offerings do you have that a renovator might be interested in?

Marty Sadlier: There are two parts to renovating. You can be a person who wants to renovate because this is just the house you want to live in. For within reason, you’re quite happy to overcapitalise. So the budget isn’t necessarily that important to you. Now that might be a smaller fraction of the people who are doing renovation I would think more than it should be in that regard. I think every renovation you do, you should have some return on investment from a budgetary sort of part.

So at the very start at a conceptual stage when you’re maybe talking to an architect or a draftsman or interior designer is putting some numbers around those works. And that would be when I would be talking to a quantity surveyor. So our initial step could be, “I’m thinking about buying this property. I’m thinking about doing this as a renovation. What am I in for?” And that may be a catalyst of whether you even put an option on that property to purchase, or even go to an auction to see what you’re willing to buy for knowing that what you want to do to it is going to cost X amount.

And then that would go right through to the detail stage of actually costing up the actual scope cause it’s been quite defined that you’re able to then use that estimate to compare builder’s pricing or subcontractor pricing that’s coming in. So you’ve got some sort of budgetary allowance right through the tool when the services are done, assessing defects or variations.

Bernadette Janson: Great. It’s purely for structural renovations?

Marty Sadlier:  Yep.

Bernadette Janson: A long thing, obviously.

Marty Sadlier: I guess not necessarily. Depending on your house. If you’re going through and repainting and redoing lights and redoing floors and the like, you could still be spending quite a lot of money on your property. And being able to ascertain what, say, pulling up the carpet and polishing the floorboard should cost when you’re going to be getting prices in from various trades, it would certainly be worthwhile. You don’t want to be caught out in that. You’re getting a price from a trade that is giving you a price purely dependent on their workload, as opposed to what it should cost.

Bernadette Janson: Oh yeah. Seriously that’s going on at the moment. Yeah. And so that’s really interesting because one of the things━ like I was saying to you, I’m looking at negotiating well on property purchased this morning and it’s in Newcastle and I have never done a project in Newcastle. And so there are quite challenging things about this property.

It needs some work on the foundations and the call space between the house and the ground is very limited. And a few other things like that. I was talking to the buyer’s agent and I said to her that I’ve allowed about 20 grand for that, for the worst-case scenario. And she said, “Oh no, I don’t think you’ll need to allow that much.” And then she went to the builder and said, “actually yes, probably 20,000,” but I would feel a lot more comfortable if I actually had a quantity surveyor’s opinion. So how do you adjust for location? Because I know that building costs there are different to what they are here.

Marty Sadlier: Yeah. So there are indices. So there is what something will cost in Sydney in Newcastle, maybe 5%, but then there are the regional indices on say a building price index. And that’s based on scarcity of materials and labor. So what it would cost to say, build in Sydney would be vastly different it’s a broken hill because there’s less competition. They might not even be a concrete plant there. They might have to ship a lot of material out there depending on the build. So it might be that you could do a weather-clad house out there fairly price competitively because of the nature of the builders who are used to building in that and materials around.

But you may not be able to build a gable house at the same cost you could in say Dubbo, because there are no people out there and you have to pay for transportation or tradesmen to stay over. So there are certainly instances of that. And when we get that even in, just in Sydney.

So not only is there a regional difference, it always comes down to competition. We’ve just done an extensive house in Clontarf. Now the marble floors are putting down two meters by one-meter slabs. Now that we weren’t able to get pricing from the general tiling fraternity, because a lot of tilers wouldn’t lay a tile that big or want to work with a tile that big. They didn’t have machines that could cut them on and do all those sorts of things economically and weren’t interested. 

In some cases, they may say they’re interested, but their price that they were giving was showing they weren’t really interested in it or able to do it. So suddenly we were paying or getting prices fairly high because there was just no competition to do it. So certainly you do have the regional indices, which will drive up price regards on competition and scarcity and the like, and also workloads.

I can remember, doing work as a carpenter in the late 1990s in the Eastern suburbs of Sydney. And it was just after some big hailstones hit the area and you just could not buy a tarp in town to put over your roof and tiling prices were through the roof. So you’ll find it after certain sort of weather events, cyclones in the North, or whatever it might be, you just can’t get tradespeople.

The tradespeople will just go “I’ve got━ I’m booked out now for nine months, if you really need to fit me in you’re going to pay for it,” and you to weigh that up. We’ve had jobs where it’s in Melbourne there’s been an influx in certain suburbs and someone will say to me we’ve cost this half a million dollars. The cheapest quote I can get is 1.3 million and we did at the last job and we’re on the money and it was the exact same build. So you can start to see that unless you can get people and you need two people. Like at auction too, if you want to sell your place at auction, you need two bidders to drive it up. The same is if you’re trying to get a price from a subcontractor, you need a couple of people to help drive the price down.

Bernadette Janson: Yeah, exactly. Okay. So that’s really good. So your local offices have that local knowledge that you pull into that task. The other thing I want to ask you, as well as the recorded index that you use. 

Marty Sadlier:  Yeah.

Bernadette Janson: How much time do you need to do that? And roughly what does it cost? And I know that’s a variable thing, but if you could just give us an idea, that would be really useful.

Marty Sadlier: Yeah. So if you’re looking at feasibility that it’s pretty high-level drawings, and when I say high level, there are some people that come to us with a sketch on the back of a serviette because I haven’t purchased something yet, or I haven’t really committed to the project of going and spending 10 grand with an architect. So they’re trying to get a bit of a feel for it. Now, in that instance, first, a cost plan, which we’re able to do fairly detailed because we’ll go to the site and measure it up and we’ll have that conversation with the client. That might be something around the 600 to a thousand dollar mark.

Then you’ve progressed a little bit further and that might be a three, five-day turnaround depending on the access of sites, if we then jump forward to you’ve now gone to a draftsman or an architect, and you’ve got some finishes and structural sort of elements depicted on the plans and it’s a little bit more robust. We’re able to then count taps and the number of toilets and toilet roll holders and exact square meters of wall tiling. Now that’s something that’s going to be more in the vicinity of say 1500 to $2,000 mark based on going through all the information and costing that up.

That’s something similar to a bill of quantities that people would have heard about that is a detailed estimate that they can then compare individual trades. And that would, we usually quote about the 10 working days for that service and usually come in much quicker if required.

Bernadette Janson: Okay, great. That’s good. And of course, that’s actually how we connected, reconnected, I should say is because I asked you to do something, do that on our renovation at home.

Marty Sadlier: Yeah.

Bernadette Janson: Yeah. I do have people in my family who could do it, but I’d waited a few weeks and though this isn’t going to happen so I better do something about it.

Marty Sadlier: Yeah. And look, I think that’s a really nice way of actually summing that up because time is money. Now when you’re renovating a property, let’s take the consulting out of it. If you’re renovating it so it’s going to be rented out and it’s going to take nine months, or are you going to wait around for a year because of trades that are getting back to you? You’re losing rent.

So time is money and the other thing is, if you’re not an expert in it, if it’s going to take you a week, you may far be a better option to get someone else to do it in a day. And you’re a week down the road.

Bernadette Janson: I absolutely agree. When I saw the proposal for $600, I thought “seriously, I don’t know why I waited so long to its great value.” Okay. The next thing is to talk about depreciation. There were big changes in the laws a couple of years ago, as renovators if we’re renovating our own investment properties, do we still have the opportunity to depreciate plant equipment?

Marty Sadlier: Yes.

Bernadette Janson: How does that work? Are depreciation reports still valid?

Marty Sadlier: Yeah, absolutely they are. The big thing about depreciation, the big sort of changes they made in regards to plant and equipment were that if you’re putting in the plant and equipment items. So if you’ve got an existing property and you buy it and it already has a kitchen renovation done to it, and you’re now the new purchaser, you aren’t able to claim that plant and equipment it has already been utilized by the previous owner.

So from a plant and equipment point of view, it has to be something that you’ve done yourself. So if you’re looking at buying a property and renovating it, you’re going to be getting the plant and equipment.

Bernadette Janson: Yeah, exactly.

Marty Sadlier:  That was the big chain. So really prior to that if a previous owner had put something in and that item still hadn’t got to the end of its effective life, you inherited the ability to claim that reminder, that’s now gone.

Bernadette Janson: Yeah, exactly. So there is still some opportunity if you’re buying and a company name, is that correct?

Marty Sadlier:  Yeah. There are certain changes that would depend on how you’re buying it with your accountant. There are also different things where if you’ve actually purchased it pre the 2017 date, there is a grandfathering part to that. But it needs to have been rented before that.

So there are still some tweaks, but the general idea of it is that if you’re buying something now and you’re going to be renovating it and it had already been installed by a previous person, it would be gone.

Bernadette Janson: Yeah. Excellent.  So what does a renovate need to present you with in order to get that depreciation report done? Do you need receipts? How is that?

Marty Sadlier: Yeah, if they’ve got the receipts, absolutely. In the first instance, we always say to people, if you’re planning on doing a renovation let’s get some good photos before you even start ripping stuff out because there could be something in there that we can utilize for you. And when you’ve done your renovation, the ATO will believe that it’s fair and reasonable that you would have receipts.

Now in the event that it is a structural thing, like a new roof went on and by the previous owner, you’re not going to have a receipt. So, therefore, as a quantity surveyor, we would need to estimate that. But if you’re doing work to your property, it’s fair and reasonable that you’d have that receipt. If you don’t in the absence if you don’t. And that was in a shoebox that got wet in a storage facility. We will estimate that. So in the essence of, and especially with I think where it’s really important is if you’re doing a renovation where you’re having the property vacated and you’re going to do it in two months, that timeframe is much the same. But if you’re going to do a renovation of a property over a period of time is really important. 

For argument’s sake if you’re depreciating the value of blinds that you’ve put in January, and it has an effective life for a certain period of time. If you’ve only just put those in now and not two years ago, you want to know the date that you can claim them from and maximize that. So you don’t want to be checking that price in with the general renovation you did previously.

So that’s why we’re asking about those dates and those invoices because we’re trying to maximize your value you can get out of that asset.

Bernadette Janson: Excellent. Yeah, that makes sense. And when you come and do a depreciation report, so the other thing is so that you do need to actually inspect the property?

Marty Sadlier: Yeah. And there are competitors that would say, you don’t need to inspect it. I’ve heard things like we’ve got software that can estimate it. The age-old argument has always been that there’s no software in the country or the world that can work out what you’ve got in your property.

They don’t know what lounge you’ve got in there, or how many knives and forks you’ve got. If you have to service one that you’re renting out with that. So at the end of the day, we’re also going to notice things that you may not. So it might be that you’ve bought this property. You’ve done a bit of a renovation.

And when we go out there, we actually go hang on a minute, this property was renovated a couple of years ago. We can tell because the skirtings are different in bedroom one to bedroom four, or when we’re outside, we can see a different facial or a different gutter.

We know this has had a new roof at some point, and we’ll go through and check DA’s and do our research on that’s money that you can be claiming that you may have just been none, the wiser for.

Bernadette Janson: Exactly. So I guess that would come under the capital, what’s called capital work?

Marty Sadlier: Yeah. So that would be because it’s structural, it’s not part of the plant equipment, it would be written off at 2.5% of its value.

Bernadette Janson: Yeah. Cause it’s written off over 40 years and stuff.

Marty Sadlier: Correct.

Bernadette Janson: Yup. Oh, that’s really useful information, and what’s the situation with scrapping schedules now?

Marty Sadlier: So there have been some changes to that. I must say Mike of our officers is the absolute resident guru on scrapping and tax depreciation. The most important thing is that if you’re pulling something out so you’re scrapping an object or an item from a property. So you’ve bought a property and you’re renovating it, so you’re gutting it, there may be residual value in that item. So the carpet that you’re pulling out or whatever it might be. So it is best to keep a check and a balance of what that is and what you’re pulling out.

And that goes back to my first comment that if you are going to be doing a renovation, let us know what you’re planning on doing. And we can get some photos or understand what you’re doing and we can guide you on, “hang on there’s going to be some value in that. ” There may not be some value left in it, but for the sort of effort of a phone call and a quick chat, it could be, thousands in your pocket.

Bernadette Janson: Yeah. And the distinction with scrapping schedules is that the property needs to be intended to be offered for rent?

Marty Sadlier: Yes. The idea of scrapping doesn’t apply to someone that is buying a property to demolish or to renovate, but it might be that you had bought it and it’s been rented and you’ve had it rented for some time. And you’re now looking at upgrading or doing a renovation, there may be some residual value in there. But if you’re purely buying something because you’re gutting it next week or demolishing the whole building next week, that’s where we just need to look at the nuances around how that’s being done as to whether the scrapping applies to or not.

Bernadette Janson: And so what happens, let’s say you finished the renovation and you put it up for lease and it remains vacant? Let’s say it’s towards the end of the financial year and it remains vacant for some time you don’t get a tenant, can you still claim that scrapping schedule?

Marty Sadlier: Yeah. And the other input and will the depreciation even more importantly, that you’re able to, as long as the property is available for rent.

So if you’ve got an advertiser’s available for rent and you’re just unable to get a tenant, you’re still the asset is depreciating in that time-space. But if it’s that you have finished it and you decide you want to go away for a while and just lock it up, they would not even decide it’s not actually available for rent. But if you’re trying to get a tenant in and it’s advertised and you just haven’t been able to find the right person or whatever, it might be, you are still able to claim that depreciation.

Bernadette Janson: Yeah, I think that’s a worthy distinction. Now the other day I heard you on The Elephant In The Room podcast.

Marty Sadlier: Yes. 

Bernadette Janson: It was just patch on actually. I do listen to it, but not that often. And that you were talking about valuation for insurance purposes and it really brought something home to me because we live in a Strata titled property that has five owners. And we always, every couple of years get the property value to determine whether we’ve got adequate insurance.

Marty Sadlier: Yep.

Bernadette Janson: And I looked at that after listening to you and thought that maybe it’s not a value or we should be getting, it should be a quantity surveyor. Because what I do is I look at it and I put, I usually think if it costs me $5,000, a square meter to replace, is that enough? That’s what I do. And I don’t know. I don’t think now having listened to that, that’s adequate.

Marty Sadlier: No, don’t take it personally, but you’re probably one of 83% of Australians that are underinsured in that instance because you could be missing out and that’s the catch. We aren’t doing it right as an insured nation. We don’t really put the value into the priority of home insurance. And that’s not a new thing for about 20 years of studies. We sit at about 83% of Australians are uninsured. Ah, sorry, underinsured. The definition of that is that you have only insured the property for 90% or less of its value. That covers or catches where people get caught out in is that they add an amount to their previous amount. 

So we’re going to put up 5% this year, but the issue is that the original price might’ve been under-done. If you think about your own property, if you have a block of land and you build a house on it and you go, okay, I know it costs 400,000 to build that block of that house.

And you insure if that value you’re under-insured now people will go no, that’s, you’ve got to pay the builder. But what you’re not allowing for when you bought that block of land, it was a block of land. It was empty. So now you’ve got a property on it. If there’s damage and you have to rebuild, you also have the demolition cost of getting rid of the original.

Now, if that’s an older building that has say a bit of an asbestos roof. It might not just be the asbestos in the roof, if you’ve had a fire and that demolishes, then you’ve got a special source of the whole site. So you’ve got a contaminated site. So just in the demolition, you’ll be inadequate.

And then you’ve got to look at the different things of when you’re rebuilding, you’ve got to allow for the costs of architects and the consultants and all those things you’d need to rebuild. So we see a lot of farms under-insured purely because farmers and family members have built shed over time. But the reality is if they burned down, you may not be able to rebuild them. Maybe an age thing or you’d no longer want to be able to do it or a timing thing you can’t rebuild all 10 sheds at once.

So if you’re getting someone else into now do that, you’re going to be under-insured. And then we have the cost escalations issue wherein time things cost more. So there’s a lot of people that have a bit of an understanding of what their property should be, but they’re not really allowing the full picture of what they should be allowed for.

Bernadette Janson: I’m very aware of the risks of un-insurance and I honestly believe that the way that we were going about it and with the advice of the property manager was adequate, but I’m really actually quite grateful that I now know that and can action that. Basically, you do insurance assessments?

Marty Sadlier: Yeah. And look, I think people need to understand that if your property is worth a million dollars, a new insured for 900,000, so you insured it for 90% of its value, most insurers will pull the under-insurance close, which is that we’re only now going to pay you 90% of the payout. So you’re not 10% short. You’re a lot less than that short.

Some people will say we’re keeping our premium down. The difference between, say, ensuring your property for 900,000 or a million, I don’t know. It might be 20 bucks and run the scenario, like it, it may not be worth what you know, and I don’t know, I’d I really I would hate to think that while smoke is still rising off my property, I’m getting a tap on the shoulder saying farther away, you gotta chip in 200,000 or whatever. I just couldn’t think of anything worse.

Bernadette Janson: Absolutely. So it’s definitely something that if anyone’s in this situation, they need to address. I do think sometimes you can go mad with insurance, but ensuring if your home is, like 101.

Marty Sadlier: For the best part of most Australians, it’s the biggest asset you’re going to own. People will research the backside of a TV that’s going to be going in the spare room. And yet get advice from someone in a conversation over coffee about what they should ensure their property for?

Now, I just think that it’s a priority, maybe insurance has had a bad name in the past or what have you, but I just think that for some of the insured things that we get I hear people say, “Oh, I’ve added my iPad to the contents insurance, or I’ve done this,” but have not even considered what their properties should be insured for.

Bernadette Janson: Exactly and the ridiculous thing is we actually pay someone to provide a valuation. We’re just paying the wrong person. 

Marty Sadlier:  Yeah. Look, read the valuation. If you’ve used a valuer read the report, there’ll be a disclaimer in there that says that “no, we can’t actually stand by this and you should use the services of a quantity surveyor.”

I’ve got a saved message on my phone that if I’m out and about with people, I show them and it was a valuer ringing me up and leaving a voicemail saying, “I’ve just been asked to do this report for a client, can you please get back to me and let me know a rough cost per square meter so I can do the report?” Like I was flabbergasted. I was just flabbergasted that the valuator even rang me up for that. Why not just say to the client, “I can’t do this for you. Use the services of someone who is actually trying to do this.” A bank doesn’t use a valuer and go and assess the builders’ construction costs of a build, it doesn’t use a valuer to determine what his tender should be.

A builder won’t use a cost calculator to work out what he should be going in on a tender yet they all use quantity surveyors. You’ve got to look up what people are using? Why am I using someone that no one else is? 

Bernadette Janson: Yeah. So given our audience, Marty, is there any question I should be asking you?

Marty Sadlier: I think a really good question is, when do you use a quantity surveyor? We touched on it before. I think the easiest way to answer that is, just to make a phone call and speak to someone because everyone’s going to be different. And it, someone might be just doing a bathroom renovation and I might go you know what, you’re going to pay me $600 to price up something that you could probably do yourself. Cause it’s only two or three trades, whatever it might be. I’m going to tell you that might not be worthwhile, but then there are bathroom innovations and then there are bathroom renovations.

So it’s not one shoe that fits all. I think, ring up a certified quantity surveyor and make sure there are CQS and speak to them about what you could do? How much would that be? And they will talk and I’ll tell people, look, it’s not worth it because in a lot of scenarios, it might be a client will say to me,  Marty, can you please give me a rough idea of the feasibility of this renovation?

I’ll say, “how far away are you from getting the full drawings from the architect?” then, “oh, a week.” I would say, “you know what? Don’t worry about it,” like wide awake and I’ll do it off those because if I do them off this now you’re only going to pay something that is not going to be relevant.

So It will depend on how far you’re going down the road or whether you’re doing it for feasibility because it’s just a want to maybe see if I can get finance for it or whether you want to compare builder’s pricing. I think that the first thing is to open up the dialogue, speak to a quantity surveyor fairly early on, and now we’ll be able to help build something up for you.

I’ve done a report for renovators where I’ll export it into Excel and send it to them and then they’ve got it as a working document. They then price something and they can change it and manipulate it and they’ve got this working budget.

Bernadette Janson: Yeah, that’s great. That’s really good. So I’d love that, actually.

Marty Sadlier: Yeah, because we might go in with a tiling rate and say, “look, we’re going to allow for a PC.” So the supply of the tiles is $70 a square meter, and then we’ll have the component of that or the install component of that separate.

Now, if you then decide that you’re out on the weekend and you see some tiles you really like because we’ve given you that as a working budget, you can then go in and change the $70 per square meter to 105, because you now are going to use a decorative mosaic tile, and you can adjust the lay, right? If you’ve had a con and we’re not charging for it. But you’ve been able to update it. You can say it more of a live documentary, “hang on, I’m still on a budget or have saved some money here, where am I tracking?” That’s the benefit of having it cost out properly. You can then use it.

You’re paying for something that you should be wanting to use so that you’re knowing your numbers, knowing where your money’s going. It’ll help with cash flow because you’re able to see, okay, the next bit I’ve got to do on my renovation is tiling. Wow. I’m going to have a, now I’m going to be out for about 70 grand in the next couple of weeks. It’ll allow you to help see where your cash flow is going.

Bernadette Janson: That’s really great advice. A long time ago, Mike, your business partner told me this story about someone who engaged his neighbour to build a carport and it didn’t go to plan and they had no contract between them and it was a nightmare. That required the services of a quantity surveyor.

I have used that story so many times trying to drum into my students the need for having contracts. So I did ask you whether you had a story to bring to us today, whether it’s a funny story or a scary story.

Marty Sadlier:  Yeah.

Bernadette Janson: Is it too much of a demand?.

Marty Sadlier: No, I’ve got lots of scary stories. I am an expert witness. So I do a lot of reporting for the courts when there’s a dispute. So I tend to say the good, the bad, and the ugly when it comes to the industry. And see where some things will be a dispute over a fence, but the next thing you know, it’s multiple houses and escalates.

We do see the horror stories of it. I think for me, the scariest thing is probably just luck sometimes, like I was on a building site years ago and there was a brick wall that was propped up. It was a brick facade to the front of a building that was being kept. I was there in the morning and we did an assessment of some demolition costs that they were going to get paid and I left the site and then that afternoon, the wind had picked up and the brick wall blew over and it actually killed someone on the site.

So I think that from a sort of the scariest thing is probably, timing and being aware when we see the different things with no reporting of not doing things right. But I think, know, sometimes I like to put things into perspective a little bit and just that, that was probably the scariest thing for me that you go how close was all of that.

Bernadette Janson: Was that luck on your part?

Marty Sadlier:  Yeah, that’s right. And it might not have just been as simple as the wind that could have been after that more props were taken out for whatever reason or whatever it might be, but it just shows that like I think. And in that instance, that was probably the scariest I’ve been on a building site, but at the time it wasn’t a concern. I wasn’t worried at all, but that’s probably the scariest thing.

Bernadette Janson: I think I might pull that question further up in the interview in the future.

Marty Sadlier: Yeah. Look, I think there’s some real━ that’s the thing, like when you talk about, those sorts of things, I’ve been doing it for 20 years now, I’ve seen, disputes over a driveway end up where both parties are in district court and they’re up to four or $500,000 in legal fees. And the whole building’s now being defected. And our, this has been happening the whole time. And it really was either payment of a driveway at the end of a job. It wasn’t refusing to be paid. Like it just they’re the scary things where, you know, stereotypically the retired male that is almost looking for something to do, grosses themselves in it. But there are some pretty scary things.  I was looking at it from a consultant’s point of view, the scariest thing, it’s the lack of paperwork.

It’s still in this day and age, the handshake agreement is still extremely prevalent. And we see it as soon as there is a dispute, they’ll go there have been variations all the way through, and you’ll look at the paperwork. There is none or hadn’t, that was asked and it fuels this legal and they’re the only people getting the money out of it at the end of the day. Is that legal sort of sector when all you had to do was document something.

Bernadette Janson: Yeah. Can I just ask you on that note, so often with trades, we communicate a lot via text. And often the jobs they’re not over you’re talking about budgets of, between 60 and a hundred thousand. They’re not massive. They’re predominantly cosmetic. Yeah. And if something, a trade, you might agree, a variation via text. So I’ll just say, can you confirm that back to me via text, will that stand up in court?

Marty Sadlier:  A correspondence, but why not just do it as an email? That’s that at least there’s a little bit more security around it. And what are you agreeing to, in terms of that variation? A text may have some photos attached to it or what have you, but I think there’s nothing wrong with texts and email for a variation, but I think that’s the first step.

The final step is then documented somehow. So I might text you, “Bernadette would be great to catch up for coffee?” And you might go, “yeah, that’s great.” But then we formalise it with a meeting request later on. And it might not be…like it could be after the fact. I might send you an email saying, “Hey, great to have caught up with you, Bernadette. And yes, I’ll get back to you on these three points or whatever it might be leading up to our podcast.” I think, if you’re going to do a tech scenario for a variation followed up with that email, “okay, Mr. Painter, as per our discussion yesterday, I agreed that you’re now going to paint the bedroom walls blue. And what have you- can you please just, reply back with confirmation?”

It’s better than just being the text. But there’s nothing wrong with texting. You may be at work. There’s nothing wrong with that. And it might be that variation gets done and in the worst case do it not long after don’t wait till the end of the job because it’s all fine. And then when it goes, pear-shaped, you haven’t got anything to support those extra changes.

Bernadette Janson: Yeah. That’s really good advice. So thank you for your input. It’s been valuable to me and I know it will be really valuable to our community. If someone wants to avail themselves of the services of MCG Quantity Surveyors, how do they go about that? Where can people look?

Marty Sadlier: They can jump on the website which is www.mcgqs.au and they can find all our contact details there, or put an inquiry through on there. They can get hold of me directly in an email and we can send it to you, but it’s [email protected] or just on the phone. We’re more than happy to have that initial conversation with someone and you know what it may not be a job for us meaning that it might be a light bulb moment for you. Something might get explained in a different way that now makes sense.

Bernadette Janson: Yeah. That’s fantastic! Thanks very much for that, Marty.

Marty Sadlier: No worries, have a good day! 

Okay, so that’s it for today. Now, if you haven’t already done so please come over to iTunes and leave us a review, give us any suggestions that you would like for future episodes and we will be so grateful. We read them all and we are so appreciative of you for making the effort. 

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