On today’s show we’re talking about a disease that is rampant throughout the world of real estate investing. This disease is everywhere and it is the source of millions of dollars in lost revenue and increased expenses. There is no vaccine against it. There is no outright cure. But with good process it is possible to be immune from this disease.
The disease I’m referring to is called versionitis. Versionitis happens when you reference the wrong version of a document, an outdated version of regulation, or the wrong version of a drawing.
It’s the source of misunderstandings, it causes wasted materials, cost over-runs, and contractual disputes between contractors, architects, subcontractors and owners.
It happened to me very recently. The planner for the city sent me a document. She told me it was the latest and greatest. It was not yet published by the city on their website, but we should use the one she sent us as a guide for our development plans.
So I did as she suggested and saved the file, referred to it frequently, and built our plan based on her guidance. Imagine our surprise when the newly updated published document on the website didn’t match the version the planner sent us. All of this happened in the span of two weeks.
You might be a subject matter expert in a particular area. You know the regulations. But the regulations change without warning. I had a real estate agent give me an environmental report for a site that had contamination. She told me that the concentration levels of gasoline in the ground were below the required level of 150 ppm. But then the regulation changed to 50ppm and she had no idea. She was operating on stale data.
We had a subcontractor bid a job based on an old drawing. The GC made a mistake and didn’t include the latest drawings in the contract, even though the old drawings referenced in the contract were nearly 6 months old. The result was several mis-steps where the wrong components were ordered. The building inspector for the city pointed out the deficiencies and the new parts needed to be ordered for the HVAC system. The cost of this single error was more than $60,000.
Every time a copy of a file is made, there is a chance of versionitis.
So how do you prevent versionitis?
It requires a discipline. It means that every time you reference a government regulation, you go to the website and download a fresh copy of the document. Every time you share a file, you send a link to the file and not the file itself.
You see, the second you make a duplicate copy a file, one of those versions is potentially out of date. Even within our own team, we have to exercise great care and put version numbers and date codes in the name of a file.
The cost of implemented a bullet proof document management system is not that much. It’s a few thousand dollars a year. But saving a single costly mistake makes the investment look like a bargain.
We’re in the process of evaluating several software systems. In the coming months, once we have selected and implemented a system we’ll share more about what we chose to use and why.