The Risky Ground Beneath Your Feet

The Real Estate Espresso Podcast

The Risky Ground Beneath Your Feet

Spotify Google Podcast Apple Podcast Subscribe via RSS Leave a Review

The Risky Ground Beneath Your Feet

Welcome to the Real Estate Espresso podcast, your morning shot at what’s new in the world of real estate investing. I’m your host, Victor Menasce.

On today’s show we’re talking about what I consider to be the number one risk in any construction project. This is one of those activities that forms part of the substrate of the project, but in a customer-visible sense, adds zero value to the project. It’s necessary, but unwelcome. Furthermore, it’s the number one area where some contractors notoriously overcharge their clients.

I’m talking about excavation, site preparation, backfill, and grading. All of this falls into the category of dirt work. At the core of this work is a high-quality geotechnical survey. The geotech tells you the condition of the soils beneath the surface. Some conditions might be suitable for construction and others not.

For example, let’s imagine for a moment that your proposed project has a height restriction, and in order to meet that height restriction, you need to dig down to a certain depth to achieve the required foundation depth. Now what if your property hits bedrock only a few feet below grade? Will you have the option of raising the structure and raising the grade to meet the new height, or will you need to blast the rock in order to dig deep enough?

If your neighbors are too close, blasting might not be an option. In that case you’ll need to chip away at the rock with a ram. That could get expensive in a hurry.

We had one project where the bedrock was only two feet below grade. We were able, in that instance, to eliminate the basement level completely and raise the building. We lowered the pitch of the roof in order to compensate and still meet the height restriction.

The excavators are notorious for not honoring their quotes. They’ll point to the fine print in their contract and state that if their machine time took longer, well, they’ll charge you based on the actual cost associated with the excavation. This is where it’s important to have accurate measurements of the volume of material to be removed.

In one case, an excavator dug a foundation hole about 10 feet larger than required. I took the position that just because they kept digging beyond what was required, that was on them. We were not going to pay for that extra work because we never asked for it.

They were supposed to send the excavated material only a few hundred yards away. Instead, they charged for a much larger distance to transport the exported material. To make matters worse, there was only a single operator that particular day who was operating both the excavator and the dump truck. When we added up the machine time on the excavator and the time stamps on the dump truck, it was physically impossible for a single person to be in two places at once.

Even if the operator left the machine running when he wasn’t on site, the client should not be paying for an idle machine. The warmup time for the machine doesn’t count either. The billing was fraudulent, and simple math exposed the fraud, but you have to be willing to go the extra step to ensure you’re not getting ripped off.

What happens if you have organic material? That’s wonderful for building a garden, but terrible for building structures or even parking. Organic material breaks down with bacterial action and compresses slowly over a long period of time. If you build your building on top of organic material, it’s going to shift and settle, and building on organic material is not going to give you a durable structure. It’s going to be plagued with structural issues over its entire life.

The only solution is to remove the organic material and to replace it with native soil or compacted material that’s suitable for building. That can also include certain types of gravel. Typically the substrate is built up in 12-inch compacted layers.

In one project the geotechnical survey consisted of 26 test pits. That should have been sufficient to get a representation of the subsurface conditions. Unfortunately a large volume of organic material was missed, and they had to dig down 32 feet in order to find stable material. The material then had to be replaced with compacted material, resulting in about 750 truckloads and a 1.5 million dollar cost overrun just in dirt work. These are the types of risks that are possible when it comes to site conditions.

In another case we needed to raise the grade substantially. The imported material is going to be significant. We’re working with another developer to take delivery of their excess material, so when they’re getting rid of 5,000 yards at $17 a yard, that’s going to save our project about $85,000 in imported material.

So as you can see, the numbers involved are big. If the grade of the property’s not suitable for surface drainage, or if the amount of stormwater detention is going to be large, the costs mount quickly.

In the case of another project also built on bedrock, the design of the drainage had to be well considered. Rock does not absorb water, and so that means the risk of flooding increases. The additional drainage design is going to cost money that would have been avoided if the subsurface had been a more permeable material like sand.

Now if the structure below the ground can’t support the weight of the building, you may have to drive piles down to bedrock so that the foundation footings are sitting on something solid. That can also be incredibly expensive.

If the substructure is not suitable, that can sometimes be fixed by spreading the load of the building across the entire base of the building. That’s done by building what’s called a raft. This is exactly what it sounds like. You pour a massive block of concrete that acts like the hull of a ship. It’s a rigid block of solid concrete, and it distributes the load across the entire width of the building. That too can be expensive, but it could be less expensive than moving dirt if you have a lot of dirt to move.

When we look at a site for potential construction this is one of the very first things we look at.

As you think about that, have an awesome rest of your day. Go make some great things happen, and we’ll talk again tomorrow.

Stay connected and discover more about my work in real estate and by visiting and following me on various platforms: