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Licensed contractor to inspect Wholesale deal

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Brandon Spearman Sr

Norcross, Georgia

Apr 18 '12, 07:51 PM


BiggerPockets colleagues,

Am I waisting a contractors time if I ask them to walk the property with me in order to get an estimate on the repairs? I'm new to REI, and I need to determine how to calculate the ARV without paying for an inspector. I don't intend to hire the contractor to make the repairs, so is he giving me a free estimate?

Let me know what you all think. Thanks a lot.



J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Apr 18 '12, 08:08 PM
2 votes


You're having a contractor walk a job with you and give you an estimate with no possibility you'll actually hire him to do the work...and you're asking if he's giving you a free estimate and wasting his time?

Of course you're wasting his time.

Instead, be up front with him, and offer to pay him for his time.



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Joel Owens Moderator

Commercial Real Estate Broker from Canton, Georgia

Apr 18 '12, 09:12 PM


I have been thinking about this as well. I have been helping many who have contacted me with knowledge on certain types of deals.

I am thinking of charging a consulting fee that will be credited to the buyers at closing off of my commission when a purchase goes through.

I have to think about spending time with people who are serious about doing business and not just educating them and taking no action.

I sent a plumber out today to inspect plumbing on a vacant apartment building and I am paying him for the trip.

Brandon free classes are done at Home Depot on how to install things and if you spend time in the store you will start learning what materials cost.Free to you and you are not wasting anyone's time.

Check with other investors at your local REI meeting to find out references of great contractors who charge a fair price for work.



Medium_allworldrealtyJoel Owens, All World Realty
E-Mail: [email protected]
Telephone: 678-779-2798
Website: http://www.AWcommercial.com
www.AWcommercial.com 678-779-2798 [email protected]


Brandon Spearman Sr

Norcross, Georgia

Apr 19 '12, 03:58 AM


Right, J Scott, I see now my question was redundant. On on of the forums a gentleman mentioned hiring a contractor to get estimates for repairs rather than hiring an inspector. I wasn't sure if he was paying the contractor or not. But it makes sense to pay the contractor a nominal fee for his time.

Joe, great idea. My first step will be to look at the property myself and see what kind of cosmetic repairs need to be made. I can then go to HD and estimate myself. As far as plumbing, electrical and the foundation, I will need to consult a profession to get an accurate assessment.

I want to spend the least amount of money possible on wholesale deals, in order to maximize my profit.



Shawn J

Real Estate Investor from Baltimore, Maryland

Apr 19 '12, 11:58 AM


Brandon- Yea that will be another obstacle I will have to cross when the times comes as well. I dont have any rehabbing experience whatsoever. I have an aquaintance who is a unactive home inspector who could help but he lives a little ways from my prospective target areas.:/ So its learning for me, which may take awhile before Im comfortable telling a buyer "Hey it needs this" Without a quote from a contractor.. Or I might just have to pay for a contractor to come out as you spoke about.- There are books that teach those things as well, which I will also look into. Learn Learn Learn.



Timothy Rogers

Wholesaler from Garland, Texas

Apr 19 '12, 01:16 PM
2 votes


Brandon,

I met a contractor and we decided to work as a team. I promote him to my end buyers to do the rehab work for my wholesale deals and he promotes me to other investors he does work for. So, I am not wasting his time due to the potential business he can receive from providing me the scope of work. We both see it as a win/win.



J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Apr 19 '12, 06:40 PM


Originally posted by Timothy Rogers:

I met a contractor and we decided to work as a team. I promote him to my end buyers to do the rehab work for my wholesale deals and he promotes me to other investors he does work for. So, I am not wasting his time due to the potential business he can receive from providing me the scope of work. We both see it as a win/win.

For a seasoned wholesaler, this is actually a pretty good deal for a contractor. But, the sad fact is, most wannabe wholesalers never go on to do a single deal, so the contractor that is helping out a new wholesaler is unlikely to ever recoup anything for the time and effort spent.



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Stanleybruce Okonedo

Note Investor from Cambridge, Massachusetts

Apr 19 '12, 07:42 PM
1 vote


Brandon, I think it is a good idea to always give the contract to the licensed contractors who inspect your properties for free that you are wholesaling. It builds a better rapport between you and the contractors as well as make them do a better job for you.

Rgds,
Stanleybruce Okonedo.



Deborah McCarthy

Contractor from Nampa, Idaho

Apr 19 '12, 10:05 PM
2 votes


Another contractor's opinion - Please don't call a contractor and use their "free home estimates" without the intention of using them. It costs us alot of money to walk off a paying job site, spend gas to get to you, and spend the hour or two that a good contractor will take to thoroughly go through your project with you - especially if we are a mom-n-pop operation offering free estimates to struggling home owners.

Also remember that contractors have special contact boards just like BP - and we do talk amongst ourselves. It might not be such a big deal in a huge city, but in a place like Boise, it will get you black listed very quickly. Those of us in the construction trade are pretty close knit and we try to help each other, even though we may be competing for the same work. We need each other in case someone lands a huge contract and needs to "borrow" workers from another rival company just to get the job done. If you are identified as a time waster, you will be labeled as such and your construction rates just went up by quite a bit should you actually choose to hire someone after wasting a bunch of contractor's time.

HOWEVER, most of us DO like to help real estate investors and homeowners! For a fair fee, we'll be glad to spend the hour or two, walk through the project, and explain why certain things may be a problem and what you need to look for. We encourage you to ask questions, take notes, and call us in the future if something else comes up. Most good contractors will be happy to spend the time to teach you about hidden landmines that most people don't see until it's too late. Not only will you gain valuable knowledge to help you with your investment endeavors, you will gain a positive reputation in the construction community and people will more than likely be agreeable to offer you discounts and such.

Just my two cents. :-)



Keith Lutz

Real Estate Investor from Hackettstown, New Jersey

Apr 20 '12, 02:14 PM


For a fair fee, we'll be glad to spend the hour or two, walk through the project, and explain why certain things may be a problem and what you need to look for.

@Deborah McCarthy, what's a fair fee? I thought I saw @J Scott mention $40 on another thread.

$50 seems fair, would that include something in writing? (not to hold the contractor too, but more for negotians with homeowner)



Deborah McCarthy

Contractor from Nampa, Idaho

Apr 20 '12, 02:23 PM


I can only speak for myself and my area. If the property is located within a reasonable distance (30 miles), then $40 is perfectly acceptable. However, we have MANY properties spread out in the country that could take alot of gas and time to get to, especially when you're fighting snow drifts in the winter. In those long-distance cases, we may charge $50 or $60 to cover it.

Our estimates are in written format broken down by category. We do have clauses on the bottom that state several "subject to" factors and a timeline that the estimate is good for. We keep a copy and give a copy to the homeowner.

I also take photos AND video of every property that we estimate so that if a homeowner calls to ask be questions about the estimate, I can refer to my visual references without having to drive back to the property.

Every contractor is different, so I would ask them each to explain their estimating procedures and associated costs.



Brandon Spearman Sr

Norcross, Georgia

Apr 20 '12, 03:12 PM


Thanks a lot, Deborah. I definitely don't want to waste anyone's time, and I am always willing to pay for someone's services. I'm strategizing on how to maximize my profits via wholesaling.

I think $40 - $50 is worth someones time for an hour or less. I think a lot of repairs in homes will be repeated, so after one or two walk throughs with a professional, I believe I will be able to estimate the repairs on my own. With the estimates and comps from the neighberhood, I'll get a hang of calculating ARVs.



J Scott Moderator Donor

Real Estate Investor from Ellicott City, Maryland

Apr 20 '12, 03:51 PM
1 vote


Originally posted by Keith Lutz:
I thought I saw J Scott mention $40 on another thread.

Yup, my GC (@Aaron McGinnis) charges $40 per hour (regardless of whether that time is spent giving a bid, helping assess a rehab concern, answering investing/analysis questions, showing out of town buyers around an area, etc).

Also, I'm sure most GCs are happy to give that money back if you actually hire them, and after you've used them once or twice, they'll probably be happy to start giving free bids (since they know there's a reasonable chance they'll get more work).



Medium_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Karen Margrave Moderator

Developer from Orange County, California

Apr 21 '12, 09:50 AM
1 vote


People that have contractors go out to inspect properties for which they have no intention of hiring them for the work, but looking for free services are not only wasting the contractors time, but messing things up for everyone else. We are more than happy to go out on a potential job, spend time with the homeowners, and discuss any work that needs to be done.. and we do it for FREE. However; with people doing what you're suggesting, it wastes our time, costs us money in gas, and is just plain rude! We don't want to have to charge for estimates.

Of course, should you be honest about the fact you aren't going to hire the contractor, most contractors would be happy to go out for a set fee.

Thankfully we haven't had any problems with investors .. and I hope you will reconsider what amounts to taking advantage of contractors that are already struggling in this economy. I'm sure you didn't look at it from the contractors perspective, so you're forgiven. Honesty is always the best policy.


Edited Apr 21 2012, 10:00 by Karen Margrave


Karen Margrave, Parlay Investments, 1st American Construction
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.parlayinvestments.com
PARLAY: definition: to increase or otherwise transform into something of much greater value


Shawn J

Real Estate Investor from Baltimore, Maryland

Apr 21 '12, 05:02 PM
3 votes


Karen- Absolutely, I would disclose all information about what I'm trying to do and where my knowledge lacks and ill pay for his/her time with no problems. If they know beforehand I JUST need a accurate quote for a fee, its up to them whether they want to come on out or not. I would view this as a very necessary investment for my future in RE so wouldn't have any issue with it.
I can't speak for anyone else but as a newbie the last thing I want to do is tarnish a name I haven't even established yet.:/



Karen Margrave Moderator

Developer from Orange County, California

Apr 21 '12, 10:58 PM


You know, in all honesty, even if we weren't being hired for the repairs, and it were someone we knew or it was close by, we'd still go give them an opinion for free. We usually treat it as what goes around, comes around, and try to help where we can.



Karen Margrave, Parlay Investments, 1st American Construction
E-Mail: [email protected]
Telephone: 949-933-3955
Website: http://www.parlayinvestments.com
PARLAY: definition: to increase or otherwise transform into something of much greater value


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