Is the Answer to my Contractor Problem Starting my own Company?
I love fix and flipping homes and buying rental properties.
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I love the money you can make and finding great deals, but my biggest problem has been working with contractors. I have 9 fix and flips going right now and I can’t find good people to fix them! I have interviewed new contractors, hired new contractors, used old contractors and I am having no luck finding enough great contractors to keep up with the work. I have decided to take my own advice and focus on how to improve my luck with contractors by writing out this article.
My luck With Past Contractors
In the past I have never had so many fix and flips going at once.
I also had a great contractor who was a little slow, but could handle a few jobs at once and do a good job. However, on one of the last flips I had this contractor work on we ran into major problems.
He hired a worker who used to work for a HUD field service company. I know the kind of work many HUD field service companies do so I was a little worried about how it would work out.
The contractor let this worker do a major rehab that was over $40,000. New kitchen, new bath, rebuild trusses in the roof (because the previous owners had taken out a support wall), new doors, new paint in and out and a bunch of minor items were fixed on this house.
Immediately we had problems on this job including cabinets hung over an inch off level, horrible drywall finish work, bad paint jobs and more. I talked with the contractor and he admitted the work was bad and had it redone. The job also took almost 4 months to finish, which was way too long.
The worst part is the contractor told me the job was done three times; I drove out to the house 15 miles away and it wasn't done! His worker was telling him it was done when it wasn't.
I decided to give the contractor another chance, because he promised he would never use this worker again on my houses. He admitted he was good at plumbing and electrical, but not painting or drywall. He said he had other guys who could work on another flip I had ready to work on.
The new house took almost two months to finish and less than $10,000 in work was done. New paint, new bath, a few new cabinets and other minor times were all that were needed.
Guess what? The few cabinets that were added were hung crooked! The contractor used the same worker he promised he wouldn't use for the entire job. When I asked him about it he said he never remembered telling me he wouldn't use him.
My Luck With New Contractors
Having to fire this contractor happened at a very inopportune time, because I had so many flips I was buying.
I used an old contractor for one flip who I stopped using because he got very expensive and slow. I started using a contractor who is a licensed plumber and who has been great to me as a plumber.
He wanted to go out on his own doing full remodels and I helped him get started with a job on one my flips. I also hired a brand new contractor that I found through Home Depot. He sounded awesome, had a great crew, and promised short turn times.
The Results of the New Contractors
The contractor who I used to use and decided to try again is being very slow, but getting the job done.
The plumber is doing awesome, but he is not big enough to handle multiple jobs yet. He has hired another guy to work with him and I have high hopes for the future.
The new contractor is doing a flip, but his bid was higher than I hoped and he is taking way longer than he said it would take. I had him bid two new jobs and his bids were astronomically high. He also has been sketchy on getting bids back quickly and returning phone calls.
I Have no Choice But to Hunt for More Contractors!
I bit the bullet and paid for Angie’s List last week.
It only cost me $7.99 for the entire year, so I wasn’t too upset about the cost (I remember it being much higher). I am meeting two contractors in the next week I found off Angie’s List. I hope they can help me get some more properties fixed and sold so I can buy more.
Planning for the Future with Contractors and Fix and Flips
With all these problems with contractors, I started thinking about how to improve my system.
I know an investor in my town that has 60 or so rental properties and he has a full-time handyman/contractor on his payroll that maintains his properties and fixes up new purchases.
I have ten rentals and I plan to buy 100, which will require a fair amount of maintenance. I buy 10-15 fix and flips a year and I hope to increase that number over time. With so much work going on, I am wondering if it would be worth it to hire my own contractors/handymen and put them on the payroll full-time.
Pros and Cons of Creating My Own Contracting Company
- Contractors dedicated only to my properties; I know I will have priority over all other jobs and get work done quicker, which saves me money.
- Save me money; paying a handyman or contractor full-time I would be taking over the management of the jobs and cut out a general contractor saving me money.
- I have control over the jobs; I don’t have to worry about costs increasing or contractors cutting corners to make more money for themselves. The workers do what I want or they don’t work for me anymore.
- I don’t have to worry about finding new contractors when other contractors don’t work out.
- I could potentially market this company and start doing outside jobs for another income source.
- I have to manage people and manage jobs which takes time (I do have people on my team that can handle most of this work).
- I have to create a new company, add payroll, workers comp, insurance and take on more liability (Again my team can take care of the paperwork and accounting).
- I will have turnover with handymen and contractors and may have to hire out specific work like electrical or plumbing if permits at required.
- I will have hourly workers who won’t be extremely motivated to work fast.
- The market is crazy here and it may be tough finding workers and the workers willing to work for hourly wages may not be as good as a general contractor.
- I have never been a contractor myself, but I do not the basics of making repairs.
What Do you Think?
What pros and cons did I miss and is it worth the pain and hassle to set up a contracting crew of my own?
I would not have just one handyman, but a crew that could work on multiple houses at one time.
Is anyone else out there managing their own crew of workers? If they saved me enough money and time I could even hire my own dedicated manager to look over everything. One of my new goals is to improve our contractor situation so help me out!
Be sure to leave your comments below!