Personal Development

Interview: A Contractor’s Perspective on Working With Real Estate Investors

Expertise: Real Estate Investing Basics, Real Estate Deal Analysis & Advice, Mortgages & Creative Financing, Landlording & Rental Properties, Business Management, Personal Development, Flipping Houses, Commercial Real Estate
154 Articles Written
contractor-perspective

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In today’s video, I am excited to chat with one of my general contractors! Pat has been a great team member for us. He does everything from clean-up and demo work to full fix and flip projects. We talk about the most commonly discussed — and perhaps most misunderstood — relationship in real estate: the contractor/investor relationship.

When this relationship is not working, both sides are trying to get the best of each other, and no one trusts anyone. The investor thinks the contractor is slow, and the contractor thinks the investor is impatient or unrealistic. The investor thinks the contractor produces low quality and cuts corners, and the contractor thinks the investor has no idea what really goes into these projects. The list goes on and on!

Related: 4 Reasons You’ll Never Find a Good Contractor (Insight From an Investor/Contractor)

It is important for real estate investors to vet out contractors, but it is equally important for contractors to vet out investors as well! In this video, we discuss how real estate investors and contractors can work best together and build a long-term relationship.

Some of these tips to build a long term relationship include:

  • Have alignment of goals.
  • Have the same standards for quality.
  • Make sure that your definition of standards are aligned.
  • Build trust with one another.

In real estate investing, having strong contractor relationships is probably one of the most important aspects of this business. It can make or break you!

I would love to get some discussion going. How do you build a strong relationship with your contractor?

Thanks as always for watching!

Matt Faircloth, co-founder and president of the DeRosa Group, is a seasoned real estate investor. The DeRosa Group, based in historic Trenton, New Jersey, is a developer and owner of commercial and residential property with a mission to “transform lives through real estate." Matt, along with his wife Liz, started investing in real estate in 2004 with the purchase of a duplex outside of Philadelphia with a $30,000 private loan. They founded DeRosa Group in 2005 and have since grown the company to owning and managing over 370 units of residential and commercial assets throughout the east coast. DeRosa has completed over $30 million in real estate transactions involving private capital including fix and flips, single family home rentals, mixed use buildings, apartment buildings, office buildings, and tax lien investments. Matt Faircloth is the author of Raising Private Capital, has been featured on the BiggerPockets Podcast, and regularly contributes to BiggerPockets’s Facebook Live sessions and educational webinars.

    Terry Martin-Back
    Replied almost 3 years ago
    Having been on both sides of this, (I’m a GC, RE Broker and investor), everyone has to have a clear view of the project and time constraints, write it down and have financial penalties for each side. From my experience, new investors come in and try to be decorators and create these HGTV settings and end up taking additional time and money. Unless you are doing high end flips, use the same design on every project; paint, flooring, cabinets, doors, windows, fixtures. The point on a flip is get in, get out and get on to the next one. For a buy and hold, the same is true, keep it basic so when you have to turn the unit, you are in and out and on to the next one. Finally, “Investors”, make sure you understand local and state laws for “Licensed Contractors”. I recently save a BP follower thousands of dollars on a remodel and hopefully an un-licensed scam artist get to spend a little time as a guest of the state!
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied almost 3 years ago
    Hey Terry, Thanks for the comment! I really respect your perspective as you have sat in both seats of the table. I think that a really solid construction contract would solve many of the problems that arise in contractor investor relationships. I try and document expectations and timeline in the contract but that doesn’t take the place of weekly or even more frequent job site walkthroughs to agree on goals for the week. Any other tools you can suggest that investors can use to stay clear on communications with their GC’s? Matt
    Patrick Liska Investor from Verona, New Jersey
    Replied almost 3 years ago
    Matt, Does the rockem sockem robots on your shelf help relieve your stress ? Haha good Article/ Video, I am a Contractor/ Investor, and i personally have made it a policy of mine not to work with Investors for multiple reasons, inexperience, unrealistic expectations, not willing to pay for the quality of work – always want the cheapest, etc. On the other hand, as an investor, I want to get the best work for the lowest price but do not mind paying for quality work that i know will last. My investment properties are out of state, so i hire local contractors to do the work, again for convenience, tax reasons and in case of emergencies i know i have guys or my PM has guys they can call. It is always key to make sure everyone is on the same page as far as scope of work and timelines, without it you can kiss your budget good bye and the relationship between the contractor and investor the same.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied almost 3 years ago
    Hey Patrick, Nice call out on the Rockem Sockem Robots lol. We must be of the same generation. I love your perspective as you have sood on both sides of the Isle on this. So my question to you – is there really a happy medium between price, speed, and quality that is a win win for both sides? If so how do we get there? Matt
    Bob Norris Investor from Kennett Square, Pennsylvania
    Replied almost 3 years ago
    Matt, thanks for the article and perspective. I am an investor of flips and rentals. I have worked with a GC on a number of projects and over that time have learned what my expectations are and what standards I have for new subs that I bring onto a job. I try to use the same guys, so we both get a better understanding of how we operate. Price is critical, but not the only measure. Over time, I have developed a list of specs/requirements on specific parts of a renovation. There are so many details that if I required my subs to call for every detail, the project would never get done. If their decision is different than mine would have been, I note it and point it out in the next job. Most of the time, it is something small that will not kill a project. Another key I believe, is paying your subs quickly. I believe they should get paid as soon as the job or portion of the job as agreed is done.
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied almost 3 years ago
    Hi Bob, Thanks for the input. I have heard that other contractors pay GC’s quickly in order to motivate. Do you think that makes a difference? I have done it at times but got away from it because it was forcing me to run around with a check book. Now we ask them to have their invoice in to us by Monday for payment on Wednesday. If they miss that window, they get paid the following Wednesday. It helps us with our systems but I can tell it frustrates our contractors. Thoughts? Matt
    Karl B. Rental Property Investor from Los Angeles, CA
    Replied almost 3 years ago
    Great video, Matt. I use Angie’s List a lot when I need a tradesperson and so far it has been a good choice. PS. I’m checking out deals on the treasury.gov page and there’s a property (industrial condo unit) coming up for auction in March in Cherry Hill. I figured mentioning it to you would be my nice gesture of the day. 🙂
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied almost 3 years ago
    Hey Karl, Thanks for thinking of me! That’s awesome you thought to reach out. We don’t go that far south but it was a good thought. I try and do a good deed every day too, lol. I call it my random act of kindness. Have a good one, Matt
    Letitia Harris Flipper/Rehabber from Ahwahnee, CA
    Replied almost 3 years ago
    This was a terrific interview, it’ll help a lot of people who don’t realize how valuable having a great relationship with your GC is. A lot of us flippers want to be “hands on” to save money. I’ve discovered that ain’t always the case! The pros can demo a kitchen in minutes, and it took me hours (and it was a small kitchen), and I have a hurt shoulder that still gives me problems over a year later. I found my GC through homeadvisor. I tried Angies List, but didn’t like that friends can pad a someones reviews. From HomeAdvisor, I interviewed 6 of them, showing them my first flip house, handed them the list of what needed to be done. From interaction, pricing, and getting a feel for how they’d handle one very difficult aspect of that house, I picked the one who I felt would work best. He’s been my contractor for my 4 flips, and I’m bringing him in on my newest one. I like not having to worry about quality work, permits, cut corners, etc… and he likes being respected, having his draws paid immediately, etc…
    Matt Faircloth Rental Property Investor from Trenton, NJ
    Replied almost 3 years ago
    Hi Letitia, Thanks for the comment. Glad to hear you are enjoying that service. Do you still require that GC of yours to bid each and every job against other contractors or do you automatically give them the work? Matt