At what point in your first BRRRR do you interview contractors?

Question

Hi,

My wife and I are getting started investing.  We've targeted BRRRR to make our money go further and have been studying up for a couple months.  It's time to make the dive and find a property, but I've got one question that nobody else seems to ever have asked.  At what point do you start interviewing contractors?

I know we need to build up a team including the real estate agent, property manager, lender, and contractor.  All but the contractor make sense to build relationships ahead of time, but in order to interview a contractor, don't we need a house first for him to view and give us a scope of work and bid?  I'm confused as this seems like a chicken and egg situation to me.  We want a contractor's opinion before closing on the house, but with our fist house, we don't yet have a contractor we trust.

Any insight is greatly appreciated!

Julius L Evans · Answer

Hello. These are great points. I meet with the FSBO and the general contractor at the property tomorrow. Based on the bid the contractor provides (well, I asked him to provide an estimate and a bid on the job), that will be factored into the offer price. This is my first investment property so I'm excited about the process. I am banking on the contractor providing enough information, once I receive the report, that will allow me to make a purchase decision. Are there any specifics I should keep an eye on?

Evan Polaski · Answer

@Tyler Ruppert how handy are you?  Have you done a lot of work to your own house?

I am getting at the same thing as Jonathan.  However, for my first BRRRR I bought it before lining up a contractor.  However, I had done work myself and with contractors on my own houses, so I had some idea what things should cost.  I also had more than ample savings to cover overages.  If your budgets are tight, and any overage will put you under a) I wouldn't go after the project and b) as others mentioned, I would offer to pay various contractors OR other investors to walk the project with you to understand scope and general costs.  Then bring in contractors to bid once you are under contract.

Jonathan Greene · Answer

Before you get to work interviewing contractors, you really have to familiarize yourself with contracting and the work that gets done on houses. That's why it's often a good practice, as others have said above, to befriend other local investors so you can go by their jobs and see a rehab in action. If you don't know anything, meeting with a contractor on your first BRRRR is like going to a car dealership when you have an orange light. They could tell you it's the mazellimeter and you need a new one and you'd have to Google it, take it for a second opinion, or just say ok. Too many new investors just say ok to everything a contractors says and then it does not go well from there.

Colby Hager · Answer

@Tyler Ruppert

You should begin interviewing contractors by collecting bids during your option period. You are correct in that there is nothing you can do until you have a house.

Begin speaking with other investors and ask if they will refer their contractors. Some will share others may not. (Best carpenter I’ve ever had)

Drop in to other flips in progress. If the work looks good, ask for cards or contact information.

Go to the pro desk at Home Depot early in the morning and start collecting business cards. (Best electrician I’ve ever had)

Taking these steps now will help you know who you are going to call for a bid when you get your first house under contract. Spend as much time in your option period understanding how the contractor works, who supplies the materials, what they expect from you etc...

When I was first starting out I would try to spend several days at a property (especially if vacant) meeting with contractors, asking questions, comparing what one said against the other.

Hopefully this will get you started

And lastly, “contractor I trust” should be deleted from your vocabulary.  No offense to the honest contractors reading this post.

Whitney Hutten · Answer

@Tyler Ruppert Will you be using a PM?  If so, think about using their contractor so they can help manage the process for you.  If not, you want to start networking now to find contractors and paying them to give you a bid (not an estimate) on any bid you are seriously considering closing on.

Tyler Ruppert · Answer

Thanks for the reply. Paying a contractor for consulting makes a lot of sense and is something I hadn't considered.

George W. · Answer

Yeah it helps to provide value to the contractor first. Why would they want to waste time for a lead that might happen?

If you offer to pay them for consulting on a house your looking at, most reasonable contractors would be interested.

Be upfront with them as well. Tell them it's your first property and your looking to improve a place. Dont tell them your a flipper/investing hot shot and promise them a ton of work when you've never bought a place before and have never worked with them before. I've done many estimates and we almost never hear back from the hot shot type. So as a whole they're taken alot less serious than people that are upfront.

It definitely helps to know the contractor before though. Maybe your family uses one regularly or a freind is a good friend with one. Maybe there's one in your town that's been there forever and does a lot of work locally.