Met a contractor in WalMart
Investor · Surprise, AZ · Member since 2018 · 156 posts · 110 votes
So I'm in Wally World minding my business and a guy comes up and down the aisle giving out business cards! Lo and behold he's a remodeling contractor! Don't know if it's a sign from God or not, but I have been looking for contractors for when I get my first property.
I give him one of my cards too. My question is, what kind of things do I need to ask him so that I don't come off as brand spanking new to this? Obviously I went and looked him up on social media, google searches, etc. Good work based on the pics. He is licensed and insured and works in my area!
When you are dealing with contractors what kinds of questions do you ask?
Hey Aminze, I would recommend asking him these questions:
The reason I tell you this is because Well Known renowned contractors don't just go around giving out business cards because they should have business already attracting them. Here's a funny story, when I first got into rehabbing and flipping I put up a " We Buy Houses" ad on craigslist and a crooked contractor contacted me and gave me their business name and what they do. I said " ehh whatever I'll give them a shot." So I brought them out to a prospective property I wanted to rehab and this dude pulled up not in a contractors vehicle but in his family's jeep with his wife?! So I brought him through the property and he didn't even give me a business card or anything. So that's when I knew something was fishy. So after he finished the walk through he begged me for $50 to write the estimate and I was like " ehh whatever he didn't even mention this over the phone that he charged for estimates." So I was riding back home, and my partner said " Call him up and tell him stop at the next street so he can give you a business card cause I don't trust this guy." So I called the contractor, and he didn't even have business cards but had a estimate paper with his "logo" on it!? So I was real upset and make matters worse he took like 6 days to send the estimate from the UPS STORE! He didn't even have a computer or a laptop. He had to scan it to me from the UPS Store! The reason I shared this story is because Contractors put the CON in contractor and they cannot be trusted. Make sure you vet this guy to make sure you don't get screwed over.
@Kumar Tummalapalli Ok you said this
for a 100k project , you want 60k right away . It could take you 3 months .so The entire risk is with the client , the client is paying for a product he doesn't have.
No , on this I would get $30K at the contract signing , with the job starting in 30 or so days . Now we start work the day after the contract , we hire engineer to get permits ( permits can take 30 days to 6 months depending ) $$ have been spent so has time , order materials , line up subs etc . So I may have 40 hours plus tied up in this . Deposits on materials are paid . Dumpsters , spot a pot etc. job starts in 45 days due to getting permits ( beyond contractors control time gets added to completion date ) Demo starts , customer pays second third upon demo completion .
Of course the entire risk is with the client ITS THEIR JOB .If I let a customer get behind on the payment schedule then my money is at risk . Thats just bad business
The property is an asset of the customer ? Sure , now If I hold first position on their loan , its not a problem But if I have to file a lien I am holding a bag of xxxx.
We are in different markets the risk may be imbalanced in your area . But we have pretty strong laws to get a home improvement licence , and pretty high criminal penalties if you cheat or dont complete the job , and a criminal offence disqualifies you from getting a license .
As far as payment schedules , I simply comply with the laws of Maryland .
You talk of contractors not showing up , Thats due to customers not vetting their contractor . There is 1 reason we dont show up . " Mr Smith , we need the second draw on monday morning " Oh I am waiting for a check , it may be 2 weeks . " Ok Mr. Smith give me a call when that check comes and we can reschedule your job "
Funny how fast the check shows up .
We are in different markets , you want a contractor around me , you wait , you want a good contractor , you wait longer . You dont want to pay my price , thats fine , the next person will . Good contractors are not looking for work , they are looking for more good help . If a job doesnt have great margins , we pass .
"I have explained about investor pricing , some contractors agree because of some unique benefits , which I explained , I won't repeat "
This is the same as builder pricing , its the lowest margins in the construction business .Sure there is volume but the numbers run too tight . the contractor puts all their eggs in one basket , when the next cheapest guy comes along , you are out . Most want to pay in 90 days , so you are giving an interest free loan to the customer . Not enough money in it
@Kumar Tummalapalli Ok you said this
for a 100k project , you want 60k right away . It could take you 3 months .so The entire risk is with the client , the client is paying for a product he doesn't have.
No , on this I would get $30K at the contract signing , with the job starting in 30 or so days . Now we start work the day after the contract , we hire engineer to get permits ( permits can take 30 days to 6 months depending ) $$ have been spent so has time , order materials , line up subs etc . So I may have 40 hours plus tied up in this . Deposits on materials are paid . Dumpsters , spot a pot etc. job starts in 45 days due to getting permits ( beyond contractors control time gets added to completion date ) Demo starts , customer pays second third upon demo completion .
Of course the entire risk is with the client ITS THEIR JOB .If I let a customer get behind on the payment schedule then my money is at risk . Thats just bad business
The property is an asset of the customer ? Sure , now If I hold first position on their loan , its not a problem But if I have to file a lien I am holding a bag of xxxx.
We are in different markets the risk may be imbalanced in your area . But we have pretty strong laws to get a home improvement licence , and pretty high criminal penalties if you cheat or dont complete the job , and a criminal offence disqualifies you from getting a license .
As far as payment schedules , I simply comply with the laws of Maryland .
You talk of contractors not showing up , Thats due to customers not vetting their contractor . There is 1 reason we dont show up . " Mr Smith , we need the second draw on monday morning " Oh I am waiting for a check , it may be 2 weeks . " Ok Mr. Smith give me a call when that check comes and we can reschedule your job "
Funny how fast the check shows up .
We are in different markets , you want a contractor around me , you wait , you want a good contractor , you wait longer . You dont want to pay my price , thats fine , the next person will . Good contractors are not looking for work , they are looking for more good help . If a job doesnt have great margins , we pass .
"I have explained about investor pricing , some contractors agree because of some unique benefits , which I explained , I won't repeat "
This is the same as builder pricing , its the lowest margins in the construction business .Sure there is volume but the numbers run too tight . the contractor puts all their eggs in one basket , when the next cheapest guy comes along , you are out . Most want to pay in 90 days , so you are giving an interest free loan to the customer . Not enough money in it
You clearly mentioned that you will take the second 33% when you start , "when you start" means nothing has been done . Ok it seems you adjusted that to 33% . so glad to see that .
Customer need not and will not - have to hand you 30k and "assume" and "pray" that you will show up . Yep If you show up , that great , but you know the chances of that happening . It seems like you need money to pay for the work/permits , which is not a good sign of a business.
You are not willing to risk a customer not paying you - even though you have a clear recourse , but you are entirely ok with a customer taking all the risk of you not showing up ... Why ? By the way your explanation of "IT IS THEIR JOB" means nothing . you should back it up with some substantive argument. An investor can say "IT IS MY PROJECT" and "I AM THE ONE PAYING YOU" so you should carry the risk . You know this won't lead anywhere and in either scenarios , its called exploitation . I don't condone an investor exploiting a needy contractor and at the same time , I don't encourage contractors exploiting 70 yr old or some innocent home owner who thinks he has to pay 66% before job starts .
Maryland laws seem to be much better , so that's definitely a relief , Just like how you don't want to depend on " government/laws" to recoup your money , the home owner also will not be thrilled to approach or use one of the so called stringent laws you mentioned . The first page in this website https://www.dllr.state.md.us/license/mhic/ talk about several contractors who are under scrutiny . As you see so many "broke" customers , do you think the government is going to send a cheque for 60k the next day . And as these are already broke , how can they survive this financial hardship
The core difference in our argument is that , I am proposing equal risk share , and opposing exploitation of any party involved. But you seem to be convinced that "hey Investor , you give me work , you give me money and how dare you ask to share the risk , give me 30k and just hope everything works out , if not resort to laws , But hey that logic doesn't apply to me , I won't take any risk , I am running a business but why should I take any risk , why should I resort to laws - My business should have zero risk , your business should have all the risk "
I am sure the readers will understand the funny part . Ofcourse "vetting" the contractor , is what I am doing now and what the original OP s purpose of this post was. When I "vet" , I look for people asking 60k down payment .
I think there may be more than one reason why contractor doesn't show up , looks like you only know one of them , What about - the contractor who's business model is to collect as many downpayments as possible and tell a story everyday for the next three months , what about the contractor who knocks on the door and says , let me fix your drive way , I am here for a job , take 10k , demo 2X2 area and then never show up , what about the contractor who says to a 70 yr old that the contract only is for buying the tile and laying it out , but the caulking and finishing will take additional 3k
You are convinced of a lot of things about customers- they don't have money , they don't know how to vet , they don't know what to buy , they don't know anything abt construction .
Your description of investor pricing is not what I was referring to . They are completely unrelated. I don't pay net 90 , I pay for materials and any complete work .
So you mean to say your fellow contractors , work for builders with no margin , for cheap and then also float the money for 90 days . Do you seriously think this is the case ? I think you shouldn't presume that about your colleagues , there are certainly lot of contractors working for builders and doing great . But I would be interested to see if you have any data to support this statement . I get everything much cheaper in Amazon than any other store , ohh are they selling for cheap ?? then they must be losing money and when the next cheap thing comes - people will ditch it . I wonder why Jeff bezos is the richest man in the world.
And regarding waiting for contractors and you passing up , You can set whatever strategy you like for your business . I don't know how you came to the conclusion that price is the problem , Did we discuss on pricing ? or Did I say something to suggest that ? or perhaps another assumption? . Another point regarding the demand , I position myself such that I don't have to deal with any unreasonable demands or be desperate , so in this case , I don't NEED to rehab , you can pick the next guy , I can decide to not even rehab , and switch to Exit B . However this post is not about you and me , It is about an investor planning her vetting process .
Even though we didn't discuss about pricing , Higher prices doesn't automatically mean good work . Ever heard of "Madoff" .you just run in to more sophisticated crooks . Just because he collected millions and charged hefty fees , his investors did nt automatically get big fat checks
I came across and saw lot of hard working contractors , who are open minded , reasonable , big picture oriented , affordable and make lot of money .
I strongly hope this post prepares homeowners/investors of what to expect when they go out to find a contractor . Ofcourse I wouldn't encourage any one to come to conclusion that every contractor will be the same .
@Account Closed
Whatever amount of trust you have in this person
$0 upfront. $0 - non negotiable
If you’re a complete newbie. Hire a 3rd party inspector. Let them look at your scope of work and decide whether the work was completed before you write that check
Good luck
@Kumar Tummalapalli Deposits in Maryland 33% at contract signing , 33% when work starts ( that can be parerwork ) the final third can be in draws . 5 day right of recision , 10 day if the customer is over 70 , if I remember correctly ( they just changed it ) .
David , I cant answer questions about a property that doesnt exist , its pure speculation .
Unscruplious customers ? Back when I was young , I would get the "while you are heres" . While you are here can you fix this , do that etc . But they didnt want to pay . Thought I would do it for free .(Learned that lesson ) . Or when the wife comes in " Thats not the color I wanted in the living room " And I show her the signed off paint codes she signed for each room . And then they dont want to pay because they dont "like" it . The last one was a roof job 2 story colonial like 33 square tear off , customer wanted to supply materials , like a idiot I agreed and I wrote on the contract roof top delivery . I show up and there on the driveway was 33 square of shingles , and felt . His response was for 3 of us to carry them up . " Sorry chief , but you can climb that ladder over 100 times to get them up there , call me when you are done " .
Now 95% of the time everything works out fine .But In the begining I learned some great lessons . I ALWAYS finished a job . But left money on the table . Now its ALL in writing
I finally learned to have a iron clad detailed contract .
66% down before you even show up is an absolute joke and flat out robbery. OP for the love of god do not even return a phone call of any contactor who suggests this
@Kumar Tummalapalli There are many different business models , and it the end , the business reputation is what makes them successful . David , how you describe "contractors" and situations is more fitting to "Chuck in a Truck " Not a full time businessman running a Home improvement company .
As far as deposits go , work starts when pen hits the paper not when I walk thru the front door , there is more to contracting than swinging a hammer .
Any contractor that runs with the money and doesnt show up is a crook , plain and simple . But there are crooks in every industry .
What about investors who form LLC's and then Bankrupt them in order not to pay contractors .
It goes both ways .
Contractors have no reason to "share the risk " in any project . Unless they get to share in the reward .Getting paid for work performed is not the reward .
David , you said "I pay for materials and any complete work ."
Well I price for a finished product based on the contract . Materials and labor are supplied by us , I dont work time and materials .
There are plenty of contractors who dont know how to manage funds , as there are homeowners , and even flippers and investors . And there are good ones and bad ones in all the above .
@Kumar Tummalapalli I can see you and I wouldnt be a good fit doing business , we would both be fighting for the driver seat . And surely you wouldnt like my contract which follows Maryland law to a tee. It also addresses just about every thing that can go wrong with a project . But my way of business has always been fair , projects get done . Customers are happy and 99% of my work is referral .
This is a free country , a customer can hire who they want . I am up front with my terms and conditions , the contract with the scope of work can be 10 pages for a tiny job or it can be 70 pages for something larger . Lots of fine print . But when something comes up , I can direct the customer to the agreement .
Thats "chuck in his truck"
Jonathan , most Contractors , their main tool is a Cell Phone . Its how you call your subs and suppliers . The employees supply their basic tools .
If you asked me that question , all I could tell you is I have a 40x60 building , and 3 sea containers worth of tools and equipment from hammers , saws, backhoes ,trucks , trailers , vans , bobcats etc . Some get used alot some get used once a year . And if i need it and dont have it , I rent it or buy it . ( the backhoe pissed my wife off since I brought it home and taught my 10 and 13 year old boys how to dig with it , hey they had fun )
By the way , skill saws are out , Makita is much better , so is Milwaukee .
Gentlemen, thank you for your different perspectives and insights. I will take all under advisement!
@Account Closed I pick up tools , way too often , more than I like to . Problem is everyone is busy , I have to wait for subs . Much longer than 5 years ago . nobody is cheap .
No contractor does all the work themselves , you know that , you cant beat a man thats good at his trade . But there are times that segment of the job requires it be done NOW or its too small to bring in a sub . Employees are the problem , they are the biggest cost and the biggest problem .
As far as tools go , I have great ones to Harbor Freight ones . It all depends on the job . About 2 months ago we did a roof , But the customer wanted all new plywood . So I picked up 4 harbor freight circular saws , we cut the shingles and plywood at the same time , Tore the crap out of blades and the saws . They were priced into the job and 2 still work .
I still enjoy the work , thats why I do it . ( the money helps too ) But the contractors that make the BIG $$$$ dont own tools , all they do is sell, finance and sub . They have salesmen , subs and supervisors . Grossing 7 figures a month is the norm for them . Now these are the guys that will take you for a ride .
Some intresting articles @Account Closed About The Md / DC / Va areas
https://www.washingtonian.com/2011/04/01/12-things...
Here is a couple about customer supplied materials
Hypothetical situation (sorry this is morbid, not wishing this upon anyone but for the sake of the argument)
We agree on a $50,000 job. I give you $35,000 deposit before a material is bought or minute of labor is completed.
You cash the check then get hit by a bus. Now what
Hypothetical situation (sorry this is morbid, not wishing this upon anyone but for the sake of the argument)
We agree on a $50,000 job. I give you $35,000 deposit before a material is bought or minute of labor is completed.
You cash the check then get hit by a bus. Now what
Well Chris a $50K job is a small one , But the deposit would be $ about $16,000. Once I finished demo , I would collect a second deposit of $16K . I wouldnt cash a check , I open a job account and deposit the check in the bank . if I get hit by a bus ,the bus gets totaled since my alter ego is Super Contractor , man of concrete and steel ........................... if I get hit by a bus and drop dead , the job will still be completed , ( delayed but completed ) my contract would be assigned to another licensed contractor , I have all this covered with my attorney .
Something thats done quite a bit and the customer may not know is that contractors will sell or assign the job to a different contractor , the original contractor is still responsible , but all the work and subs are done by the second guy . ( similar to wholesaling properties)
@Account Closed Some more reading about contractors very good insight .
go to some articles at bottom of the page
Hypothetical situation (sorry this is morbid, not wishing this upon anyone but for the sake of the argument)
We agree on a $50,000 job. I give you $35,000 deposit before a material is bought or minute of labor is completed.
You cash the check then get hit by a bus. Now what
Well Chris a $50K job is a small one , But the deposit would be $ about $16,000. Once I finished demo , I would collect a second deposit of $16K . I wouldnt cash a check , I open a job account and deposit the check in the bank . if I get hit by a bus ,the bus gets totaled since my alter ego is Super Contractor , man of concrete and steel ........................... if I get hit by a bus and drop dead , the job will still be completed , ( delayed but completed ) my contract would be assigned to another licensed contractor , I have all this covered with my attorney .
Something thats done quite a bit and the customer may not know is that contractors will sell or assign the job to a different contractor , the original contractor is still responsible , but all the work and subs are done by the second guy . ( similar to wholesaling properties)
That sounds great and all - but entirely way too much trust is given there. There's a reason why hard money lenders pay draws based on inspections AFTER the work is completed. To protect their investment and make sure they don't get burnt
Thats why there is a contract . And I dont sign it with a hard money lender my agreement is with the client . Their deal with finance is their end .
If he wasn't God sent maybe the devil sent him!! Watch out for people that just pass out cards. They might not be busy enough or new themselves.
What I would do is look at the Court case search website 1st and see if he has a record or CURRENT record. Then I would ask for 3-5 prior references. Look him up on white pages, yellow pages, Angie's list, and research his phone number up on Craig's List. When you get burned once, you try your mutherloving hardest not to get burned twice. Trust me!!!
What a great discussion. Thank you @Account Closed There are some great ideas here. Take what works for you, do your due diligence on any contractor you might want to work with and make sure you have a legal contract before the work starts with a very, very clear scope of work - do NOT sign a contract that is vague and does not DETAIL the exact work that will be completed, or you could find yourself paying a lot for "that is not included" work.
@Matthew Paul, thanks again for all of the resources!
@Account Closed, I'm so grateful for the exchange and this forum.
@Account Closed if you are planning to buy and hold, it might be worthwhile to hire subs directly for smaller partial renovation jobs as you turn over units. It will give you a chance to meet tradesmen doing smaller jobs (with smaller risk) and then get recommendations for GCs for bigger jobs in the event that you end up doing flips or complete renovations.
In the interest of providing good information and not wasting readers time , i didnt want to continue to retort as I made my points and we are just repeating our self .
But again - Man , this is brutal , trying to scare off a newbie investor by showing articles from "contractor oriented websites" . what are those websites for ? whats the incentive ? That pretty much sums up , what an investor/homeowner should look for
Lets not complicate , just take a simple scenario of painting , see how many ways you can get messed up . ofcourse I can share literally thousands of articles /news shows about contractor scams . I am sharing only one to drive my point.
https://www.angieslist.com/articles/how-some-inter...
And dont read the article , because that might be biased , read the comments .
Again I know the common response is - I am not like that , they are bad contractors . The aim of this discussion is not to prove something at an individual level . It is to say what a homeowner can expect when they try to hire a contractor.
Like any profession , not everyone is competent , not everyone is fair . But with contracting , the odds are really really stacked against you . I genuinely feel for the good contractors as nobody can beat the stereotype but at the same time , it also provides them with a unique opportunity . Out of 6 contractors I reached out , only one responded with the information that I requested , asked valid qns and communicated professionally . So it was really easy for him to get my business - Just etiquette 101 and Business 101 . And by the way , I know the common retort , we dont have time . So to clarify the nice guy spent the least amount of time , but he listened to me , asked the right questions and showed true intent .
TL:DR , look out for people who ask 30k ish upfront . Look out for people who say - if I dont show up after taking 30k , go to court , but hey , I wont take that risk , I want my money upfront . Look out for people who say - listen , I am very busy , You have to wait 2 months for me , so accept all my terms . And mostly , even though there is some repetition and fluff in this post , just reread the whole post , two to three times and make note of the red flags .