J Scott - Author of Flipping/Estimating Book - Ask Me Anything!

316 Replies

Originally posted by @Natalie Schanne :

@J Scott - How do you manage contractors so you get the price you need, the quality you desire and the timeline you agreed to? (Sometimes “contracts” don’t solve everything.)

How do you manage relationships to request rework (until you get quality you expect) without paying extra or buying extra materials, and having that contractor work for you again / not walk off the job?

Did you ever get your contractor license and insurance in any area to make it easier to manage the permitting process/subs (in case you had to change someone)?

The GCs who bid my job ask for like 200% of any price in your books (in NJ where the home values are 150-200) regardless of how many I contact. The craigslist guys at $100-200/day are hit or miss. My favorite workers are those with a day job doing x and do it for me for an affordable amount but usually aren’t licensed to pull permits.

I got a tile guy to sign a contract he didn’t really read stating he was paying for all materials besides tile and grout and he will get $100 less per day if not finished by yesterday (it’s 80% done and the 10 days to finish 1000sf was generous). He brought me $500 in bills for leveling spacers and thinset and redguard/crack prevention. I don’t know how to keep a relationship with him if I deduct the materials from his completion payout. (He’s very skilled but constantly broke.) I agreed to give him $3psf for 1000 sf of floor tile after having a $1600 “+ materials” competitive bid from my B quality handyman who would have used the cheap spacers and the floor may have been uneven. This tiler’s quality is very good.

Thank you!

Hey Natalie,

I believe I say in the new edition of the Flipping book that, in a hot market, contractors are the most difficult part of the job.  It didn't use to be that way back when there were fewer investors and contractors needed to do a consistently good job in order to find work.  But, these days, contractors just need to have a pulse, and someone will be willing to pay them.

With that in mind, here are a few thoughts:

- First, many parts of NJ are going to be in that 10-20% of the nation that is more expensive than the upper limits indicated in the estimating book.  There are just some markets (San Francisco, Southern California, NYC, parts of NY, Washington DC, etc) where labor and materials are much higher than most of the rest of the country, unfortunately.  Luckily, home prices typically reflect this as well.  If you're working in an area with extremely high labor prices, but low housing prices, you may want to revisit your farm area. 

- Don't just have your contractors sign the contract, especially the handymen and small time companies.  Actually go through it with them, make sure they understand what they're providing and what you're providing.  That way, at the end of the job, when they try to charge you for things not in the contract, you won't have to feel bad saying no.  I know one investor who will literally record his discussion with his contractors walking through the contract, so that if they ever end up in court, the contractor can't claim he didn't know what the agreement was.

- In terms of, "How do you manage contractors so you get the price you need, the quality you desire and the timeline you agreed to?"  You don't.  I write in the book:  BETTER, FASTER, CHEAPER - PICK TWO.  Typically, you only get two of those with contractors.  And you need to decide which two are most important to you.  For me, it used to be better and cheaper -- I was willing to compromise on speed.  These days, I don't want my projects to drag on (the economy can shift any day now), so I go for better and faster -- I'm willing to pay more.  Figure out which two are most important to you, and find the contractors that will satisfy those two.  Oh, and some won't even give you two out of three -- try to avoid those.

- In general, when someone tells me that they get royally screwed by a contractor, it was because they didn't check references on that contractor.  Most contractors that will screw you do the same thing to all their clients.  You certainly aren't the first.  Many investors are too lazy to do due diligence (I'm often too lazy myself and I regret it).  Check reference, visit past job sites to see quality, check for lawsuits, verify their insurance and license, etc.  Most bad contractors don't hid their "badness" very well.

Hi @J Scott , I just wanted to say that I think this is great. I recently listened to the podcast as well, but was familiar with your work and contribution to the site and to the flipping world in general even before that. I have no questions for you at this time but really wanted to let you know that I really do appreciate you taking the time to really allow others to learn from you. I'm sure I speak for many when I say how appreciative we are of what you've done for our community. The fact that you created this thread is awesome. That's all I got! Take care!!!

Originally posted by @Polar Prutaseranee :

Hi @J Scott, I just wanted to say that I think this is great. I recently listened to the podcast as well, but was familiar with your work and contribution to the site and to the flipping world in general even before that. I have no questions for you at this time but really wanted to let you know that I really do appreciate you taking the time to really allow others to learn from you. I'm sure I speak for many when I say how appreciative we are of what you've done for our community. The fact that you created this thread is awesome. That's all I got! Take care!!!

Thank you for the kind words, Polar!

If you get scarred half to death and then get scarred half to death again, do you die? 

Originally posted by @Andrew Syrios :

If you get scarred half to death and then get scarred half to death again, do you die? 

Did I miss something???

Originally posted by @J Scott :
Originally posted by @Andrew Syrios:

If you get scarred half to death and then get scarred half to death again, do you die? 

Did I miss something???

 An extremely stupid joke perhaps.

Originally posted by @Andrew Syrios :
Originally posted by @J Scott:
Originally posted by @Andrew Syrios:

If you get scarred half to death and then get scarred half to death again, do you die? 

Did I miss something???

 An extremely stupid joke perhaps.

 I feel like you're just 1/4 alive at that point. Now, I don't know how long you can do that until all your 9 lives are gone. 

Originally posted by @Andrew Syrios :
Originally posted by @J Scott:
Originally posted by @Andrew Syrios:

If you get scarred half to death and then get scarred half to death again, do you die? 

Did I miss something???

 An extremely stupid joke perhaps.

Oh, you were asking me a question... Now I understand.  I thought you were making a reference to something else and I couldn't figure out what!

Good question...

I consulted a doctor friend and he said that most people round up when estimating percentage death from sacredness.  We say "scared half to death" when in actuality, it's normally probably only scared 20-30% to death. 

So, on average, you have to be scared half to death about four to five times before you actually die.  

@J Scott I loved your breakdown of the economic side of real estate in your latest trip to the BP podcast. You really peaked my interest in the ups and down of the market. Is there any literature that you recommend on the subject?

@J Scott Great podcasts my man! Really enjoyed them! My wife and I are looking into our 1st multifamily property this year. We currently have 2 properties that we have mortgages on. We rent out one and live in the other. We live near Los Angeles County and are considering a local/out-of-state purchase. After reading the above about buying and hold markets (Population Growth; Income/Wage Growth; Job Growth). What suggestions do you have do you have for locating a suitable area? With your experience, where should I start the research for this investment?

Originally posted by @Mouhamad Rahal :

@J Scott I loved your breakdown of the economic side of real estate in your latest trip to the BP podcast. You really peaked my interest in the ups and down of the market. Is there any literature that you recommend on the subject?

Hey Mouhamad,

BP will be releasing something in the next month that I created...stay tuned!

Originally posted by @Orlando Perez :

@J Scott Great podcasts my man! Really enjoyed them! My wife and I are looking into our 1st multifamily property this year. We currently have 2 properties that we have mortgages on. We rent out one and live in the other. We live near Los Angeles County and are considering a local/out-of-state purchase. After reading the above about buying and hold markets (Population Growth; Income/Wage Growth; Job Growth). What suggestions do you have do you have for locating a suitable area? With your experience, where should I start the research for this investment?

Hey Orlando,

I always recommend starting where you know, where you know people, and where you can easily get to...  

What places have you lived?  Where do you have family?  Where do you have friends?  Where have you visited that you like?  Where would you like to visit?  What's an easy commute from where you are by plane, train or car?

These are the places you should start looking, as they will all provide you some benefit.  Whether that benefit is that you know the area already, or you have someone on the ground that can help you, or it's relatively easy to get to, having some advantage going in will be important when you're ready to start investing.

So, make a list of these places, and see if any of them work.  If not, then we can talk about Plan B...

Originally posted by @Julia Fair :
Originally posted by @Andrew Syrios:
Originally posted by @J Scott:
Originally posted by @Andrew Syrios:

If you get scarred half to death and then get scarred half to death again, do you die? 

Did I miss something???

 An extremely stupid joke perhaps.

 I feel like you're just 1/4 alive at that point. Now, I don't know how long you can do that until all your 9 lives are gone. 

 All nine? I'm not a cat unfortunately... Hahaha!

Originally posted by @J Scott :
Originally posted by @Andrew Syrios:
Originally posted by @J Scott:
Originally posted by @Andrew Syrios:

If you get scarred half to death and then get scarred half to death again, do you die? 

Did I miss something???

 An extremely stupid joke perhaps.

Oh, you were asking me a question... Now I understand.  I thought you were making a reference to something else and I couldn't figure out what!

Good question...

I consulted a doctor friend and he said that most people round up when estimating percentage death from sacredness.  We say "scared half to death" when in actuality, it's normally probably only scared 20-30% to death. 

So, on average, you have to be scared half to death about four to five times before you actually die.  

Now this is the type of lucid analysis I've come to expect!

@Orlando Perez I recommend investing in an area where there is a college population. In San Luis Obispo, Cal Poly students cause a need for more and more housing and have increased the rent year after year. Message me, I would love to send you some listings that pencil out in regards to ROI and ROE.

I want audiobooks on CD.  Are your 2 books available on audiobooks?  I haven't found them thru Bigger Pockets.

Originally posted by @Chuck Glover :

I want audiobooks on CD.  Are your 2 books available on audiobooks?  I haven't found them thru Bigger Pockets.

BiggerPockets has an audio version of The Book on Flipping Houses.  It's a download, not a CD.  The book is also available on Audible, I believe.

The Book on Estimating Rehab Costs is not sold in the audio format, simply because it contains a LOT of tables, and these wouldn't read well in audio format. 

What are your thoughts on doing a lease option as an exit strategy on a property that was planned to be a flip? The contractor has dragged the job out so long, that any relief from carrying the payment on this one is appealing, but do you think I'll risk a down shift in the market by giving the potential buyer a 24 month window to buy? Stress!!

@J Scott

Just ordered the revised version bundle last night and i am AMPED UP to get reading these books. 

After i finish ill review this forum and the first one for questions that i may have that have previously been addressed. 

So stoked to read these and get a flip under my belt. 

@J Scott

I have two questions . In the interview you spoke about "6 things to prepare for." One of those concepts was to "figure out a reasonable worst case scenario" and then build the deal from there. In the interview you talked about worst case scenarios as somewhere in the 15% range   This seems low to me, but I also use conservative numbers for worse case scenarios. My plan is to buy an 80k homes than need between 10k-20k worth of repair and then sell them for 140-150k (where the comps are now). I plan to sell them traditionally or by cashing out and refinancing. So what is a reasonable low? Or How did you determine 15% to be your "low"?

This brings me to my second question. My original plan for those $80,000 houses was to cash out refinance. But you specifically talked about NOT leveraging and keeping as much cash as possible for the down turn. My thought was I didn't want to pay taxes on the flip and wanted to 1031 out of the properties later on. Is this a poor strategy considering the potential market downturn? Almost all my money is liquid cash as of today, very little is in the stock market. I know you're not an accountant or financial adviser but you are someone who I am taking advice from directly.  If you need tangible numbers to make an assessment PM me and I can tell you how much cash I have.

Thank you for your books.  They have been an unbelievable help.

Just ordered both books over the weekend can't wait to dig into them... going to use them not only for flips but also BRRR strategy on long term holds...

Originally posted by @Shawn Regnier :

@J Scott you should update your signature

Unfortunately, I don't have any control over that (I don't think)!  That was put there by BP staff...though I agree they should update it!

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