Do all house flippers only care about getting cheap contractors?!
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Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
6yYou decided this was your first post?
It's a numbers game, there's a balance. You may be too high to work with someone who does this for a living. There are contractors who will lower their pricing fora flipper who keeps their crew consistently employed.
Whining to a bunch of investors about investors being cheap is going to earn you exactly $0 of new business. This is an excellent platform for networking and building business- shift your motive.
38 Replies
- Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes6y
You decided this was your first post?
It's a numbers game, there's a balance. You may be too high to work with someone who does this for a living. There are contractors who will lower their pricing fora flipper who keeps their crew consistently employed.
Whining to a bunch of investors about investors being cheap is going to earn you exactly $0 of new business. This is an excellent platform for networking and building business- shift your motive.
- Chardon, OH · Member since 2020 · 18 posts · 15 votes6y
Maybe working for investors isn't for you. I am in the construction field and rarely do any work for investors. Why? The exact reason you just explained. There is plenty of money to be made off of residential customers. Either adapt to what the investors needs and learn to do work for cheaper by saving on materials and labor, or stick to the people willing to pay for your quality work.
- Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes6y
My take as a rehabber landlord: contractors are often middlemen, and seem to function best for homeowners who cant manage their own rehab projects because of inexperience and they have a life. As such, contractors have high prices and a flashy pickup truck to show for it.
For me, I really dislike the flashy contractor middleman and would much rather deal with the "rednecks" directly. Which is a rude thing for you to call them since you're out looking for the same guys.
Also really nothing in residential rehab really needs a college degree. The electrician has a bunch of training/experience that is similar and he gets paid accordingly, but everyone else just needs a little experience, tools, a van and an alarm clock to show up for work on time. Its my job to set expectations and ensure the work is being done to mutual understanding.
TBH if you are chasing stingy flippers around, I think you should change models and go after homeowners. They actually need the service you provide and you'll make more off them. Then you can take that money and do your own rehabs/rentals/flips etc. - Rental Property Investor · Glens Falls, NY · Member since 2016 · 176 posts · 169 votes6y
The craftsmanship when it comes to flipping is sub par and these contractors are putting lipstick on pigs. Far too common in my area. The work is Sh*t.
- Member since 2018 · 61 posts · 22 votes6y
I use the cheapest contractor I can find. That'd be me. Where I live, home values are pretty low, so hiring a contractor kills my profit.
- Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes6y
You just have to find your niche. Many investors take the cheap route but many of us want to bulletproof a house so we don't have to deal with as many repairs. My guess is that more buy and hold investors would be willing to pay more for higher quality work. Us remote rehabbers need quality boots on the ground that can be very difficult to find.
My day job is working for a contractor who spends 3 mil a year before we do any work so I'm familiar with the pressures of overhead. How many crews are you running? Vehicles plural seems like a lot for most small outfits...
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes6y
The suggestions would be like stated above. Avoid flippers if they aren’t willing to pay your premium. If you aren’t a discount contractor (having uniforms, trucks, etc) then chasing after flippers work is not for you. Go after homeowners.
@Natalie Kolodij
Thanks for the response! By the way, I am a fan, and really like the Bigger Pockets podcast and the advice I get from it! Not looking to whine about investors being cheap, just trying to find out what investors really want from a contractor. If all they want is cheap, I’ll know not to waste mine or their time bidding on jobs for them as there are lots of other jobs out there that will give you a fair price and not try to beat you down and nearly make you bow to them in as they “have so much work” and are only really looking for someone cheap and may be hard to work with. It’s not worth it to spend your life not benefiting from the time and effort you have put into your profession and trade. I hope you get what I’m trying to say, not trying to come across as arrogant and “entitled”. I do believe tho that sometimes builders and flippers (can) get so “in it for themselves” that they don’t think of the people they are hiring in trying to help them also in building the community! If they are that way too much, those builders will soon get a bad name in town as being cheap and stingy and nearly no one will care to work for them after the word gets out.
@Zach Weiland Thanks man, that makes sense! It really rubs a person the wrong way when you have a investor pull up in their fancy dancy ride and then try to beat you down on the price when it comes time to do the job. Just trying to find out what contractors really want. I guess it’s not cut and dry because people are different in their characters.
- Chardon, OH · Member since 2020 · 18 posts · 15 votes6y
@Justin P. Yeah most investors are usually worried about their bottom line because their goal is to make money so the cheaper the better. Homeowners are more likely to be worried about the work being done well and being done right without worrying about the cost because they are the ones living in and with the work being done if that makes sense.
@Nicky Reader Thanks for the advice. I’m sorry and apologize if I offended you by saying the word “redneck”.. maybe I should say tobacco spittin’, jeans riding up on their boots, big belt buckle, shaggy haired, pulling up in a blasted out muffler, rusted out truck with stuff piled high in the back, shade tree contractor then? Lol... I agree with what you said though. I guess you need to just take a contractor person by person and find out what they really want and what they are like. It would just be nice to know that on the front side. I care about doing good quality work and don’t want to lower my standard just to get a job from a cheap contractor. Thanks!
@Dylan Mejo That is exactly right man with some contractors! It makes you nervous about purchasing some of these homes for investmentsthat have been flipped once you see what can go on and what gets covered up..
@Patrick Strain Understood. Do you usually have good luck getting the same contractor back? Or do you have a list of electricians and plumbers and HVAC people and it doesn’t matter if you use the same company that you know you can trust?
@Todd Rasmussen
Thanks! That is exactly what I am trying to do at this point having just started my own business about a year and a half ago and finding that niche. Trying to figure out what good investors really want and what they are looking for in a contractor, and wether quality work, showing up in newer, clean vehicles and uniformed employees make a difference to them as it shows a dedication to professionalism.
- Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes6y
Originally posted by @Justin P.:
@Nicky Reader Thanks for the advice. I’m sorry and apologize if I offended you by saying the word “redneck”.. maybe I should say tobacco spittin’, jeans riding up on their boots, big belt buckle, shaggy haired, pulling up in a blasted out muffler, rusted out truck with stuff piled high in the back, shade tree contractor then? Lol... I agree with what you said though. I guess you need to just take a contractor person by person and find out what they really want and what they are like. It would just be nice to know that on the front side. I care about doing good quality work and don’t want to lower my standard just to get a job from a cheap contractor. Thanks!
I think you missed my point. Are you an actual tradesperson or are you the middleman?
If you are a high quality, reliable trim carpenter for example, yeah I would pay you more than Bucky Twoteeth.If you are the guy hiring the trim carpenter, then market efficiencies will naturally push you out when dealing with another business such as a flipper.
My thought based on your response here is maybe there is more to the story of how you are having trouble finding work than just cost.
@Brian Pulaski
Thanks Brian. Taking pride in my work while having a good quality of life, means a lot to our business. I’m willing to work hard but, I’m not very willing to work hard for next to nothing, unless of course that person needs it. There have been instances where you feel the need to help someone out and their gratitude pays you far more spiritually than any money could..
- Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes6y
Originally posted by @Justin P.:
Do real estate investors think they are the only ones that need to be making the good money? I’m talking about from the perspective of a good quality contractor getting turned down to do a job because some shade tree dude was willing to do a job for some beer money?! It can be frustrating in the pricing of jobs. Contractors need to make money too! Or is it all about the investors pocket and who cares if the job is done properly behind the Sheetrock and paint?! Any suggestions for the contractor who does quality work but is obviously higher than that handyman or redneck due to the effort put into 4 years of college, exams, licensing, continuing education, Insurances, professional uniforms and vehicles, and other overhead?Thanks!😁
I am not and have never been a GC.
If I were a GC, I wouldn't work with new homeowners or new investors at all. My target would be ONLY those folks whom I have reason to believe have already been burned by a cheapo GC working for, as you put it, beer money.
If it was a homeowner, I'd check zillow/redfin for when they purchased, and I'd want to work with folks who have owned for at least 2 or 3 years, enough time for them to already have been burned.
If it was an investor, I'd just ask them how many properties they own, looking for 2 or 3 minimum (sorry to throw you under the bus new investors, but I'm pretending to be a general contractor here, not a loan officer).
If you are ONLY getting phone calls from folks that do not pass the applicable test, then I'd say you have a marketing problem (in my industry, same thing, if the LO is only getting calls from people working in fast food who don't have the income to qualify for a mortgage at local price points, that's a marketing problem). If that is need the case, then perhaps at least now we know what the actual problem is. :)
This is specific to the SF Bay Area, but my general advice for new investors or homeowners here is to NOT buy properties predicated on what you THINK general contractor labor costs and quality are in our area. Stick to workable real estate for the first one or two, something will break at some point and then you will need a skilled tradesman, and the "lesson learned" will be on some small $5k thing, not a big $50k thing. Heck, happened to me when I bought my first home, it's a lesson that just needs to be learned, and it can ONLY be learned the hard way if your skull is anywhere near as thick as mine is, GC dynamics is among the most, if not the most, under-discussed part of homeownership and real estate investing in general. All the books and websites and blogs just seem to gloss over it like it's no big deal, when in reality it's make or break for a LOT of real estate related undertakings, and the ONLY way to figure it out... is to do it.
@Nicky Reader
Got it! No, there is lots of work to go around here in this area and I have no shortage. Very busy! I am a tradesman. Also a landlord and wanting to buy more rentals, possibly build a small subdivision on one of my properties, do house flipping, and real estate trading is my end goal.. just getting some ideas on whether it is worth it to build a business on working for contractors or more for homeowners and contractors that do custom homes... also what kind of employees to hire. Thanks for your response, I appreciate it!
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes6y
Originally posted by @Justin P.:
@Brian Pulaski
Thanks Brian. Taking pride in my work while having a good quality of life, means a lot to our business. I’m willing to work hard but, I’m not very willing to work hard for next to nothing, unless of course that person needs it. There have been instances where you feel the need to help someone out and their gratitude pays you far more spiritually than any money could..
You shouldn’t have to work hard for next to nothing. Just keep in mind there are “clients” out there that value price more than quality.
As a flipper myself I look for quality and value. I don’t mind my contractors making good money. I however draw the line on certain things.
I had a proposal for windows on a house. $10,000 or so. I priced the materials out myself, around $2,800. I ended up replacing them (I come from the construction world and know how to do most things) and it took me two days. Now I get that everyone needs to put food on the table, but to pay $7,200 for two days of labor... that’s hard for me to accept. With that said I would NOT have gone back to him and asked, “can you do the job for $3,500”, that would be insulting to him. I simply told him I went another route. - Investor · Columbus, OH · Member since 2017 · 861 posts · 1k+ votes6y
Originally posted by @Justin P.:
@Nicky Reader
Got it! No, there is lots of work to go around here in this area and I have no shortage. Very busy! I am a tradesman. Also a landlord and wanting to buy more rentals, possibly build a small subdivision on one of my properties, do house flipping, and real estate trading is my end goal.. just getting some ideas on whether it is worth it to build a business on working for contractors or more for homeowners and contractors that do custom homes... also what kind of employees to hire. Thanks for your response, I appreciate it!
Gotcha, i thought you were a GC. For trades, reputation is important. Once I find reliable providers I hang onto them. I do not at all care what they drive or how they dress, as long as the rates are fair and the quality of work is in line with the cost.
I have found everyone I use thru random networking and referrals.
- 6yMike CumbieBusiness MemberREALTOR® · Brockport, NY · Member since 2015 · 3k+ posts · 4k+ votes
I have a list of people I call for various things. I have a AC/ Furnace guy, I have an electrician, i have a plumber, I have a Garage door guy, I have an excavator guy, I have a backsplash guy, a window/door/trim guy. I have painters and a list of handypersons. When I have a project that needs one the conversation normally goes like this.
"Heya Chris (my electrician). I need a new riser put in and the access point moved from the chimney at 123 main street. When you get a chance stop over and let me know what it needs"
"Ok Mike, I should be out that way Thursday and I'll take a look"
"You know the lockbox code"
Chris: "Hey Mike, that one is going to be around $600. I ordered the line and set up a shutoff with Nat grid. It will be done Next Wednesday "
Me: "Cool let me know and I'll square up"
When done, I meet at the earliest convenience and pay up. They are business people, not businesses. I don't even get competitive bids because they give me a fair price and I trust them with their own timetables. I always say this business is not about real estate it is about relationships. If someone wants to meet 4 times and then complicate the whole issue with "trim ideas" and "paint samples" they aren't my person.
"Hey John, put a kitchen in 45 Elm like the one you did over at 576 Westfall. Let me know when it's ready for the backsplash because I'm having Tommy put one in like he did over and Mary's sisters house". Empower the people you work with to make decisions and know that you trust their decisions. They know when the price won't be within my specs and they call.
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes6y
As a flipper I like having my go to contractors. Not all trades, but right now I have 75% or better I only need to make a single phone call. I know right around what they will charge (so my budget is correct) and they know they will get easy access and paid on time with no chasing me down.
- Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes6y
Originally posted by @Justin P.:
@Todd Rasmussen
Thanks! That is exactly what I am trying to do at this point having just started my own business about a year and a half ago and finding that niche. Trying to figure out what good investors really want and what they are looking for in a contractor, and wether quality work, showing up in newer, clean vehicles and uniformed employees make a difference to them as it shows a dedication to professionalism.
Quality work yes.
The rest of it no. If you are a year and a half in and own more than a vehicle, you are spending too much and might be (based on my observations of others starting general or specialty contracting companies) just churning money. That truck is profit that's not in your pocket. A truck or van to pick up and deliver material to multiple job sites is plenty of vehicle for most new contractors. The crew can work out of a gangbox at each location and get themselves to and from work. Having a clean appearance to your employees might be beneficial for service type work, but I think it's lost in construction. Besides, an investor isn't going to be meeting an employee until you already have the contract.
Having the nicest equipment, trucks, and tools means you are spending more money than your competition and therefore have higher overhead. Your quote will come back higher or your profit will come back less than all your competitors if you are the guy spending the most.
Spend less
Quotes can come down
Volume will increase
Your fixed costs will be spread over greater direct installation costs
Your margins will increase more and you'll have the profit margins you are missing now.
- Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes6y
@Todd Rasmussen I made fun of my contractor back in my last market. He was my go to framer/siding guy. After my first job with him, he sold his 1999 F350 for a 2017 F350 crew cab, long bed lariat with every option. I never really cared, he can run his business as he sees fit!
- Rental Property Investor · Clarksville, TN · Member since 2016 · 1k+ posts · 1k+ votes6y
I'm a buy new and drive into the ground fan myself and a truck upgrade 18 model years is probably a necessity move over squandered overhead. In your example, it sounds like the only mistake he made was buying a Ford. :)
The most value I get in construction unfortunately isn't in my market area. The most value I get is out of my local drywall guy. He shows up with everything but the drywall in a beater 90's pickup and his crew drives their personal vehicles to our home. Home depot sends a stack of drywall on a semi without charging for the delivery. His crew throws up drywall and goes home. He stays to texture or comes back on a weekend by himself. He's netting 95% of his gross after he pays his crew.
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