Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
I read too often contractors are more of the problem rather solution to investment strategies. What if you could find a local contractor service that manged contractors based on customer satisfaction ratings you provided as reviews (kinda like Angies but exclusive to contractors), a service that required all contractors to be performance bonded and insured so that you are guaranteed good service and quality workmanship or you money back. What would that be worth to you?
Disclaimer: There would be stipulations on the insurance claims such that false accusations could not be made, of course
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Only the bad contractors are part of the problem, the good ones are solution and problem solvers. I think it all depends on the skill sets of the investor and the experience they have. Those with abilities and experience can form great relationships with good contractors. I think it is those that are newer that often get taken for a ride.
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
Well the thing most investors do not realize no matter how seasoned you are there are better target customers out there for the good contractor than REIs that pay the contractor less than half the amount they can make elsewhere, the good ones that is that know better. I know that from my experience, REIs are not my target I could care less about their business. What if that could fixed and you were not left out in the cold from the big fish with the bad contractors?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
I disagree Terry. First off, no good contractor can make any money charging only half the cost to RE investors. I think your staement is overly exagerated. Secondly, a good RE investor would be a great client for a good contractor and although they offer lower priceing, the contractor knows they dont have to worry about some picky lady taking 10 years to decide what color, what type of stone, etc, etc, etc.
Also, contractors can stay busy with a good RE investor. They make their money on long term relationships.
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
Originally posted by Will Barnard:
I disagree Terry. First off, no good contractor can make any money charging only half the cost to RE investors. I think your staement is overly exagerated. Secondly, a good RE investor would be a great client for a good contractor and although they offer lower priceing, the contractor knows they dont have to worry about some picky lady taking 10 years to decide what color, what type of stone, etc, etc, etc.
Also, contractors can stay busy with a good RE investor. They make their money on long term relationships.[/quote
Will, perhaps I was not worded correctly. My customers( I will not name whom) my typical margin is 40% profit and I cannot handle the volume of business I get, currently looking for more project managers. No REI will show good ROI based on those margins my normal customer can afford. Correct? No REI or homeowner around here will pay me 40% profit on top of materials and labor.
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
I forgot to mention, my competition whom is not as good as I, expects 50-60% margins, they have overhead I don't pay for that is why I under bid them and the demand for my company is so high.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
You have quite a bit of broken sentences so I am having difficulty following what you are trying to say. None the less, I am getting the feeling your post was not intended to strike up conversation but rather pitch how good your contractor company is. If that is the case, this is not allowed, If not, my apologies, but from your posts and tone, that is what I am getting.
My minimum returns on an annual metric is well over 60%, in fact, my bare minimum is 60% and I typically hit 90%+. So I personally compete just fine and make great returns. My contractor is great and he makes the typical 15% spread on the job. Since he can do multiple jobs for me each year, he makes a great profit. Over the last 12 months, he has billed over $1M just to my company alone. I would say he is making a great profit working with me.
The title to your thread was that contractors are often part of the problem rather than the solution. I agreed with that with the caveat that good contractors are just the opposite. Case in point, yourself and my own contractors. Let’s try and stick with that topic.
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
The topic is still on track, has nothing to do with my wanting more REI business as stated. 15% will not work for most "good contractors" around here anyway. The topic is I am thinking of offering a retail contracting service in a commercial building I plan on building next to a local lumber yard and I was wanting feedback on that hence "what would a service that found good contractors rated by customers be worth" Sorry you misread Will, I'm not the best typist but I thought it was VERY clear I was not self promoting, again no need for that out here, "no interest" :)
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Sweet! Thanks for clarifying Terry. While such a service may be quite beneficial to many, I am not sure it would be so to someone like me who has the comfort levels and relationships I have with my contractors, though I would guess I am the minority and NOT the majority. Therefore, such a service (similar to an Angies list) may be quite beneficial assumming the ratings are true and not friends of contractors posting rave reviews. Im afraid many of these recommendation services have such a problem.
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
Yes, Will, I grew up in Cali, graduate by LAX, El -Segundo, CA, class of 1979 and have watch the REI market out there since. The climate out here in storm damage midwest alley is much different than there. You are the exception to the rules, I swear CA and TX are countries of their own lol!
So I could use some more feedback on this thought of a contractor service that guarantees good service and workmanship? Online and one stop shopping right outside and indi of a major lumber yard or home improvement center?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Terry Portier:
Well the thing most investors do not realize no matter how seasoned you are there are better target customers out there for the good contractor than REIs that pay the contractor less than half the amount they can make elsewhere, the good ones that is that know better.
I disagree with this...
Many "retail" contractors will charge twice as much per hour of labor than their investor-focused counterparts, but those retail contractors will bill many fewer hours overall (their homeowner customers provide much less repeat business and many fewer referrals than investors do) and the retail contractors will tend to have lower margins, as they need to keep up appearances (nice trucks, Yellow Pages ads, website, customer service support, etc).
So, while I'm sure there are exceptions, in my experience, good investor-focused contractors don't make much less (and sometimes make MORE) than their retail counterparts.
What if you could find a local contractor service that manged contractors based on customer satisfaction ratings you provided as reviews....
There are a lot of details here that you'll find are VERY difficult to overcome when scaling this type of business. You've probably noticed that there is no really good reputation system on the Internet for people, companies, etc. -- the reason for that is that as the pool of users grows (both those being assigned reputation and those seeking it), the incentive and likelihood of someone figuring out how to rig the system increases.
Sure, you could probably do this small scale (a few contractors in a local market), but if you try to scale it up, you'll run into some major obstacles. For what it's worth, I spent a couple years working with a couple of the biggest online companies in the world trying to solve the reputation problem...for the most part, they've all given up on large-scale implementations for these reasons.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Terry Portier Will Barnard is right. Good contractors do good work, and charge fair prices, in relation to the job. REI that are experienced and know what they want, which saves time, and money. Obviously if you have a client that you work with frequently, you want to build a long term relationship, and give them the best deals, that's business.
Contractors are all different. For our part, if we have a customer and they decide to upgrade something on a job, they always get it at our price. If they want to buy themselves things like a new washer and dryer, etc. that has nothing to do with the job at hand, we still let them get it at our discount. We consider ourselves contractors, not retail outlets, and we think it's a nice service to provide to our customers.
Personally I worry less about customer reviews online, than building long term relationships with the people we are hired by. However; these days we don't do contract jobs, and haven't for quite some time, but we still keep the same principles when working with those buying a house or building from us, offer a high quality product, genuinely care about the people and the job, and everyone will be happy.
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
J Scott
Originally posted by J Scott:
Originally posted by Terry Portier:
Well the thing most investors do not realize no matter how seasoned you are there are better target customers out there for the good contractor than REIs that pay the contractor less than half the amount they can make elsewhere, the good ones that is that know better.
I disagree with this...
Many "retail" contractors will charge twice as much per hour of labor than their investor-focused counterparts, but those retail contractors will bill many fewer hours overall (their homeowner customers provide much less repeat business and many fewer referrals than investors do) and the retail contractors will tend to have lower margins, as they need to keep up appearances (nice trucks, Yellow Pages ads, website, customer service support, etc).
So, while I'm sure there are exceptions, in my experience, good investor-focused contractors don't make much less (and sometimes make MORE) than their retail counterparts.
There are a lot of details here that you'll find are VERY difficult to overcome when scaling this type of business. You've probably noticed that there is no really good reputation system on the Internet for people, companies, etc. -- the reason for that is that as the pool of users grows (both those being assigned reputation and those seeking it), the incentive and likelihood of someone figuring out how to rig the system increases.
Sure, you could probably do this small scale (a few contractors in a local market), but if you try to scale it up, you'll run into some major obstacles. For what it's worth, I spent a couple years working with a couple of the biggest online companies in the world trying to solve the reputation problem...for the most part, they've all given up on large-scale implementations for these reasons.
Yes, marketing contractors is an idea I have at the local level and will very much depend on the supply and demand and scope of there. There is a company called "Renovation Realty" in San Diego, CA, and one here called UBUILDIT, that retail home sales, builds, and contractors, but I am trying to come up with a different twist.
Here are the latest earning from Angies list, she must be doing something right. Did you know she started in Columbus, OH as a call in service that rated local home and lawn care services. She went door-to-door, signing up members and collecting ratings on local contractors. I think she has the best system out there. Much better than BBB, but for whatever reason some of our customers want to know if we are BBB rated.
April 24, 2013
Angie's List Reports First Quarter 2013 Results
First quarter revenues increased to $52.2 million, up 68% over the prior year quarter
First quarter service provider revenue increased to $37.5 million, up 78% over the prior year quarter
Cost per acquisition ("CPA") in the first quarter was $72, a decrease of 12% over the prior year period
Total paid memberships of 1,951,774 at March 31, 2013, up 60% year-over-year
First quarter cash provided by operations of $9.9 million
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
Originally posted by Steve K:
Originally posted by Terry Portier:
Here are the latest earning from Angies list, she must be doing something right.
Angie's list does do one thing exceptionally well: lose money.
lol. That's because she has a A+ rating with BBB, the company she markets against, go figure! She also has a class action suit against them.
BBB is BS! They lean to the companies that pay their bill. The want $30/mo for 1-3 employees and if you are a big company you stand no chance as consumer against them and what they pay BBB. I tired it with Verizon and Motorolla, wasted my time.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Terry Portier:
My main customer manages a much higher volume of homes and commercial property than REI's around here, and the pay out is over twice REI's and homeowners. All I need is a card and good reputation to obtain and maintain their business.
Which is why I said there are exceptions. I can count on one hand how many retail contractors I know who bill more hours than the good investor-focused contractors I know (other than the big shops with lots of advertising and customer service overhead).
What I'm am trying for figure out is there a way to market good contractors by retailing them, so that the volume is higher.
Why don't you become a GC and hire these contractors to be part of your crew (or use them as subs) and then hire yourself out?
Here are the latest earning from Angies list, she must be doing something right.
No doubt they're making lots of money. But, the only time I've ever used Angie's List is the only time I've ever had to take a contractor to court for failure to uphold our contract. After I won the lawsuit, I forwarded a copy of the judgement to Angie's List, but as far as I know, the contractor is still on their list of recommended contractors.
I've never said that you can't make money in this business...I just said that providing good reputation services is hard. My one experience with Angie's List solidifies that belief in my mind.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
13y
Builders and Investors, landlords, flippers, and odd jobs for Realtors are a contractor's/handymans/construction worker's bread and butter, Harry Homeowner is the gravey along with union work in some cases.
As to a system, here we have the National Home Builder's Association, includes rehabbers, you can call them and get the same feedback, complaints, insured, bonded, volume of business and if they know you, they'll suggest who might be best for the job. :)
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
J Scott
We are GC, paper contractor with a team of subs, but we do not target the general public(home owners, REI's) .....we target companies that manage a much higher volume of properties than them.
I am looking for a way to retail contractors to make it worth my time. I am thinking of building a office retail strip of say 4 right next to say Home Depot in their line of traffic, putting my self in one, renting the other three. I would provid a GC service to the public, to the ones like single moms, elderly people, or anyone, that either don't have the means, or attempt a DYI then remember me on the way home, etc......I'd solicit all my suppliers too, charge them to have another place to put their products in, and maybe rent them one of my spaces. Just brain storming here. Combining a REI with a retail business opportunity for myself, my subs and suppliers. Sort of like Rennovation Realty or UBUILDIT with a twist. Id provid a performance bond insurance so that none of my clients would ever end up in court. Before that happen or a claim, I'd have a rating system that take the risk down to myself and my customers. I might even use Angies list and hand my customers a review from in my office space upon completion of the work.
Angies list is a pretty sweet deal for businesses. There are no fees like BBB and a much better scam filter, and after you bring two memberships to them that vary in price depending on location(my area after a 40%discount is $10/yr) they give you your own page like an internal website, and put you at top of the search engine if you offer members a discount on your discount page, like senior citizens, vets, etc, I'm thinking. It's a win win if you are a good contractor, and your customers gain access to rating's of other businesses in their local area for a small fee. Angie has alot of money invested right not in TV rating's and advertising, as much as I hate to admit it they are not bad to have working for you, but if you are a bad business can back fire fast!
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
So, you won't have customers sign any contracts with you? You won't be a construction company and you won't be a paper contractor -- you just want to be service-based company that matches contractors with those who need contractors, for a fee.
Real Estate Investor · Central, TX · Member since 2012 · 479 posts · 165 votes
13y
I like your thinking but there are a lot of questions to be asked. How do you make money on these transactions? Does the contractor pay you a fee? Does the homeowner?
How will you market this business? Why would someone call you instead of the in-house contractor list at Home Depot?
What value do you bring to the transaction? The people spending money need to know this.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Terry Portier I can understand you wanting to grow your business, but I don't know that being a broker for contractors is going to do it, unless you are in an area where all the contractors are just so busy that people can't find one by going onto Craigslist, getting referrals from friends, etc. There are areas in the country where that is possible, and affluent enough that they wouldn't care about the additional costs it adds to a job, but is your area one of them?
What is the market like in your area? What is there a demand for? Retail space in most centers that have a big box store is pretty expensive. Aside from that, you would be competing with all the contractors that already are registered with the big box store and get referrals. As for renting space to your suppliers, I doubt many of your suppliers of building products can compete with the prices customers can get at the big box store you'll have next door, especially after they have to add in the extra cost of renting space from you, etc. It makes no sense.
You say "We are GC, paper contractor with a team of subs, but we do not target the general public(home owners, REI's) .....we target companies that manage a much higher volume of properties than them"
If you have a successful niche in the market, why not build on it, with additional services related to that? Good luck!
Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes
13y
This is a weird conversation. There is the appearance of agreement on the surface, but not in the details of this dialogue. No matter what any of the SUPER-seasoned investors above are saying, Terry seems to have this point that he is trying to make which would justify the need for a new service. There may indeed be a need for that service. But my GC is someone I've known most of my life, he does ONLY REI and commercial because those things generate recurring revenues that keep his crews employed.
Personally, I don't see the need for another Angies-list like service when you could just use Angies list to find a contractor. But only newer REIs need that. Anyone that does volume has contractor relationships that they have nurtured for a long time.
Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
13y
Dev Horn I agree, it is a confusing thread. At first blush it appeared the OP was thinking of doing an Angie's list type business. Then after more conversation, from what I get out of it, is that he's trying to find a new niche for expanding his business. There's nothing wrong with that, but in order to help him, some of us have related other ideas, or things he might want to consider.
Cincinnati, OH · Member since 2013 · 292 posts · 81 votes
13y
Terry, what's the long-term plan for your business? Old REIs already have preferred contractors. New ones who use your service will find a contractor they like and use them directly thereafter. Having them performance bonded is useful, but I suspect that once the customer is comfortable with the contractor, they'll cut the middleman out.
You'll need to factor in needing a lot of marketing to bring in new customers to replace the old, if that's the case, and have a large enough market to support the churn.