Why are contractors part of the problem not solution?
Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
Why are contractors part of the problem not solution?
Most Popular Reply
Dev HornPro Member
Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votesThere should be some sort of BP award given to anyone that has endured this thread. =D
81 Replies
- Contractor · Anchorage, AK · Member since 2012 · 351 posts · 196 votes13y
Originally posted by Terry Portier:
Randy,Where I differ is in the overhead variables in contractor pricing that DO NOT necessarily mean lack of experience, slow, poor quality. I think that is where you are wrong, I do respect years in a business, but unless you have that many years in every city in the world it does not make your experience more valuable, it is just localized and can be skewed from the masses.
As stated some overhead variables are,
1. Employee vs. sub
2. Cost of retail office space
3. Advertising
4. Litigation (some subs may be in)
5. Education and experience
6. Volume of workAgain, these are cost that can be passed onto the customer that have nothing to do with a company’s ability to perform on time and schedule or cheaper.
My day job I am an Aerospace Engineer with 30 years. I've worked in most major cities you REI in, never Alaska thank you, ;) I do hear what you are saying Randy since as a consultant-contractor that has seen A LOT of BIG corporate business, I am high priced because I know my trade very well. I'm usually the first to get let go when the budget crunches since I am expensive. Just happen so I am working on my company and REI. But, I don't see this as Rocket Science and as "complicated" as you. I realize the people we manage are not professional, rather blue collar workers that can make it more complicated than needs be, but the principles are the same at a smaller scale. I am fortunate to have seen the big dogs play, another reason why I know how to provide that level of service to my customers at lower cost. Dealing directly with the shop, mechanics, contractors is not new to me, I am a licensed FAA mechanic as well. My son is also an Entrepreneur degree with a lot of talent, some experience that out sells ones with more experience, so I don't underestimate the kids with less experience I have learned a lot from. This all plays a factor into faster, better, cheaper. I also consult a lot of companies that are stuck in old manufacturing and design practices that run their companies into the ground. You can bet the same thing exist in the contracting world from people that do not know how to manage, just simple principles, that created this thread. Yes the risk are high to the REI that is not in the field daily, not only the things Randy and I pointed out but in estimating jobs.
“Unlike the OP, I couldn’t care less about production contractors who chase insurance work. I have no interest in the work, profits that for the most part are unrelated to performance/quality, or in the money motivated mentality in that sector.”
Fist off our sales team chases the jobs, our PMs manage them in the field. It is obvious you have no idea what this work entails or have experience with it. If we did not perform quality work fast at low cost our mega client(S)/ customers would never hire us back, there are too many others knocking at their door. We will obtain more work from these clients based on past performance and a good reputation as we have already have proven.
A recap on the risk (some of which can be very costly) to an REI hiring and managing subs to save up front cost, new or seasoned. This is USA.
1. If you don't pay the price from profits to have an LLC and proper "Commercial" General Liability and Workers Comp insurance you run the risk of personal injury and workers comp and other law suits. I have talked to both attorneys' here, it happens often.2. If you don’t not have the experience and/or software to estimate jobs you run the risk of under estimating jobs.
3. If you do not understand labor laws and IRS code you run the risk of back taxes, fines, and penalties.
4. If you do not understand building code and keep up on them, you run the risk of making costly mistakes. We attend a builder’s local code meeting every month for this purpose, time you don’t have to account/pay for by hiring a GC. If you can't pull permits you need to pay a licensed contractor.
5. If you do not have experience managing materials and labor, job sites, etc., you can make costly mistakes.
There is more trust me.LOL! I will just agree. Im wrong. Youre right. Donuts ARE much cheaper at the Police Academy coffee shop!
- 13yChris ClothierBusiness MemberRental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
Wow -
I thought I was reading some of my usual responses as they kept getting longer and longer and longer...
Terry Portier - I would not use a system like that and I am not 100% sure there are too many investors that would either. There are some, but probably not enough to make it worth the hassle.
Investors are still using tried and true techniques to find good contractors for all the services they use top to bottom. Word of mouth. Many companies that I work with are almost exclusively to our company because of the volume we give them and the rest of their work comes from referral and word of mouth jobs. Much like Will Barnard or J Scott or Bill Gulley said earlier (too much work to go back and see who said it), our subs get 52 weeks of work and fair pay from us as their bread n butter pay and those 52 pays a year help them stay consistent with their labor. WIth consistent labor they try to pick up a dozen or so jobs a year where they will make a little extra and they can find plenty of those jobs through word of mouth.
When investors want to find subs, they still find them by asking local REI associations, other investors or the big syndicates and I just don't believe there is need for a service or would be much demand for it.
Chris
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes13y
Originally posted by Randy F.:
Knowing all I know of the Milwaukee market, im surprised and impressed you seem to have put together a team so successfully.It's been ridiculously difficult, and I'm just starting to understand why (I think :)...
Atlanta is a "real estate town." It seems everyone and their brother is an investor, contractor, agent or is in some way related to real estate. There tends to be more qualified labor than there is work (and plenty of unqualified labor). This means that labor prices in general are low (more supply than demand), and also means that smart contractors recognize an opportunity like working for a busy investor.
Milwaukee is completely opposite. There are very few investors and what seems like a good equilibrium bringing contractors and contracting work. Therefore, there are fewer contractors who need the benefit of steady work (they can find it themselves), and because most of the contractors have never worked with investors, they either don't see the benefit or don't believe it.
For what it's worth, the contractors we've used on the first few projects are starting to get it, and they are happily giving us better rates on the next projects than they have on the past projects,because they see the benefits of consistent work, flexibilty and some referrals we've already given. I think other contractors would feel the same way, but they don't quite get it until they've spent some time working with us (or other investors) and realize that giving investor discounts can be a win/win.
It's been a much harder sell in Milwaukee.
Now, that said, we're moving into a third market that appears to be right in between Atlanta and Milwaukee in terms of contractors. Many that understand what it means to work for investors and many that don't. It's easier for us than Milwaukee, but mored difficult than Atlanta.
Again, all of this is just my $.02...
And btw, I completely agree with you that this isn't something that would be easy for a new investor (we paid close to retail for our first couple Milwaukee projects), but with more experience and more projects under the belt, there should be higher margins. So, I tell new investors to just give it time and not try to accomplish overnight what often takes months or years.
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Sounds like everyone has their own personal experiences with contractor’s, and those experiences can vary from state to state, county to county, city to city, town to town. What cracks me up is when someone claims to have expertise in a place they have never been a contracting company. How can they size it up, how can say what would work and would not? Just based on what they have experienced elsewhere? IF they NEVER been there and done it? LOL! Oh only on forums, I tell ya!
Got to feel for the REIs that are doing rehabs from out of state.
More I look at REI business more I realize how far apart it is from a construction company. I see some construction companies that invest to, I'm thinking better as a separate company, again, probably depends on your local market. Perhaps a good use for a series LLC.
Well it's been an interesting discussion giving me a better feel for what has been going on elsewhere in the nation, thanks for that. :)
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Bill Gulley
Here is my being part of the solution and new way for you Bill to power your bird house cams vs your solar panels I'll post on my thread. I'm very familiar, have helped design and build carbon fiber plastics on some this worlds best aircraft like the B-2, F-35, Boeing Dreamliner (structure, not battery lol)....It is amazing what happens in the tech world by accident. It can possible work on your landlord birdhouse power packs, no more 12 V lawn mower batteries and solar supply source that depends on sun, imagine that buddy! :)
The future is looking bright, even for the contractor's remote equipment power sources and transportation :)
http://www.kcet.org/news/rewire/science/more-good-news-on-those-carbon-supercapacitors.html
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes13y
Originally posted by Terry Portier:
More I look at REI business more I realize how far apart it is from a construction company.This is one example of why -- when discussions come up about whether formal business education is important or not -- I'm generally on the side of YES IT IS. Or at very least, a good bit of real world business experience.
I'll generalize here, but in my experience, most to investors who don't have much business education and/or experience, there is probably little difference between running a real estate investing company and running a construction company. Hey, they're both real estate companies that focus on construction, right?!?!?
But, the first thing someone with a little bit of real world business experience (or a business education) would say is that these two types of businesses couldn't be more different. A real estate investment company is a PRODUCTION enterprise. A construction company is a SERVICE enterprise. If you think that you can take a production enterprise and just start adding service components to it (or vice versa), you're in for a big surprise. You could spend a month just figuring out the accounting differences!
If you have experience running a real estate investing company, that experience is likely more applicable to creating a new company that focuses on designing clothes or building furniture than a new company that focuses on retail construction.
That's why when investors tell me that they're going to start "bringing labor in-house" by hiring employees and then offset the costs by hiring out that labor for retail construction, I often laugh to myself. I'm not saying it's not possible (I've seen people do it), but again, these businesses have very little in common, and don't compliment each other the way most investors assume. You're essentially running two full-time businesses that will more likely get in each other's way than help each other (unless you're really, really good).
I apologize if this post comes off as condescending -- I sincerely don't mean that. I just think that too many investors take the business side of things for granted and get into trouble when something that seems to be common sense isn't. It's like when Bill Gulley reminds new investors how important it is to understand the basics of RE before jumping in; its also important that we understand the basics of business.
- Contractor · Anchorage, AK · Member since 2012 · 351 posts · 196 votes13y
Originally posted by Terry Portier:
Sounds like everyone has their own personal experiences with contractor’s, and those experiences can vary from state to state, county to county, city to city, town to town. What cracks me up is when someone claims to have expertise in a place they have never been a contracting company. How can they size it up, how can say what would work and would not? Just based on what they have experienced elsewhere? IF they NEVER been there and done it? LOL! Oh only on forums, I tell ya!Got to feel for the REIs that are doing rehabs from out of state.
More I look at REI business more I realize how far apart it is from a construction company. I see some construction companies that invest to, I'm thinking better as a separate company, again, probably depends on your local market. Perhaps a good use for a series LLC.
Well it's been an interesting discussion giving me a better feel for what has been going on elsewhere in the nation, thanks for that. :)
I must have missed something,Terry. I didnt see where anyone claimed to have "expertise in a place they have never been a contracing company". Feel free to use the "quote" feature.
- Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes13y
I'd say what we have here is not just the failure to communicate, but the unwillingness to communicate. Terry, you're not loking for sound advice, you're looking for endorsements for you ideas. The only way for you to come back to earth is to either listen to what people are saying or try your business plan and find out for yourself.
You have no idea how many hammer bangers have come to me to set up thier own construction company with ideas of making money off the eforts of others. Whatever spin you add to the concept, it's been tried before.
What is missed is that construction workers are free spirt types, some show up and some don't. You can't instill in most of them any sence of loyalty unless you pay them well and regularly, they go wher the money is and lack responsibility. If they get a better offer, they are gone. Those that are responsible understand the business and they don't really need a clearing house for what they do.
Paper contractors don't get the best workers or tradesman, they don't need you, so you end up with the sluff offs, you may get a couple good ones, but the rest will be those that can't cut it on the open market or working for the major contractors in that area.
I went to school with a guy who strated a paper contractor business, he did fine after twenty years of beating his brains out, I know, I financed him. Basically, he could have done better if he had conentrated his efforts in something else, but after 20 years, he's doing okay.
As to the ideas of products and sreving the big box stores, there is a gross lack of understanding of business, this is not a highschool level of market analysis. You have some MBAs here telling you some things and it's ignored, my advice included.
As I said, you can follow the advice or just stay on your one track thinking based on your real, hard core business experience, vetted by years of success in finance, legal issues, marketing, business development, public relations and market analysis.
Dreams can come true, but start by getting experts to assist you, especially when you are fixated on an idea and others are telling you that in reality, it lacks good business sence. :)
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Originally posted by J Scott:
Originally posted by Terry Portier:
More I look at REI business more I realize how far apart it is from a construction company.This is one example of why -- when discussions come up about whether formal business education is important or not -- I'm generally on the side of YES IT IS. Or at very least, a good bit of real world business experience.
I'll generalize here, but in my experience, most to investors who don't have much business education and/or experience, there is probably little difference between running a real estate investing company and running a construction company. Hey, they're both real estate companies that focus on construction, right?!?!?
But, the first thing someone with a little bit of real world business experience (or a business education) would say is that these two types of businesses couldn't be more different. A real estate investment company is a PRODUCTION enterprise. A construction company is a SERVICE enterprise. If you think that you can take a production enterprise and just start adding service components to it (or vice versa), you're in for a big surprise. You could spend a month just figuring out the accounting differences!
If you have experience running a real estate investing company, that experience is likely more applicable to creating a new company that focuses on designing clothes or building furniture than a new company that focuses on retail construction.
That's why when investors tell me that they're going to start "bringing labor in-house" by hiring employees and then offset the costs by hiring out that labor for retail construction, I often laugh to myself. I'm not saying it's not possible (I've seen people do it), but again, these businesses have very little in common, and don't compliment each other the way most investors assume. You're essentially running two full-time businesses that will more likely get in each other's way than help each other (unless you're really, really good).
I apologize if this post comes off as condescending -- I sincerely don't mean that. I just think that too many investors take the business side of things for granted and get into trouble when something that seems to be common sense isn't. It's like when Bill Gulley reminds new investors how important it is to understand the basics of RE before jumping in; its also important that we understand the basics of business.
Thank you, looks as if someone FINALLY has their head around what I have been talking about all along :)
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Thanks for all the inputs,
After careful reading them all I have determined that no one knows my local as well I as I do, and I respect all contractors that know theirs. The erection of my retail office 4 plex will happen soon, it is just a matter of whom I can presell the other three complexes to at this specific location, and no what I have in mind has never been done around here before that is the beauty behind it. :) I’ll keep you all posted on its and our companies continued success, which I am sure will happen soon.
The other take away I have is I will definitely be the guest speaker at my next local REI meeting, thank you especially J. Scott for all your input, subject, "why are contractors the problem not the solution"
I’m very much a fact guy, I have question, and I only want to hear from people that know the facts about their states requirement. I am looking at my first commercial bid, I am going to put a door in a wall, my state tells me that I as the end user must obtain labor invoices from subs that show sales tax. The sales tax is only applicable to existing commercial, not residential nor new commercial construction, why I don’t know. Here is the montrostiy of info my state imposes on retail contractors and end users like me: Look how massive it is, another example how different the construction co requirements are, http://www.ksrevenue.org/STGuideLinesCCR.html
I’d be interested in your states requirements to just compare, please provide a link to the requirements. Thank you!
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Also, to the real knowledgeable and "experience" contractors out there that want to prove themselves out here, I be interested to know how you would design and build a digital billboard on land. I like to know what materials you would use, how you would design it, how you would build it cost effectively, and how you do so in a manner that produced a positive cash flow to the land it was on. Thank you!
http://www.megasigninc.com/?gclid=CJeBqMyOg7cCFcfd4AodIjIA0A
I got a feeling this thread will now die? :)
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes13y
Originally posted by Terry Portier:
...thank you especially J. Scott for all your input, subject, “why are contractors the problem not the solution”I've never, ever said that contractors are part of the problem.
In fact, reading through this thread, YOU are the only one who has stated that.
Not sure why you think that's the case, but clearly nobody else does...
Originally posted by Terry Portier:
I’d be interested in your states requirements to just compare, please provide a link to the requirements. Thank you!....
I be interested to know how you would design and build a digital billboard on land. I like to know what materials you would use, how you would design it, how you would build it cost effectively, and how you do so in a manner that produced a positive cash flow to the land it was on.
....
I got a feeling this thread will now die? :)
I have a feeling it will too. You've changed the topic about 20 times in this thread, including three times in the past two posts.
I hope you're more focused when it comes to your business than you are when it comes to this thread... :)
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Business is doing great! I read alot here and locally contractors are a problem. I'm still waiting for answers to my questions :)
I said I was building a 4-plex long time ago, with a contractors outlet and billboard :) - Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Originally posted by Terry Portier:
I’ve never done the RE part before so any other advice on how to approach this would be appreciated. Once I have that I will start looking for hard money lenders or partners. I see there are some new blogs/podcast on that I need to look at. Perhaps I need to pre-sell these so I have the $.5 mil or so I am thinking I may need vs. taking the chance or renting them. If I have any takers, I’ll ask them to issue a construction loan cash outlay requiring material cost for their space up front, the full payment to pay my subs and myself when complete, like normal. I really don’t want the risk of partnering with anyone.Here is the other question I asked, 2nd page, the topic did not go off from me, noone answered. :)
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes13y
Originally posted by Terry Portier:
Originally posted by Terry Portier:
I’ve never done the RE part before so any other advice on how to approach this would be appreciated. Once I have that I will start looking for hard money lenders or partners. I see there are some new blogs/podcast on that I need to look at. Perhaps I need to pre-sell these so I have the $.5 mil or so I am thinking I may need vs. taking the chance or renting them. If I have any takers, I’ll ask them to issue a construction loan cash outlay requiring material cost for their space up front, the full payment to pay my subs and myself when complete, like normal. I really don’t want the risk of partnering with anyone.Here is the other question I asked, 2nd page, the topic did not go off from me, noone answered. :)
What is the question? It's not clear what you're asking and there are no question marks anywhere in that post...
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Originally posted by J Scott:
Originally posted by Terry Portier:
Originally posted by Terry Portier:
I’ve never done the RE part before so any other advice on how to approach this would be appreciated. Once I have that I will start looking for hard money lenders or partners. I see there are some new blogs/podcast on that I need to look at. Perhaps I need to pre-sell these so I have the $.5 mil or so I am thinking I may need vs. taking the chance or renting them. If I have any takers, I’ll ask them to issue a construction loan cash outlay requiring material cost for their space up front, the full payment to pay my subs and myself when complete, like normal. I really don’t want the risk of partnering with anyone.Here is the other question I asked, 2nd page, the topic did not go off from me, noone answered. :)
What is the question? It's not clear what you're asking and there are no question marks anywhere in that post...
That is because I am so green at commercially developing a strip mall I don't even know what to ask specifically so I asked for "any advice"
So there are several lots around this big box with different brokers signs on them. As I said way back I talked to them and have the plat maps. As I said my plan is to offer a contractor service in one of four units.
1. Looking for creative ways to buy the land, I talked to one guy said he was the owner. Should I ask him for a note? Or should I try another way to bring him on the profits from the build and sale? If so how would I structure that?
2. Any ideas on whom I could direct mail at a location like this to pre-sell? I'm think business that target construction work. I am thinking of putting a sign on the property if the owner will let me. Maybe "Will build to suit" or "Commercial Units Available" or both?
3. On four plexes, is it good cash flow if three units are paying for one or should I be seeking a higher return?
4. How do I determine what these units would sell for in a market with a lot of lots in the area? With so many lots available, is it better to flip the units or rent them? How do I determine that?
5. I also figure I can place a digital billboard on the highway lots, anyone ever done that before?
6. Flat or pitched roof?
BTW: There is a bar and grill with a outdoor volleyball court with a lot right next to it I can do this on, another smaller one 100 feet away, both face a major highway. Then there is a huge lot they said they would sub divide that is not by the highway on the other side of big box and not in as much of big boxes traffic. All lots surround the big box and they have one in their parking lot too, but want more than the rest.
Also, all this is located on a side street off the main road that is why all these lots are not the higher cost ones in this city. There is lot close to the main road main entrance to big box, but my billboard would not be seen as well from it. This lot however is located right across the street from a median sized medical building.
Hope that was clear, again I am not the best writer and have never done this before :)
- Contractor · Anchorage, AK · Member since 2012 · 351 posts · 196 votes13y
Originally posted by Dev Horn:
There should be some sort of BP award given to anyone that has endured this thread. =DDev, I would settle for a bottle of generic ibuprophen!
Just to be clear... And honest... I do recognize I was part of the problem, not the solution in this thread!!
- Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes13yOut of all your comments in this thread, this line has my vote for the most valid, most true, most concise statement of all. Your right, a construction biz is entirely different from a RE investing business.
Thank goodness I have been in Vegas drinking, reading his thread needs to come with a disclaimer: "caution, reading this entire thread may give you a stronger headache than a hangover!"
- Real Estate Investor · Member since 2012 · 189 posts · 32 votes13y
I'm kinda surprised J Scott went the whole mile like he did... wonder if there's an award badge for that...
- Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes13y
Originally posted by Kelvin K.:
I'm kinda surprised J Scott went the whole mile like he did... wonder if there's an award badge for that...Because I always learn stuff when I debate with Randy F.!
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
Yes, that is what happens when someone such as me that does know how to run a successful construction company, but does not REI, tries to mix them. Although it may be obvious I am confused as to the REI business side, it has been very clear to me that most that have contributed to this thread have no experience running a construction co, so in reality they have no clearer vision of the difference than I. Even some contractors since there is a huge difference between being one and owning a firm that manages a large volume of them and jobs. Not to mention varying states laws keep us from fully understand the differences I have demonstrated mine in this thread.
I push myself to think outside my comfort zone box ask questions, make comments, as I did here. They may not be the best questions or comments, the most clear, are confusing, but that will not keep me from asking because I a firm believer in there are no stupid questions. That is how I treat others that do not have the expertise I do in some areas. I can’t remember a time I told anyone trying to figure something out that needed my help that they give me a headache or I need an award for "enduring" them. If I give you that much of a headache there is a very simple solution, DON’T READ! I’m finding it difficult to understand post stating what a headache it is to read something you were never forced to read? I guess I’ll size that up to silly people that enjoy self-inflicted pain? Or perhaps, just like to poke when they don’t have the answers to questions? Seems easier, instead of answer questions, make dumb comments that add no value and perhaps give others a headache or in need of "endurance"? I’ve been on forums long enough to size these people up a mile away.
The good news is thanks again to J. Scott’s help and professional mannerism on a different thread; I am getting a clearer picture of what I am envisioning, although I got much more research to do. That’s all that really matters now isn’t it. If you are getting nothing from this thread stop reading it a long time ago as some have, or any thread for that matter. - Investor · Orlando, FL · Member since 2012 · 431 posts · 106 votes13y
Originally posted by Terry Portier:
Yes, that is what happens when someone such as me that does know how to run a successful construction company, but does not REI, tries to mix them. Although it may be obvious I am confused as to the REI business side, it has been very clear to me that most that have contributed to this thread have no experience running a construction co, so in reality they have no clearer vision of the difference than I. Even some contractors since there is a huge difference between being one and owning a firm that manages a large volume of them and jobs. Not to mention varying states laws keep us from fully understand the differences I have demonstrated mine in this thread.It is beneficial that you're learning the REI side of the business because in my opinion it is difficult to grow a truly successful construction company until you have a pretty decent foundation in the investment side of real estate. If you intend to venture into new construction and the commercial side of the business then it becomes critically important.
That being said if your only interest is doing residential rehabs then no real REI knowledge is necessary. I know several guys who make a nice living doing exactly this.
In my opinion I think any of these successful rehab guys could easily run a construction company and do a damn good job of it. There is no real barrier of entry to starting a construction company. The same cant be said for being an investor who works in volume. The difference is these guys don't want to be contractors because they understand that the money and time investment is much better by being the investor and not serving the end user.
Don't fool yourself by thinking that being a construction company owner is much different based on geographical area. Laws vary, construction methods vary, but the important aspects are the same. I could easily open a construction company in any state I wanted with virtually no learning curve.
I am both a licensed gc and investor so I'm giving my .02 from operating on both sides of the fence.
- Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes13y
Terry Portier I am a contractor, agent and we develop commercial property. From what I have read in your thread, I can tell you that I think it's great that you are trying to learn and are trying to find out as much as you can about every conceivable potential project, and are thinking outside the box. Believe me, I do that too.
The problem I see is that you have too many different ideas, and projects you are looking at. You need to narrow it down to one, THEN find out everything that you need to know about that one project.
A hard money lender is not going to loan money on a project you can't prove to them is marketable. A spec, commercial, retail, project, being built by an inexperienced developer, is probably THE hardest project on which to get funding. Unless you can PROVE there is a huge demand for such space and people are beating down your doors, it's going to be a tough nut to crack.
I'm not trying to discourage you, but to give you my advice from many years experience. What you lack in money, and experience has to be made up 100% by the strength of the project.
HML's that are experienced KNOW every question and detail. They know if a project is good or not. They get their fees for the risk they take, but they do limit their risk, every aspect of a deal can't be a huge risk (the developer, the project, etc.)
I hope you understand what I'm saying, because I do have the experience specific to what you are wanting to do. Good luck.
- Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes13y
"It is beneficial that you're learning the REI side of the business because in my opinion it is difficult to grow a truly successful construction company until you have a pretty decent foundation in the investment side of real estate. If you intend to venture into new construction and the commercial side of the business then it becomes critically important."
------------------------------------------------------
I'll agree, because as I said earlier many construction co's here are not using their retail office space to market well, and I bet it is digging into profits. I can see how having REI skills to buy land to build on can be critical. I'm looking at that right now.
--------------------------------------------------------
“In my opinion I think any of these successful rehab guys could easily run a construction company and do a damn good job of it. There is no real barrier of entry to starting a construction company. The same cant be said for being an investor who works in volume. The difference is these guys don't want to be contractors because they understand that the money and time investment is much better by being the investor and not serving the end user.
------------------------------------------------------
Don't fool yourself by thinking that being a construction company owner is much different based on geographical area. Laws vary, construction methods vary, but the important aspects are the same. I could easily open a construction company in any state I wanted with virtually no learning curve.”
-----------------------------------------------------
The learning curve varies depending on individuals in our experience, it is more complex when insurance and mortgage companies are involved, that is our #1 clients, not homeowners. Being a construction co before REI has it's advantages, but as J.Scott said they are different and I agree based on what I know so far about REI, and the more I learn the more I see the distinct differences. I'll agree too that none are Rocket Science, nothing that a little help can't figure out.
----------------------------------------------------
“I am both a licensed gc and investor so I'm giving my .02 from operating on both sides of the fence.”
Thanks!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.