Why are contractors part of the problem not solution?

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

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Dev HornPro Member

Flipper/Rehabber · Arlington, TX · Member since 2013 · 1k+ posts · 2k+ votes

13y

There should be some sort of BP award given to anyone that has endured this thread. =D

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Terry Portier
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Engineer · Wichita, KS · Member since 2012 · 396 posts · 36 votes
13y
Originally posted by Karen Margrave:
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.

This is some of the best advice yet, I think you and J. Scott deserve an award for your patience:)

Yes I have been feeling I am trying to move too fast, my son has told me that. These two are two totally different animals. We don't have a national Fortune 500 construction co and it is not easy building one. My motivation to put the REI part together fast is to put us in a retail office w/o increasing our low overhead competitive edge, so I figured I'd create a deal perhaps with the land owner, or figure another way into 1 of a 4 plex. You right I got a lot of research to do first. Thanks for the reality!
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Stephen S.
Wholesaler · Holiday, FL · Member since 2013 · 571 posts · 221 votes
12y
Why is your business thought OK to be generating 60-90% but your contractor's business is OK to be at 15% ? In fact; in your opinion your contractor is doing Great. <g>

stephen
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Originally posted by @Will Barnard:
. . . . 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.

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Will BarnardPro Member
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Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
12y
@Stephen S. Great question. One thing I do enjoy is the opportunity to answer great questions. To answer, the contractor is "investing" or more accurately, fronting a very small some of capital which would include perhaps, some labor and materials. No matter if the job is a profit maker or loser, the contractor is entitled to get paid the full contracted invoice amount. If the owner does not pay, he/she can file a mechanics lien to protect the monies owed. On the contrary, the investor pays a deposit to the contractor, pays draws as the job goes along, and pays all holding costs and acquisition costs for the property, thus has invested a large sum of money. That investment should yield a higher return that that of a contractor who holds a contractual obligation form owner to pay. The investor has no guarantee they will make money. In other words, the investor takes on all the risk and thus, deserves a higher return than the contractor. I hope that answered your question.
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