Construction companies have poor presence on BP
Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes
Construction companies have poor presence on BP
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesI think part of it and based on my personal experience in Indy.. is there are two opposing forces working.
the investor who wants to buy and rehab a property for as cheap as possible to make the numbers work.
and contractors who give honest quotes but don't get a lot of work with rehab investors because there is no money in it for them doing 15 to 30k rehabs..
that leaves very much bottom of the barrel hand to mouth contractors running around that will take on those small jobs.. they have no money to buy materials.. and we as consumer take on huge risk paying in advance.
103 Replies
- Developer · NY/NJ/PA · Member since 2018 · 758 posts · 935 votes7y
Originally posted by @Tony Gunter:
@Syed H.
I was specifically speaking about doing a BRRRR and walking away with no cash (anybody's) left in the deal. So since it is a Buy and Hold it has to hit some other parameters that a flip would not. The hold rather than sell aspect. To be fair I didn't specify that was part of my calculus.
Your describing my destination with HRD+OPM, etc. but I’m still en route. Finish a couple projects I gave and that’s where I hope to move to.
So... “not being able to do it today” is not a considered option for me.
understood.
I've done BRRR on MF's. It's also still possible.The key is to buy at the right price and target inefficiencies. Too many people are making insane assumptions and driving the prices up. But they always get burned eventually. I bid way more than I win, but at least the projects I win, I know are home runs.
- Investor · San Francisco, CA · Member since 2016 · 338 posts · 444 votes7y
Just to bring up the flip side, in a super tight market like today there are also plenty of contractors charging "market prices" (and get it) who don't deserve it because their quality is terrible. You have to know who you're working with on both sides, and that's never an easy thing, especially for people just starting out. There's plenty of lemons being bartered on both sides.
- Cleveland Oh · Member since 2019 · 18 posts · 3 votes7y
@Bill Kramer
What do you look for in client? Help us, investors to do better with contractors!
I haven’t worked with contractors yet, but planning in the nearest future
ThAnk in advance for your advice!
- Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes7y
I would say to start looking for a contractor 6 months before you ever need them. Buy them lunch and have a talk about projects you have done and stay in touch. Maybe swing by a jobsite to see what it looks like. Ease into it.
I have never met a contractor who has turned down free food.
Build that relationship ealry. You're going to have to wait in line anyways, so make it count. This is the absolute best way to do things.
The last thing a contractor wants is someone calling and wanting you to start yesterday. If I have a month or two to prepare for a job, I can line up the resources like hiring more labor or get my subs lined up.
After 2 or 3 jobs, things will go alot smoother.
- Contractor · Fairhaven, MA · Member since 2018 · 167 posts · 159 votes7y
I have never met a contractor who has turned down free food.
I was once a carpenter working under a superintendent named Dick. Whenever a salesperson would stop by Dick would say "I only meet with salespeople at lunchtime. If you're selling.....You're buying"....... It always got a chuckle....and a free lunch.
- Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes7y
I think @Jim K. hit the nail on the head...you're not going to be able to find someone to come fix your toilet for you in 10 years, let alone flip a house for you. There's a supply crisis. That's why I'll be steering all my existing and future children, nieces, and nephews away from college and into trades.
- Property Manager · Chicago, IL · Member since 2016 · 69 posts · 43 votes7y
Building and maintaining a good contractor base is one of the toughest parts of the building and running a portfolio or PM business, The good ones tend to be booked for months to come you almost need enough work to keep the good ones all to yourself to truly be in good hands at all times.
- Contractor · Evansville, IN · Member since 2019 · 142 posts · 208 votes7y
Originally posted by @Nicole Heasley Beitenman:
I think @Jim K. hit the nail on the head...you're not going to be able to find someone to come fix your toilet for you in 10 years, let alone flip a house for you. There's a supply crisis. That's why I'll be steering all my existing and future children, nieces, and nephews away from college and into trades.
Mike Rowe has been a huge champion of doing just that. Check him out
- Real Estate Consultant · Whitestown, IN · Member since 2014 · 547 posts · 933 votes7y
So, early in my investing career, I took a job as the business manager for a GC. I was in charge of new business and estimates. I learned very quickly that people (especially investors) will constantly beat you up over your pricing. The slimeball GC that I worked with had a solution... give a low ball estimate and add change orders as you go to get the price where it should have been in the first place. I didn't like it, but the investors are asking for contractors to get over on them when they will not pay for their time and expertise.
Secondly, I've seen contractors who are so disgruntled over the pay and way that they are being treated, the work becomes sloppy and slow. I've seen contractors who others couldn't have success with do great work when they were treated well and paid adequately. Be careful how hard you tighten the screws on your contractors as it will frequently cost you more in the long run. I can't tell you how many times I've seen investors lose thousands over contractor issues. Time, quality, drama, fraud, theft, etc.
Lastly, I have a client who was doing a flip and after the work was done, the home was broken into, appliances stolen, and vandalized. I visited the property afterward and it seemed too perfect and efficient to be a random act. I did find out that his GC had issues with some of the subs and, although nobody can prove anything, they feel that the subcontractor may have been the culprit. Contractors are not usually the most sophisticated group, pursuing civil cases, etc... they are more likely to sabotage your home as they have the exact toolset for that.
@Jay Hinrichs mentioned a couple of pages ago that the most active investors usually manage their own projects and sub-contract a lot of things. While I've seen this, I have 2 clients who actually have partnered with GC's to be proprietary and have an equity stake in the deal or portfolio. Usually 10%-15%. They work on slimmer margins, take care of service requests on rentals, handle emergencies, etc. on long-term holds. They get the long-term upside from the partnership and know that it's a long-term relationship that benefits them.
I'm not sure at what point it should be a consideration for this kind of thing, but it makes sense to develop long-term relationships with your contractors... especially if you are out of state.
Example: Buy a home that needs $55k in rehab. The value after the BRRRR is complete is around $120k. If the GC does the work at a 10% discount (about $5,500 less) but gets a $12k stake in the property, gets 10% of the annual cash flow, as well as gets paid for ongoing work to sustain the rental property. This reduces your initial out of pocket expense and creates a long-term relationship that will be a big part of your future investments and success.
- Flipper/Rehabber · Kansas City, MO · Member since 2011 · 2k+ posts · 712 votes7y
Sadley if a contractor good or not can set up a pretty website and market, they can have a ton of business.
But a good contractor is not out advertising, he works for me and I have his number. Someone asks me who I use for rehab and I share that number. He is busy, he does not advertise.
My former contractor moved away and I now live where he does again. He is 6 to 8 months out on a job. He does not advertise at all. Totally word of mouth.
So for contractors - the good ones don't advertise.
The new ones or not so good ones are busy building websites, posting on facebook, recording videos.
Just my observations.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Ross Denman:
So, early in my investing career, I took a job as the business manager for a GC. I was in charge of new business and estimates. I learned very quickly that people (especially investors) will constantly beat you up over your pricing. The slimeball GC that I worked with had a solution... give a low ball estimate and add change orders as you go to get the price where it should have been in the first place. I didn't like it, but the investors are asking for contractors to get over on them when they will not pay for their time and expertise.
Secondly, I've seen contractors who are so disgruntled over the pay and way that they are being treated, the work becomes sloppy and slow. I've seen contractors who others couldn't have success with do great work when they were treated well and paid adequately. Be careful how hard you tighten the screws on your contractors as it will frequently cost you more in the long run. I can't tell you how many times I've seen investors lose thousands over contractor issues. Time, quality, drama, fraud, theft, etc.
Lastly, I have a client who was doing a flip and after the work was done, the home was broken into, appliances stolen, and vandalized. I visited the property afterward and it seemed too perfect and efficient to be a random act. I did find out that his GC had issues with some of the subs and, although nobody can prove anything, they feel that the subcontractor may have been the culprit. Contractors are not usually the most sophisticated group, pursuing civil cases, etc... they are more likely to sabotage your home as they have the exact toolset for that.
@Jay Hinrichs mentioned a couple of pages ago that the most active investors usually manage their own projects and sub-contract a lot of things. While I've seen this, I have 2 clients who actually have partnered with GC's to be proprietary and have an equity stake in the deal or portfolio. Usually 10%-15%. They work on slimmer margins, take care of service requests on rentals, handle emergencies, etc. on long-term holds. They get the long-term upside from the partnership and know that it's a long-term relationship that benefits them.
I'm not sure at what point it should be a consideration for this kind of thing, but it makes sense to develop long-term relationships with your contractors... especially if you are out of state.
Example: Buy a home that needs $55k in rehab. The value after the BRRRR is complete is around $120k. If the GC does the work at a 10% discount (about $5,500 less) but gets a $12k stake in the property, gets 10% of the annual cash flow, as well as gets paid for ongoing work to sustain the rental property. This reduces your initial out of pocket expense and creates a long-term relationship that will be a big part of your future investments and success.
those kind of partnerships need to be crafted very carefully.. the biggest Bru ha ha s I have gotten into over the decades were with minor partners.. were we are singed on the debt and the minor partner thinks they are the reason for success.. they can be tough to unwind and or worse lead to nasty litigation.. so caution with this route would be my advice you need very robust JV docs up front.
- Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes7y
Just look at the situation and extrapolate. The order of things is not going to continue forever because it can't get much worse before our society stops functioning. I do give it ten years max before we reach the first of many tipping points and we start seeing sudden, not incremental change, in response to untenable circumstances. There are simply too many people who believe they were born to watch and pay other people to do the work, too few people to keep the wheels bolted on the bus. Personally, I believe tech is going to change the whole game. We're going to have driverless trucks transporting materials, autonomous quadcopter drone fleets and other robots assembling, maintaining, recycling standardized multifamily. 3/4 of existing housing in this country is going to go to the bulldozers in 100 years because the skills to maintain it will simply be gone.
- Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes7y
@Nicole Heasley
I totally agree with you. Trades are where good money is. Almost every plumber and electrician I know are always swamped and make damn good money (and most have a slew of rental properties). I had $0 student loans, my wife is 38 and still owes $20k, and we make about the same money. If I could go back, I would have definitely gone more into electrical or plumbing rather than remodeling.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Matt M.:
@Nicole Heasley
I totally agree with you. Trades are where good money is. Almost every plumber and electrician I know are always swamped and make damn good money (and most have a slew of rental properties). I had $0 student loans, my wife is 38 and still owes $20k, and we make about the same money. If I could go back, I would have definitely gone more into electrical or plumbing rather than remodeling.
in our west coast markets a good plumber and electrician will knock down 100k to 200k working for a bigger company.
our dry wall contractor I may have mentioned before has over 600 employees and a JET LOL.. however keep in mind he is blessed with 90% Hispanic labor .. those guys flat get it done..
- Investor · Canton, GA · Member since 2014 · 728 posts · 500 votes7y
@Jay Hinrichs
Haha.
I’m at the point I basically work only with Hispanics, for the reason you mentioned. Get r done.
I’m fluent in Spanish too, so obviously that is a big advantage for me.
- 7yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Tony Gunter:
@Jay Hinrichs
Haha.
I’m at the point I basically work only with Hispanics, for the reason you mentioned. Get r done.
I’m fluent in Spanish too, so obviously that is a big advantage for me.
any young contractor who wants to scale learning Spanish should be a top priority
one of the turn key guys I have done business with for years did his mission somewhere in latin Amreica and become fluent and he just rocks it on the rehab side.
- Specialist · Bloomington, IL · Member since 2019 · 3 posts · 2 votes7y
@Joshua Howaniec you may be better off on LinkedIn looking for that.
- Developer · Houston TX · Member since 2018 · 423 posts · 400 votes7y
@Joshua Howaniec
What I have learned... someone in a trade is not always the best business person. They are well equipped and knowledgeable in their craft but horrible business owner. Those who are good at what they do, have integrity and fair prices doesn’t need a website or flashy logo on side of the truck. They get their business by word of mouth. Their work speaks for itself.
Those with the shinny business cards, truck wrap are trying to drum up business but might not be good in the trade they are in or they use subs rather than their own crew. This is generalizing based on my experience the last 15 yrs.
I find my trades from other trades. Usually a plumber knows a good Sheetrock guy. Or a framer can suggest a painter. Referrals from good contractors go along way with me than a flashy website.
- Investor · Youngstown, OH · Member since 2017 · 2k+ posts · 2k+ votes7y
@Luciano A. I find the same thing. They're great at what they do, but book keeping, invoicing, maintaining a schedule, communication, and other vital business skills are lacking. I've got a corporate background; I wonder if there's an opportunity out there for me to help tradesmen learn basic business skills...that would be a REALLY cool side gig that I'd genuinely enjoy and would actually make an impact on communities...I'm going to mull this around now.
But I digress. What I came to say is that many would benefit from taking some very basic business courses or getting an associate's in business at a local community college. The cost would be reasonable and the skills would be valuable.
- Contractor · Denver, CO · Member since 2009 · 399 posts · 166 votes7y
@Joshua Howaniec Hey Josh. Design Build GC here. Regarding your original post if you're looking to meet other contractors as means of networking and/or drumming up more work. One good place to start would be your local AGC for commercial construction and the local NAHB or equivalent for residential construction. Both groups put on events that GCs typically attend regularly and it's a great place to meet those guys and exchange business cards.
As far as presence on BP... as a real estate investor... I'm on here way to sporadically... as a contractor... I could give a rip. :) Actually have met two of my best clients on biggerpockets, one of whom, I am still doing business with today. I laugh every time I read a "How do you find a good contractor," post and feel like I should post a, "How do you find a good investor," post...LOL... :D
- Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes7y
@Emilio Ramirez dude thanks for mentioning the groups. I got them opened up in a window now. That's the kind of good help I was looking for.
To your second comment, I find my presence on BP as a contractor has a naturally beneficial effect on my investor goals. It's a good place to be as I have gotten both construction leads from this wonderful site and have met future partners.
Really, grateful for BP. May Josh Dorkin Rest in Peace
- Rental Property Investor · IN · Member since 2019 · 18 posts · 8 votes7y
As a rookie investor who is not having an easy time connecting with contractors, this thread has been very intriguing and insightful.
I love gleaning all the sage advice on BP and from seasoned investors, but either some of the advice may not be sound (like @Jay Hinrichs suggests with BRRR, etc.) or investors aren't implementing good practices.
Or maybe there's a whole in the real estate investing education similar to the business practices acumen missing among many tradesmen, per @Luciano A.'s and @Nicole Heasley Beitenman's observations.
@Emilio Ramirez said, "...feel like I should post..."How do you find a good investor,""
I think it would be a great thing to hear what makes a "good investor" from the other side of the table: like from GCs', agents', and other professionals' points of view.
This discussion has already mentioned a few good tips like:
- Everyone's time is valuable -- don't waste it.
- Don't expect top shelf for bottom dollar.
- Do expect to get what you pay for.
- Look to create situations that are win-win for everyone instead of merely how everyone else can most benefit you.
I'm sure I missed some others that were mentioned.
Not trying to hijack the thread, but there's a running sub-theme here about bad investors potentially being part of the bigger picture. (Or maybe I'm reading too much into it or displaying my ignorance or both!)
My wife and I are new to this game, but we want to do it right.
What does a desirable situation look like when it comes to contractors working with entry level investors? What can we, as investors, do to be considered good investors to work with?
- Rental Property Investor · IN · Member since 2019 · 18 posts · 8 votes7y
@Joshua Howaniec We are about 45 minutes northeast of Carmel. We're new to the game -- and so are likely small fries for who you're looking to do business with -- but if you'd like to connect, I'm always looking to expand our local (and semi-local) network.
- Contractor · Indianapolis, IN · Member since 2016 · 267 posts · 144 votes7y
@Jeremey J. I’ll pm you. Us indianapolis people need to become better organized. I don’t wanna just provide floors for people on BP, I want to partner with yall.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.