Newbie considering rehab project: how to approach contractors?

Question

*not sure if this is the right forum for this question*

Hello all,

I am looking for some guidance on how to talk to/approach a contractor in a manner that would avoid being taken advantage of.

I am not a flipper;  I am a newbie trying to buy his first "buy and hold" property.  But, one property I am considering would need a gut rehab, and before I count it out, I want a few contractors to tell me what it would cost for such a renovation.

I'm concerned that if I tell a contractor, "hey, I'm brand new at this and have no idea what costs should/would/could be," the contractor would see an opportunity to give me an astronomical price.  But on the other hand, if I try to act like a seasoned investor, my project may have the wrong outcome.

Do you have any advice for me?  How should I solicit contractor bids/estimates in a way that ensures the best price and outcome?  Is it ok to say "I need to know if this project can be done for $XX,000 per floor?"

Paul Timmins · Answer

@George B

Consider J Scott http://www.biggerpockets.com/flippingbook The Book on Flipping houses and The Book on Estimating Rehab Costs. Both excellent reads.

Go to the local REIA's get referrals for good contractors. The president of the club should have several for you.

Get three bids on the job walk with them through the property if possible great learning.

Good luck

Paul

Aaron McGinnis · Answer

a contractor knows when an investor is new. Don't pretend to be anything you're not.

Instead,  deal with reputable contractors who have nothing to gain by ripping you off.

Dawn Anastasi · Answer

If you get multiple quotes, you can verify that one isn't going to try to take advantage of you. For example if you get $10k, $12k, and $20k, likely the $20k one is way off base if they are all offering you the same services.

Wayne Brooks · Answer

You need to put together a detailed scope of work.  Maybe, you could pay someone a couple hundred bucks to help you, and walk you through it, that wouldn't be one of your bidders, or maybe they would.  Some of the estimating forms on this site would be a good start, so you have a sort of a list of items to look  for.

Will Barnard · Answer

In some cases, yes, but with enough preparation and confidence, even a new investor can get this done without the contractor knowing they are new.

I would not give out any info that is unnecessary such as "I am a new investor". Simply state you have a new project that you intend to buy and hold and you are seeking a new contractor to do the work. Saying it in such a manner gives the impression this is not your first go round but does not require you to lie. Perception is key and knowing what repairs you want performed, and confidence when speaking to the contractors, you will avoid a lot of these worries.

Next step is to get your itemized list of repairs needed. The inspection report J mentioned is a good start, but is not complete. For instance, if you intend to gut the kitchen cabinets and counter tops and replace with new, that will not be on the inspection report so long as it is in working and safe condition. Upgrades to the home you may want will also not be on this report, therefore, you must walk the home and decide what you want upgraded and repaired.

Get at least two quotes, 3 is best.

To save money, and if you have the time, you may consider hiring individual subs for each item, a painter, a carpet layer, a tile installer, a landscaper, etc. This will help reduce costs from taking the GC (General contractor) route.

J Scott · Answer

Yup, having a detailed scope of work is key.  Another option for this is to have a full inspection by good home inspector -- the report he gives you will be broken down into the various components that you'll need to consider when doing your repairs.

Newbie considering rehab project: how to approach contractors?

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