This may be a stupid question but I wanted to get some feedback from the community. We are rehabbing our third rental property and I have a handyman doing most of the work. One of the things I needed him to do was to fix a ceiling in one of the bedrooms. As he was trying to reattach these ceiling tiles he nicked one of the radiant heat lines in the house. This leak now needs to be fixed for the heat to work again and the repair is going to cost between $400 - $600 dollars because they use stainless steel pipe in the system. Should I make the handyman pay for this repair? His total work on this job is probably going to run me about $1000 so this will pretty much wipe out at least half his take from this job if I make him pay for it.
I have used this guy before and he does good work and is reasonable on his prices. He is also dependable.
Any thoughts?
Thanks,
Scott
@Scott C. don't cut off your nose to spite your face. Things could go from bad to worse. I would ask him what his thoughts are about the damage, get his side of the story and see what he thinks about who should pay for repairs. If he offers to pay for the full repair, offer to split it. If he doesn't want to pay any decide if his excuse is valid. A truly good handyman can save you thousands. Sometimes things are truly unforseeable, go to cut a hole in drywall and hit a wire or pipe, especially a pex pipe, may be just plain bad luck.
Scott,
It was an unfortunate accident. Ask him to share 1/2 of the repair cost. Any reasonable person would agree to that.
Just my 2 cents.
@Scott C. don't cut off your nose to spite your face. Things could go from bad to worse. I would ask him what his thoughts are about the damage, get his side of the story and see what he thinks about who should pay for repairs. If he offers to pay for the full repair, offer to split it. If he doesn't want to pay any decide if his excuse is valid. A truly good handyman can save you thousands. Sometimes things are truly unforseeable, go to cut a hole in drywall and hit a wire or pipe, especially a pex pipe, may be just plain bad luck.
As others have said it's kind of a cost/reward analysis. Could you ask/make him pay for the repair absolutely, is that the best course of action...maybe not.
Usually you are using a handyman because he charges less for the type of repairs he is doing than if your hired skilled tradesman for that specific job. But if you hired a skilled tradesman you would probably have him pay for any sort of repair for damage he had done like this. So you have to evaluate if he saved you more than the $600 it will cost to fix it, or if he will save you more than that on future projects and the issue of finding another handyman should this ruin your working relationship with him.
Not knowing the full scope of work you've had him do and his underlying value to you it's hard to say. I'd be inclined to eat the cost or at least part of it after discussing the issue with him.
I'd look at the guy. Most of these guys I've met don't have 2 nickels to rub together. If he doesn't and you're happy with the overall work he does. Work something out with him, maybe do a job or 2 for less for you. Or do something at your personal house.
I once had a good handyman who was doing some work in a house for me. He was doing some plumbing and carpentry type stuff. And without me asking him to do it, he took it on himself to also install the vinyl tile in the bathroom. He didn't do it right and it looked terrible (and I already had a flooring guy lined up to do that job). I did make this guy reimburse me for all of my extra expenses to get that bath looking right. And he agreed and was OK with it. And he still does work for me and we are on good terms. But, in your situation it looks like an accident. If it was 100% accidental, you may want to pay for this yourself. If maybe the guy should have been a little more careful, maybe you pay for the materials to fix it and see if he will do the labor for free. But a good handyman at a good price is worth keeping.
I assume you are probably paying this guy hourly, as opposed to contract lump sums for jobs. This is just a costs of doing the work. The decision is whether to keep using him, not make him pay for the work I believe.
It's impossible to know the handyman's overall financial situation without asking. Losing $400-$600 could cause him financial distress of some degree. Could you work out an arrangement where he provides services free of charge to pay back part or all of the fix? This way there's no cash out of his pocket that he was counting on receiving.
It's important to keep in mind that he has/will probably perform a service or go above the scope of work without charging for it, such as when an unforeseen issue arises during a repair or when he shows up and takes care of something promptly on very short notice. Handymen have other personal and business obligations and it's hard to know when they are sacrificing to keep you happy.
It may be time to step back and look at the big picture. There are larger issues than a $600 repair. What if this leak had ruined a new floor? If you use an uninsured handyman for the bulk of your work, you may be accepting risk that is not worth the reward. Had it been a $6000 repair, this thread would be entirely different. Chances of him covering the repair cost would be slim to none and you likely wouldn't even consider continuing to use him.
If he had insurance, you would expect him to cover his mistake. And he would have incentive to take care of it out of pocket as he wouldn't want to turn in such a small claim. And if he was good enough, and worked hard enough, and could afford insurance, he could likely afford to cover the repair he SHOULD be held responsible to cover.
Another side of the coin is that there are so many handymen and "contractors" flying under the radar who are basically working illegally. When we hire them, we are in essence taking work away from those who are doing it right, and actually care about their own financial well being and that of their customers.
I recommend paying for the repair costs yourself and chalk it up to a lesson learned. Use him until you find someone who is licensed and insured. You don't have to give away the farm to do things right. Believe it or not, their are guys out there who believe that "doing it right" means covering themselves and their customers AND charging a fair price for their services. It just takes diligence to find one.
As a licensed contractor who does things correctly and plays by the rules I completely agree Randy. Unfortunately and many of those on here don't believe that. I was involved in a thread on here regarding hvac installation that thought that equipment cost +$500 for a complete hvac system install was fair and that hvac contractors rip people off. Don't get me wrong, there are a lot of them out there, but I charge a fair price for what I do. Cost + $500 I would go broke. I have workmen's comp, $1 million worth of general liability, the state only requires $200K. I get continuing education classes constantly, I actually pay taxes and I don't necessarily do the installs, I have people to do that, because if I spent all day changing equipment, I wouldn't have time to do other calls or build my business, which requires marketing, another expense.
When selling or renting a house, does the real estate investor only charge what they need to scrape by. Hell no, they sell the house for as much as they can possibly get or rent it out for the maximum that the market will allow. Same as a contractor, we charge as much as the market will bare. Then Butt crack Bob HVAC company comes along and charges cost + $500 watering the market down. But he doesn't have insurance or pay taxes, but nobody cares cause it's cheaper and then somebody comes on here befuddled because the contractor can't pay for their mistake, you beat them down so much they can't afford insurance, but still have to eat. There is a lesson to be learned on this post. (And I'm not picking on the OP, I don't know the whole story, I'm generalizing on other posts I've read here) Sorry for the rant.
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There is a lesson to be learned on this post. (And I'm not picking on the OP, I don't know the whole story, I'm generalizing on other posts I've read here) Sorry for the rant.
When you say HVAC install, do you mean replacing a furnace and compressor? If so, that's about a 4-8 hour job, so $500 for labor is more than a fair wage ($60-100/hour), even having to cover subs and insurance. Now, if you're talking literally a new install (2-3 day job), I agree that's not a fair wage for licensed HVAC contractor.
That said, I'm a huge proponent of always using insured contractors and licensed contractors when licensing is required by the jurisdiction. Like Randy said, if this was a $6000 incident that would have been a big issue.
There is a lesson to be learned on this post. (And I'm not picking on the OP, I don't know the whole story, I'm generalizing on other posts I've read here) Sorry for the rant.
When you say HVAC install, do you mean replacing a furnace and compressor? If so, that's about a 4-8 hour job, so $500 for labor is more than a fair wage ($60-100/hour), even having to cover subs and insurance. Now, if you're talking literally a new install (2-3 day job), I agree that's not a fair wage for licensed HVAC contractor.
That said, I'm a huge proponent of always using insured contractors and licensed contractors when licensing is required by the jurisdiction. Like Randy said, if this was a $6000 incident that would have been a big issue.
Not sure what you mean by a furnace and a compressor. I'll assume changing out an air handler and outside unit. That will run me about $500 for subs. The guys I use won't go out for less than $300, that is 2 men. That will get me about 2 hrs of work. I can find somebody for less, but you might be missing something when you come home after they steal it, they might tear up your house due to carelessness or they will just do a crappy job overall. Now lets figure in taxes, gas, insurance, miscellaneous materials, overhead figuring in for any warranty issues, I have confidence in my work and my guys, but I can't say much for the manufacturers. And they are all the same. That is usually going to run me minimum $200 a job. You may not like that number, but I know my costs. So for a simple job, my costs are $500. That's what you say is fair? I haven't even put any money in my pocket yet, much less paid taxes for my personal income, paid medical insurance for my family, put back anything for retirement, because I don't have a 401K or medical through my work. Let's change this around a bit.I will use my area as an example. Let's say you are doing a flip. A simple cosmetic repair, 2 weeks in and out. Comps in area are $140K. You buy house for $80K. You estimate $15K in repairs. How much is your time worth? I'll split your figure of $60-$100/hr. $80/hr. 2 weeks in, you won't be spending 80 hrs on it, because I'll assume you have other things going on in your career/job. I'll give you 40 hrs of time. Which equates to $3200. So you have your costs of $95K + $3200 for a selling price of $98200. Let's figure in 10% closing costs, we will round it up to $110K flat. But comps are $140K. I challenge you to leave $30K on the table. That's more than a fair wage for you. You aren't doing anything except talking on the phone and driving to job site to check on people. Nothing too hard about that. Pretty much the same thing a $20/hr superintendent can do. You're a smart guy. There's a correlation here. I'll be honest with you. My price is 40% markup after all direct job costs are figured in for major repairs or equipment changes. For service, its on a sliding scale depending on what the part is.
I agree that on a $6000 job, it's a little bit different than $600. But you never know when it will be a $6000 repair or a $200K burned down house or a $1 million lawsuit cause somebody gets injured. So when you choose to be the guy that hires the cheapest, you are running a risk. I'm not the highest price guy out there, nor am I Bubba Butt Crack low baller either. I'm right in the middle of pricing in my area. I'm not out to screw anybody, but I'm not out to lose money on a job so somebody else can make money. If I'm going to lose money, I'll just sit at home and watch tv and not lose anything. I know my costs and what it takes to make money. I always tell people to hire the guy in the middle, because he's most likely legitimate, isn't too big to take care of you and will be there when you need him.
I'm not a contractor by trade, so I don't deal with these issues on a daily basis. But, I've run the numbers before, and it's never seemed that the overhead costs of doing business would be that high ($200/job).
Since you know your costs, can you elaborate in a bit more detail here?
My take on what you wrote above:
- Taxes: Are you talking about income tax? If so, why should my job be marked up to account for your income tax obligations? If it's actual taxes imposed by your jurisdiction on sales/service, that should be added to the invoice on top of the bid. Either way, it's not clear to me what taxes would be reasonable to include in the bid.
- Gas: Let's say you drive a maximum of an hour to a job and an hour home. At 50 miles/hour average, that's 100 miles. If your car/truck gets 10 miles/gallon, that's 10 gallons of gas, or about $40 in gas (on the high side). The government will allow you to deduct $.55/mile, which is a $55 deduction on this job. If you're in the 30% tax bracket, that's a $16 savings, putting your gas expenditure at about $25.
- Insurance: I'm a licensed contractor in Maryland, and I carry $1M in general liability. I pay about $600/year for this, or about $2/day. If this is a one day job, that's about $2 in general liability payments. As for workers comp, I believe HVAC is charged about 8%, so -- if your subs don't have workers comp -- that would be about $24 in workers comp coverage. If you hire subs who have their own workers comp, it would be just your exempt payment, which is about $3/day.
- Misc Materials: Why wouldn't you be charging all materials back to the investor?
- Warranty Issues: I assume you're not talking about material warranties, right? This should be covered by the manufacturer. I'm guessing you're talking about labor warranties. How often do you need to return for warranty work?
- Business Overhead: This is where I imagine the bulk of the costs would go. Which is why I recommend that investors use smaller contractors who don't have office space, big advertising budgets, fancy trucks, etc. Sure, there are business, continue ed and tool/equipment costs, but if you're doing a good amount of work, you're amortizing that over lots of jobs, and it really shouldn't be terribly much per job. Plus, if you're subbing out the work (as you indicated above), you shouldn't have any tool/equipment costs associated with the job.
It's just not clear to me where you're getting $200 per job for jobs that just take a few hours. If you're only doing a few hours/week of work, perhaps I understand (since you can't amortize the costs over as many jobs/hours), but otherwise, I'm either missing something (quite possible!) or that number is overstated.
Can you break down you actual costs for us so we can better understand where your numbers are coming from?
I won't breakdown my costs nickel by nickel. But as far as
Taxes the way it works is you do pay for my taxes, somebody has to. That's pretty much the way things work in capitalism, like going to store and buying a loaf of bread, you will pay for the taxes for the owner of the grocery store, albeit a small amount, it's part of the price. If I want to make $50K a year, I need to charge $62.5K a year (approximate). You are also paying for my medical insurance, my retirement and gas in my wife's car. Albeit a small amount.
Gas, who pays for my gas to look at the jobs I don't get? My customers do. I don't get every job I look at. But the cost has to be re-couped somewhere, otherwise I'd run out of money to buy gas to look at jobs that I do get. And I'd go broke.
Insurance, I need to move to your state. Mine runs 4x that and only goes up every year. My workmen's comp is hovering at 10%. About $5000K a year and once again, only goes up.
Miscellaneous materials do get charged back to the customer as best as you can. But you can't figure out down to the piece for a lot of things. Such as tape, mastic, copper fittings, solder, Freon, etc.... You do as best as you can, but it's never down to a science. Just like when flipping a house, something will get missed. You just figure out a number and build it in for an average.
Warranty issues do not include parts costs. There's about a 15% callback for things out of my control, such as manufacturers issues or user error, power surges, etc... they don't re-imburse me for labor outside about 2 days after install. Or any other things needed to fix the problems such as tape, mastic, fittings. I'm supposed to build it into my price. I have about a 5% callback for things directly related to my business.
Overhead, I am a smaller contractor, so my overhead isn't crazy, but it exists. I also have to have money for the slow times. I forecast as best I can, but as you know, not everything works out the way you plan and sometimes better.
Some of that $200 is intangible such as warranty, parts un-reimbursed for warranty, insurance of both types. Take a trip to supply house and you'll easily spend $100 for wire nuts, wire, copper fittings, acetylene, oxygen, a $300 jug of Freon.
Brian - It's certainly not my place to tell you (out even question) how much you want/need to charge. In fact, I apologize (sincerely) for even implying I had a right to do that.
All I'll say is that if you need to charge $500 for a four hour job ($125/hour) just to break even on the job, you're probably not a contractor that a typical investor would ever use. Maybe that's where we're having disconnect.
No reason to apologize at all. I'm good. I like a good spirited discussion as long as nobody gets their panties in a wad. I didn't and it doesn't sound as if you did either.
Honestly, if you're just shopping price. I'm not your guy. I'm not the guy that does the work myself, drives a beat up truck, smokes and drinks too much with multiple dui's, bitches about everything and works for wages. I've got installers for that. I'm too old for that, it's a young man's game being a grunt. Don't get me wrong, I'll get dirty if necessary. I'm trying to build a sustainable business, not own a job. I can get a job for that. But I'm not a big guy either, far from it. I'm a professional. Not a worker. If you're looking for value and reliability and a guy that will show up and answer my phone when you call and respond when there's an issue and you don't mind paying a little bit more. Then I am your guy. It's my model. I'm not trying to be low bidder and desperate for any work I can get. I do good work and get work pretty consistently. I do things right and you get quality from me. Those things cost a little more.
Brian - If I were ever to start a contracting company (and I've considered it), that's exactly how mine would be as well...so I certainly respect that!
The extra cost of using a licensed and insured professional tradesman is anything from 25% up to wherever you want to go. So if you nickel and dime this aspect of your rehabs, you should expect to cover the insurance cost out of your own pocket. It's an old argument in this business.
Bottom line @Scott C is if you hired an uninsured handyman, pay up and you can be as unhappy as you want to be about it. It's your mistake!
I could fix that for under $5.00. A hose clamp and a piece of old radiator hose.
Don't make a bid deal out of it. It will last well over ten years. Don't even worry about it.
It sounds as if the "nick" was accidental. If you've used this handyman before then you must think he has some value to you. I would give him the option to repair the problem. Many of my subs can't take a monetary hit but have no problem giving up some human capital in these situations. If your handyman is willing to do the repair then maybe offer to pay for the materials. Business is all about creating a win-win for the parties involved. Good luck!
@Scott C. if it were me honestly, i would probably just eat that cost as he won't have the money and more importantly it will win you some goodwill with him. This business is about money, yes, but to go long term on it successfully its about building long term relationships. That $600 will hopefully be pocket change spread over multiple jobs using him. if you make him pay it, and he may be the one that technically should pay it, but it may hurt your relationship and ruin a good thing you have with him.
@Brian Mathews i do have to comment on one of your points as i have heard this line of thinking in the past and it tends to get my dander up. I think you will understand it as well since you brought up the term capitalism in a subsequent post. The comment about the investor making all that money ($30k) while you need to make up all of your costs and the investor 'just drives around and talks on the phone which isn't that hard' (i didn't go back and copy it exactly) misses the part where the investor is also risking quite a bit of his own capital (or his other investor's capital, thus their money and his reputation) on a deal that hopefully makes him a good buck. If you broke down the investor's hourly wage i would bet it wouldn't sound as good as him making that chunky $30k sounds. On top of that, that same investor is also supporting the rest of the local economy with his money going towards other contractors, home reno company materials, making investors/the bank money, utility companies, kids schooling (via taxes) and on and on. Then multiply that by the many other deals he is doing and that is quite a bit of good for the community.
With respect to your pricing no one should ever tell you how to price your services, the market will dictate that. I understand your point about Joe handyman undercutting you, but if the investor goes that route they are undertaking the risk as well that the work wasnt done right as opposed to using a licensed guy like yourself - i am in full agreement there. Based on the way it sounds your pricing works though, and i think this is the point @J Scott was driving at, you may not be as competitive for an investor to use as another contractor. There are other licensed/bonded contractors that may be able to provide a better price. Yes that takes money out of your pocket if you have to lower your rates to compete, but that really is capitalism as it gets better prices for everyone. Eventually you would be able to systematize your company such that you could squeeze out larger profits. Or it just may be that your workmanship is a bit superior and may be better for owner occupants as opposed to investors. I think one of the better lines i have heard in this business is you can have 2 of 3 qualities in a contractor, but not all 3: time (speed of work), quality or price. It sounds like the you would fit the bill on the first 2, possibly not the last - at least for an investor. Nothing wrong with it at all, just a choice the investor would have to make.
My model isn't trying to be the low cost guy to make people happy. My model is to be the quality and value guy. I'm going to do high quality work for a fair price. Like a landlord that takes care of his property vs. a slumlord. When I'm done doing a job, it's going to be done right and you aren't going to have to be calling me for nonsensical things that should have been done, but when something does happen, I will come back. I'm not going to dodge your calls. But if I say something needs to be done and you choose not to do it because of price, I'm not adverse to not doing a job. I'm my license on the line and my livelihood. The great state of Texas doesn't give a crap if I do something not right because you didn't want to pay for it, they will fine me or ding my license. I'm all for other people making money on jobs, but not on my back or at my expense for me to do a good deed cause you're a nice guy and I want to work for you. One thing I get a lot of is if you do it cheaper, I have a lot of jobs coming up I'll use you for. My response is after you use me on a few jobs, we can revisit savings. But I never give it upfront, because that person isn't going to use me again. Its not my first rodeo. There are a lot of bottom feeders out there trying to just focus on price. When you focus on price, you are going to generally get a crappy job from any trade and I think 90% of people who have any experience more than dreaming about being in real estate can attest too. I always tell people to throw out the really low bid and the really high bid and choose in the middle and you will usually come out ok.
Just because you have a license does not mean you can do the job better. The license is only for protection.
Joe Gore
You're right. My integrity and character says I will do the job better. And keeping my license in good standing with the state is incentive to do the job better. Because I don't want the state breathing up my butt. It's my livelihood and I choose to continue doing this as my livelihood and to do that, I need my hvac license. But doing a job correctly comes with a price. Like buying a Kia vs. a Cadillac. They both come with engines, tires, steering wheels, etc... Pretty much the same people build them. It's the same manufacturers build parts for them. I worked in the auto industry, we made parts for low and high end brands on same machines with same people with same materials. So why does a Cadillac cost more? Better engineering, more time taken in assembly, a few more features. It's just a nicer car. I'm not saying I'm the pricing equivalent of a Cadillac. But I try to provide that level of quality and service. If nothing else, doing a job correctly comes with more materials which alone will drive the price.