Tips for Interviewing Contractors....

[James Zettelmeyer]

Hey Everyone!

    Im working on revamping my process, system and crews so that we can begin to actually scale instead of doing one flip at a time with the same crew.  I want to partner more with some GC's so that I can free up more time to find deals.  That said Ive never actually done a full interview with a GC before so I would like to get some feedback on what questions you all ask when your talking to them.  Obviously referrals and permission to come check out any current projects will be on the list, but more specifically Im curious as to getting a breakdown of their costs?  Do you just go to town on all the big ticket items like flooring, paint, drywall, cabinets, siding, windows, roof, lights, carpet etc etc?  I know you dont want to ask for a breakdown of every nut and bolt but just the big 10-15 things that cover 90% of every flip.  If they beat around the bush with answering those questions should I take that as an indication that I probably dont want to work with them?  

    Beyond that, how much of your materials do you let the contractor price in and handle on their side versus supplying your own?  On our 4 flips, I have provided all of my own materials and just got quoted labor from the contractors, but I want to transition away from that, at least on the bulk items and limit my supply to lights, fixtures, tile, faucets, stuff like that.  

    Im coming to the realization that  with my current crew I havent been too far off estimating the cost of renovation, but transitioning to GC's ive been over estimating as Im underwriting deals and have really gotten anything under contract in a while.  Some of the ones we didnt get are hitting the market now and based on what they are selling for compared to what they bought it for, Im way high.  So I really need to get a handle on costs with these guys if Im going to get back off the ground.  Any suggestions and feedback would be awesome.  Thanks again!
 

[Evan Polaski]

What are you actually asking?  You mention wanting to partner with a GC.  You mention trying to understand their pricing (sort of irrelevant until you have a deal).  You want question to ask them.

When I talk to contractors, my biggest tell is how they handle draws.  If they mention percentages or weekly payment, I can be fairly certain they are bad with money, and I don't want to work with them.  Draws are done at definitive levels of completion, with pricing tied to each item, i.e. demo, plumbing or electrical rough-in and inspections passed, insulation, drywall, etc.

Partnering with GC, which I have only done with one that I trust, is somewhat similar.  But, partnering with a GC will more often cost more than just hiring and paying.  My partnership was profit split 50/50.  I put in all capital. He was labor (paid at actual cost) and materials at his cost. 

The thing I would focus on more than anything is the quality of the work they do.  I might be more controlling than many other flippers, but price is a distant second to quality of work.  Put another way: I would never partner with the "cheap" contractor that cuts corners and simply does poor quality work.