How do I find contractors to bid on fixer uppers?

Question

How do you find contractors to bid on fix and flips?

Would they arrange a time to see a property through the realtor?

How many contractors do you get bids from?

I am interested in fix and flips, but not into sweat equity, just trying to find out the best way to get contractors to do the fixing.

Matthew Paul · Answer

Contractors arent going to waste their time looking at properties you MAY buy working up estimates on a property you DO NOT own .

Unless you pay them

Michael Kalis · Answer

Quick suggestion on the order of operations;

1) Put in an offer on a home contingent on an inspection

2) Do an "inspection" (not a contractor, an inspector) and they will give you all the items that need to be done.

3) Then ask a contractor to bid the projects for a "Rough number" (after you have done a ton of them, you will start to get it and not need to ask).

4) After the deal is hard, then have a contractor give you a more firm quote.

Personally, we have developed relationships with some great guys that do really good work. We found that you really don't want to squeeze everything out of them. You want to pay a fair price that works for everyone. They are excited when you call, you get quality and things done on time.

Her is to your biggerpockets!

Regards,

Mike

Kuba F. · Answer

@Ralph E.

Your purchase offer is going to most likely determine if you're going to win or lose in the end, so if you put in an offer prior to having an idea of a scope of work or rehab costs then you're doing it backwards and wasting everyone's time or are about to lose a ton of money.

You shouldn't expect a contractor/or inspector to come up with an SOW for you. A contractor will fix everything that needs fixing unless told otherwise, and that's rarely appropriate unless you have unlimited funds, or are running a charity.

An inspector may tell you what's wrong with a property on visual inspection of critical systems but won't tell you what needs to be improved to make a property marketable.

It seems like a catch-22: how do i get the rehab costs before putting in an offer to get a bid on a rehab?

New folks want to skip the first step to educate themselves in generating an SOW and pricing work. This can be at least somewhat addressed by reading up on the subject, attending property walkthroughs and asking lots of questions, or as @Manolo D. said, just paying for the privilege. When you put a price on people's time, you tend to value and respect it more.

Once you get the hang of understanding rough numbers, you'll notice that all of the sudden the hundreds of deals that you see advertised will actually all go into the sucker pile, and you'll be left with maybe one deal where you see value and others don't, and you'll no longer be wasting other people's time when you put in an offer on a deal that actually has a chance of making you money.

Now to answer your original question, assuming you've roughly priced your job and have put in an offer or if you do want to pay for the privilege of getting a quote for the purposes of due diligence before an offer, then to find contractors my #1 tip is to drive around and find other flips in the neighborhood and approach the folks working there.

Yes the realtor can let them in, or can let them know the key code.

Get as many bids as you need until you get to a fair price for the job.

Brian Pulaski · Answer

@Ralph E. what you note is probably one of the reasons a lot of beginners run into issues. It is going to be very hard to get a contractor in to look at a house you don't own. As @Manolo D. noted, you can pay them to do it, but even then I'm not sure if many would, as they probably want to spend time reviewing and bidding jobs that are closer to fruition.

Your best bet would be to start doing your homework on rehab costs. Walk the houses you are interested in and try your hand at getting a budget rehab cost. Get a solid ARV and then offer a number that gives you room for error. Until you have some experience or find the Contractors to come through houses you don't own and give you pricing, I would err on the side of caution.

After just a few houses you get the basics down and things get easier!

Matthew Paul · Answer

Think of it this way , a good contractor is busy , time is money . Plain and simple .if you wanted me to ride around with you for the day looking at houses with you and offering my opinion , it will cost you . ( More than you would want to pay) .

The 2 biggest mistakes I see people make is paying too much for a property , and way underestimating the rehab cost and time frame .

There is a learning curve , you will make mistakes and they usually cost you $$$$. If you learn from those mistakes thats part of the business .

I made 1 mistake in my whole life , and I never made it again .

Chris Mason · Answer

It's not uncommon for new flippers to be in the red for their first project or two. Nor is it unusual for ANY small business to be in the red when first starting out. That's why I get so nervous when someone says "I have $100k to my name that comprises my entire life savings, I want to dump all $100k into my first flip!"

Once in a while you see a BP success story about someone's first flip, and power to those folks, especially the ones with comprehensive "lessons learned" sections in those narratives. Ya know what stories you DON'T hear about? All the folks who lost $15k or $30k on their first flip attempt, because those folks aren't making "success story" threads. I hear about them in the form of "OK I lost my arse flipping Chris, now I want to try buy-and-hold, but btw I no longer have a down payment because the aforementioned flip ate it all..."

For MLS properties that you intend to flip (there is different logic for buy-and-hold & off market), you're up against dozens of others that have done a bunch of flips (or that are themselves GCs), so the odds that you underestimate repair costs, leading to "make sense" numbers that don't actually make sense, causing you in turn to be the highest offer on the property, causing you to get your offer accepted because the other dozen flippers ran accurate numbers telling them it makes no sense, are rather high. You're like "yay my offer was accepted!" but in the back of your brain part of you should have a little voice asking "Why was mine the strongest offer? What does everyone else know, that I don't?! What is the most expensive GC telling me it will cost, and would that hypothetically bankrupt me?"

Shoot for the success story five or six figures net profit, by all means, but if you break even on your first then you're doing OK IMO. And if you don't have the wherewithal to pay-to-play/learn & be in the red like every other new small business starting out, then it might not be your cup of tea. What you have going for you, at least, is that you are here and not watching HGTV...

Doug W. · Answer

Keep in mind that no contractor is going to give you a price without you telling him/her very specifically what you want. Simply saying "to see what needs to be fixed on the inside" can me 50 different things to 50 different people. Without you providing a detailed scope of work you are wasting your time and the contractor's (and Realtor's).

Kathleen Leary · Answer

You're not divorced until you're divorced. You don't own the property until all the papers are signed & money changes hands. Be careful spending money up-front on something you may not get. I always have an inspection contingency in my offers; not for anything cosmetic, but for structural/mechanical damage that may not be noted by the seller.

J. Scott's book is a good way to organize your tasks & SOW, particularly if you're starting out. For me, however, nothing beats experience: rotten floors, cracked joists, moldy drywall, crazy electrical, water-spewing pipes, code violations, etc. have taught me what to look for & what it takes to fix it. Even if you have an inspector & GC go over the property & potential SOW with you (& you should!), nothing beats your own eyes & know-how.

And in time, you'll develop working relationships with tradesmen who will know you're a stand-up investor who won't screw them over & waste their time. I've found it to be a reciprocal relationship.

Brian Pulaski · Answer

@Ralph E. having it under contract is a good step and might be able to get a contractor interested, however contracts and deals fall apart. Until you have the keys and your name as owner, it is all a gamble on whether anyone will want to bid on a project that might fall through.

How do I find contractors to bid on fixer uppers?

How do I find contractors to bid on fixer uppers?

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