Real Estate Investor · Centennial, CO · Member since 2015 · 106 posts · 38 votes
Hi, I'm trying to get started flipping homes in Denver. I've connected with several wholesalers and begun discussion with a potential partner and contractors. I'm finding that there are some (many?) investors that are flipping homes in Denver (and probably other markets) that are using unlicensed and uninsured contractors, some may not even be pulling necessary permits. I'm trying to understand how does someone that is trying to use only licensed and insured contractors compete with those that are not, since the uninsured contractors are going to be much cheaper. My goal is to build a business that deals with only professionals that are licensed, insured and have a high level of integrity, but I'm not sure if I can compete with others that are flipping with much lower costs. Thanks.
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
7y
@Dave Vona you have to drill down and find a niche'. Those using licensed contractors are doing work that obviously requires permits. Pop tops and scrapes with lots of spread. Also finding contractors that specialize in the work you want. They know what it costs don't have to add a fudge factor to cover what they lack in knowledge. Finding good deals should not be over looked.
Flipper/Rehabber · Louisville, KY · Member since 2008 · 1k+ posts · 1k+ votes
7y
Unfortunately the reality is that the majority of flippers are doing sub-par work. Their view is that every extra dollar they spend in rehab is one less dollar of profit because they see their ARV as fairly fixed. I don't particularly agree with that...people will pay a bit more for quality... but as long as that attitude is out there they will cut as many corners as possible.
You have to just accept that you might make less profit than they will but you will also often get a higher net price if you do better work and use nicer finishes. In my flips early in my career, I found that on homes where I fell for the temptation of cutting corners, I would often pay for it in a slower sale or more likely, in concessions after inspection. They would find little things that I might have skimped on to save $50 or 100, but since I was on to the next house, I might end up crediting $250 when they complain, just because I wanted to close the deal. Those things can add up, especially in a slower market where buyers can be pickier.
It won't always work in your favor, but there is also the value of feeling good about the home you deliver to the buyer. There were times I knew some of the work wasn't great and even if the buyer didn't notice, I didn't feel very proud. There is value in feeling proud about your work. It is possible to go overboard on quality too. As you proceed, you will find the balance between cost savings and quality you feel good about. Hopefully that balance leaves you with a profitable business.
Realtor · Denver, CO · Member since 2013 · 2k+ posts · 1k+ votes
7y
Talk to an attorney about your exposure when using non-licensed contractors. Then make that decision. It took one time getting scammed and learning about liability and now I have licensed people do everything. It is more expensive, but there is peace of mind.
Hiring a turnkey GC will be expensive. There is too much work for them. I'm scaling back into flips that need easy stuff. Carpet/Paint, etc. Too many trips to home depot, waiting on inspectors, etc. It's not the best use of my time. My most profitable flip last year consisted of changing the locks and getting the tenants out.
The market is shifting, so many flippers that used to be saved by the market, will get hurt. I'm already starting to see it.
Real Estate Investor · Centennial, CO · Member since 2015 · 106 posts · 38 votes
7y
Thanks for the replies. The attorney I'm talking to said to use insured contractors, even if some flippers do not. It's a liability issue. Although I talked to an insurance agent who had a different opinion. He said if the contractor is only doing work such as painting or drywall that me having liability insurance would suffice if the contractor doesn't have insurance. Even if they get hurt they would have to prove that it was my fault. I still prefer to have a business that doesn't take any shortcuts.