What are "investor friendly" contractors?

Question

I keep reading the terms "investor friendly" contractors or "investor friendly" prices for work performed. I've read this in a few different books on real estate investing but also in the the same books, they say to find the best reputable tradesmen. Aren't the best tradesmen going to charge the highest prices? Seems kind of a contradicting concept.

or is there situations where somebody does awesome work at low prices?

J Scott · Answer

Contractors typically spend a large portion of their overhead costs doing two things:

1.  Marketing

2.  Visiting prospective clients to give bids

Having the opportunity to do a lot of work for an investor can mitigate these expenses.  If a contractor is booked 100% of their time working for an investor and his colleagues, that contractor is saving a LOT of money and time by not having to market or go out on bid appointments.

And many contractors are happy to take that savings that their generating by having a steady investor client and use it to reduce their prices to that investor.

In the end, the investor gets better prices, the contractor makes as much (or more money) and the contractor doesn't have to spend time and energy focusing on those things that aren't his core competency (like marketing and sales).

Win/win.

Heath Ryans · Answer

@Pascual Torres an 'investor friendly' contractor is

1) someone who doesn't know the value of their own time in relation to the quality of their work.

2) OR they could be someone who believes the stability and continuity between jobs that we can provide is better for them than making bigger profits on more random, seasonal jobs.

Charles Goetz · Answer

@Pascual Torres, I would echo everything @J Scott said. I started my business in 1990 doing work on REO properties for Fannie Mae, GE Capital, etc. and working for investors. So I learned what it took to do that type of work and have always preferred it to doing work for homeowners.

I personally would rather make less from an investor than I would be doing the same project for someone living in the house. I do realize the value of my time and the quality remains the same, but to me, the value of my time is more than just dollars. I can work faster when not having to worry about plants, furniture, and cats or whatever. There are a lot fewer headaches or hassles working in an empty house. But the big thing for me is as J Scott mentioned, is that I spend close to zero on advertising related costs. Plus if I remodel someone's bathroom, they are pretty likely to call me on their next project in a couple of years. An investor will call me for every project. I have worked for one for over 20 years and most call me for every house they buy. For me, this helps both parties. If I know their goals for the house, I can help get there and as the relationship grows, it becomes easier with each one. I don't mind looking at houses that they may not even buy because when they do get one, I know I'll be doing the work as long as the numbers work out. They, in turn, don't have to look for someone new every time they buy.  Also, as I move into investing myself, I have a bunch of people who are happy to help me by sharing their knowledge and giving advice.

I believe that things are easier when we work together. The relationships that are developed are in my mind priceless. These are only built over time.

Pascual Torres · Answer

thanks everybody for your inputs. It's nice to hear the different perspectives. I will continue my search for the right help but with a better understanding.

David Stumpf · Answer

Like J Scott and Charles Goetz said, investor friendly contractors have lower costs due to being able to stay busy, having less marketing, and much less dead leads.  Home owners get multiple estimates.  If you consider that 3 is the average, only 1/3 of a contractors time going to the job site and completing an estimate will ever turn into a job that he will be paid for.  Some of the cost savings gets transfer to the investor making it a win/win and provides incentive for the investor to use the contractor again.

Unlike what some people think, it is not about nickle and diming the contractor or the contractor being paid less than what he is worth.  It depends on the contractors business model and how they prefer to conduct their business much like investors only investing where they are comfortable.

What are "investor friendly" contractors?

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