How do you vet investors to stop wasting time on free itemized estimates?

Question

Hi everyone, I’m a contractor from Memphis TN who is investor friendly and I'm running into an issue with real estate investors asking for free, fully itemized estimates upfront. I end up doing a ton of footwork, driving out to properties, meeting tradesman, and spending hours writing detailed line-item scopes, only for the investor to ghost me or use my bid to negotiate a price drop with a seller. One investor dragged this process out all the way until (we'll be starting next week when I close on the property). I want to work with investors, but I need to protect my time.

• How do you vet investors before driving out to a property?
• Do you charge a upfront diagnostic or estimating fee that rolls into the project if they sign?
• What qualifying questions do you ask to weed out the ARV chasers from the serious buyers?

I’d love to hear how other contractors handle this without burning bridges with potentially good clients. Thanks!

Bruce Woodruff · Answer

Speaking as a long time general contractor, you just need to put your foot down. I charge $250 for a property walk through with a brief report.

You will not do as many walkthroughs, but you will get paid for the ones you do. And this weeds out the looky-loos and cheapskates. You do not want to do a remodel for them anyway.

Jonathan Klemm · Answer

Hey There @Dejuan Harvey - We are in very similar space as you here in Chicago.

It's funny because @Bruce Woodruff and I area always on the same page.  We charge a fee of $197 to do a walkthrough and provide a feasibility report.  The feasibility report provides a RANGE OF COST, not an exact number, because we can't tell someone an exact number without going through all the details

Then we charge a larger fee to prepare a LINE ITEM DETAILED PROPOSAL thats after we do a full material take off and work with the clients select finished materials.

Charging money is a bit scary, but it 100% weeds out clients that we wouldn't want to be working with anyway.  Working in the investor space as a contractor is VERY VERY CHALLENGING because all projects are so time-constrained and price focused - be cautious and find quality people who value what you are bringing to the table as a renovation expert.

Jordan Ray · Answer

Welcome to BiggerPockets! As an investor, I can definitely see both sides of this. A detailed, line-item scope has real value, and if a contractor is spending several hours driving properties, meeting subcontractors, and putting together a comprehensive estimate, I don't think it's unreasonable to charge for that time. On the flip side, serious investors are often evaluating multiple deals at once, so paying several contractors hundreds of dollars on properties they may never buy can get expensive. One solution I've seen work well is offering a paid due diligence package that gets credited back if the project moves forward. That way, the investor knows you're serious, and you know they have some skin in the game. Another thing I'd recommend is asking more qualifying questions upfront. Have they already walked the property? Are they under contract? What's their expected closing date? Have they already established their renovation budget? Do they have proof of funds or financing lined up? Those answers will tell you a lot about whether they're actually ready to move forward. As someone who works with a lot of investors in Memphis, I can also say the best relationships are long-term. Once a contractor proves they communicate well, price fairly, and perform quality work, they usually become the first call on every future project. Likewise, investors who consistently close deals become the contractors' preferred clients. Strong relationships are a huge part of this business, and having the right boots-on-the-ground team—including a reliable contractor—is just as important as having an investor-friendly agent, property manager, and the right hard money and DSCR lending contacts. For investors using the BRRRR strategy, our local hard money lenders can often finance 100% of the purchase and 100% of the rehab, allowing many investors to get into deals with around $10,000 out of pocket before refinancing into long-term financing, so having a contractor you trust becomes even more valuable. Feel free to reach out, talk soon!

Greg Scott · Answer

I think that is a crappy way for someone to treat a contractor. Of course, if I were you, I would never work with any of those people.  Unfortunately, they have probably told 5 friends about your great scoping work.

Here is an idea from an investor perspective.  I would see this as something completely fair.  Give them two options:

1) If they provide you a detailed scope of work, you could give you a quote on that scope. (FWIW, on complex projects I always create my own scope of work because when I get quotes, I want them to be as apples-to-apples as possible.) If someone sends you a scope of work from another contractor, I would simply refuse to quote it because that is the kind of idiot that you are trying to get away from.

2) If they want you to create the full scope of work, you could explain that you have been spending a lot of time scoping projects for people that have no intention of actually hiring you. You want to know they are serious.  Charge them some amount to cover the cost of your time.  Something like $250 should keep away the tire kickers, but the serious investors won't bat an eye.  If they hire you, you could credit the job $250.

Dejuan Harvey · Answer

I understand I will definitely have to implement this into my business. Being new to the business side of this made it kind of uncomfortable to charge for the estimate. I also noticed investors saying "thank you for the itemized bid as all the other contractors gave a 1 number bid". That's probably why, because it was free. Doing the estimates this way is very time consuming @Bruce Woodruff great quote about money and time. @Alan F. I'm not trying to be in 1st place in the rat race to the bottom. @Shiloh Lundahl A few found me in a local Facebook group and some from word of mouth. @Ashish Acharya Appreciate the advice I sure haven't thought about the tax side yet. @Chris Seveney Thanks for posting your thoughts. @Ismael El Hamdouchi @Crystal Smith @Theresa Harris Thanks a lot, that's the fine line I've been walking

Bruce Woodruff · Answer

@Alan F. said it - 'time is a valuable commodity'. Yes, it sure is....

One of my favorite sayings is: "money is a renewable resource, time is not"

Alan F. · Answer

Contractor for 34 yrs here, Im running a business. All customers are treated the same. Send me the prints (full planset with redstamp) in PDF & I'll send an estimate in 7-10 working days. Every customer gets 1 free estimate, only 1. There's too much work out there to entertain shoppers.

Any site visit (whether service call, consultation etc) has a $99 trip fee + $150 p/hr @ 2hr minimum i.e. $399 min. I also bill in 2/4/8 minimums. Time is an extremely valuable commodity, don't waste it.

In residential remodeling 2 of the biggest time wasters are investors & REA's. Don't get involved in a race to the bottom.

There's contractor forums that can help teach you how to run a successful contracting business. May want to check them out.

Marc Winter · Answer

Insist the investor provide you a detailed list of what they want done, as line items.  (That request--up front--will eliminate many time-wasters.)

Next, using the list use ai to give you rough estimates, and personally edit those. Re-feed to ai and ask to produce a detailed estimate.

That should save you about 80% + of your time spent estimating.

Or, as others have mentioned, charge an inspection/written report fee, which can be credited back towards the job price.

Erik Estrada · Answer

This usually happens with novice investors. It all boils down to prequalifying them upfront.

Ask about similar projects completed, who they currently use, what are they anticipating to spend, and what offers they currently have on the table.

I noticed, at least on the lending side, the ones that shop the most, do not have much experience. So it usually ends in an uphill battle of seeing who can get the most skinny, if you do not prequalify them first.

Theresa Harris · Answer

I'm not a contractor, but have rentals.  If someone is taking a significant amount of time to give me a quote and itemize everything (not talking about a 10 min walk through), I expect to pay them for their time.  If it was a quick 5-10 min walk through with a verbal estimate, then I'd expect to pay less.

How do you vet investors to stop wasting time on free itemized estimates?

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