4 Reasons You’ll Never Find a Good Contractor (Insight From an Investor/Contractor)

by | BiggerPockets.com

One of the biggest complaints I hear among fellow investors is how difficult it is to find a good contractor. Even contractors recommended by other people seem to fall short.

Someone thought they were great, though. So, why don’t they work out?

There are a lot of bad contractors out there, but the reality is, there are a lot of really excellent ones out there as well. So, if you can’t find one, you should first look inward to figure out what you are doing wrong.

1. Your expectations are too high.

As investors, we are looking for some unique combinations of qualities. We want our contractors to:

  1. Be amazingly fast and efficient.
  2. Always be available when we need them and be able to start projects on short notice.
  3. Be punctual, reliable, and always stay on schedule.
  4. Provide great remodeling tips and design ideas to improve projects.
  5. Have outside-the-box solutions to problems.
  6. Work with very little oversight.
  7. Provide professional invoices and quotes, have proper licensing, and provide insurance coverage.
  8. Give the highest quality work.
  9. Have rock bottom prices.

Are you starting to see why it’s so hard to find the perfect contractor? Nobody can achieve all of these requirements.

Manage your expectations or be prepared to pay more.

There are a lot of contractors who can cover many of the above qualities, but they will probably have the highest prices. The ones who reach your goal #9 are probably lacking several of the other qualities.

So, which will it be?

Neither option really works for an investor. Too expensive and it will blow out the budget, while the dirt cheap guy will probably lower the after repair value and ruin your timeline.

Instead, you can focus on finding the contractors with the right combination of qualities. Create a list of what is truly important to you, then have only those ones bid on a project.

For example, you may have a project manager working for you, so you don’t need a contractor who works well unsupervised. You may have an awesome interior designer, so you don’t need someone to come up with design ideas.

The point is to take the focus on what you truly need in a contractor and not expect to get everything.

attract-best-contractors

2. You always take the lowest bid.

The conventional wisdom is to get a minimum of three bids, then take the lowest one. It’s so ingrained that even the federal government follows this requirement when putting projects out to bid.

Some people say the more bids the better. I’ve actually read that one person got over 30 quotes just to get the lowest price on a water heater. Who’s got time for that just to save a few bucks?

Many people recognize the flaw in this system, and now it’s common to say “it was built by the lowest bidder” when disparaging things like body armor or other protective equipment.

Related: The Investor’s Complete Guide for Hiring a Trustworthy Out-Of-State Contractor

The problem is people believe contracting is a product and not a service. A product such as a book or an electronic device is standardized — once you figure out which model or item you want, you can simply go find the cheapest price. You get the same thing regardless of what you pay.

Contracting is a service, and you get what you pay for.

Stop taking the lowest bid.

So, let’s just get it out of the way — stop taking the lowest bid. The majority of the time, the cheapest bid will result in the lowest quality work.

Obviously, you don’t want to overpay for the job, so how do we get the lowest price for the service you need?

The key: compare price for service.

Start with the work you did in #1 and rank each contractor in each category. Some contractors may have great qualities above and beyond what’s on your list, but remember, you don’t need those. Focus on what you need to have and just keep those “nice to have” features in the back of your mind for now.

Get rid of any contractor who doesn’t score well in all your “need to have” categories. Then start getting quotes from the rest.

When you get the quotes from the contractors, put them in the same order as the service they are providing to you.

If one price is considerably more or less than the others, immediately discard that. The costs for a job don’t suddenly decrease, so low bids are suspect. Really high bids can be overcharging, paying for better service, or paying for more overhead expenses. Regardless, we don’t need to pay for that either.

Now you have a great list, and it should be pretty easy to choose the best one at the best price.

find-best-contractor

3. You get itemized quotes or push for “labor-only” quotes even on complex jobs.

I know this one will be controversial, but I need to put it out there. I can speak to this from the perspective of an investor as well as a contractor (I’m licensed as a GC in my state and used to own a remodeling company).

Essentially, the majority of really good contractors will never give itemized quotes and will give labor quotes only if they are getting paid hourly.

People would ask for this, and I’d say no. If they pushed hard on it, I’d refuse to bid the project or walk away.

The reason is simple — the vast majority of people in the United States don’t understand business basics such as overhead expenses. Also, there is a massive falsehood floating out there that a “fair” contractor markup is 15-20%. Let me explain.

This is how contractors usually factor in overhead expenses.

First, contractors have a lot of overhead expenses. Michael Stone runs a great website that helped me tremendously when I was contracting. He explains contractors overhead expenses best:

“Advertising, sales commission, job supervision (which isn’t usually a job cost), office expenses (even if they work out of their home), insurance, accounting and legal fees, licenses, taxes, employee expenses, and their own salary are just a few of their overhead expenses. The typical remodeling contractor will have overhead expenses ranging from 25% to 54% of their revenue — that means every $15,000 job could have overhead expenses of $3,750 to $8,100.” — Markup and Profit

Additionally, every company should be able to charge a fair profit of 5-8%, which is money that can be reinvested for future growth. I can attest to this, as my company had a 25% overhead expense rate and a profit goal of 8%, for a total markup on each job of 33%.

So a job that cost about $5,000 in labor and $4,000 in material would have an additional $3,000 tacked on to cover my overhead expenses and profit.

“Labor-only” quotes kill contractors.

Let’s say a contractor got duped into giving a labor-only quote. The amount they should charge is $8,000 since their overhead expenses don’t change just because you paid for the materials.

Unfortunately, it’s too easy to look at the project length and quickly calculate the contractor’s hourly rate. You would balk at paying a labor rate 60% higher than what a “fair” wage is for a contractor.

Related: 10 Expert Tips for Finding the Perfect Contractor for Your Latest Project

So you shop around and find a contractor who isn’t quite as good with the business side of things, and he charges you $5,000. Well, his overhead expenses are still around $3,000, which means he is taking home $2,000.

Let’s say the contractor quoted a rate of $30/hour originally (166 hours at $30 is roughly $5,000). He is taking home roughly $12/hour after you subtract his overhead expenses ($2,000/166 hours).

Do you still wonder why these guys disappear and go out of business?

The exception is really labor intensive jobs with an unknown duration.

Contractors hate itemizing quotes.

It’s actually really simple when you think about it.

Every contractor inevitably underbids one part of a project and overbids on another — there are just too many unknowns and variables to account for when bidding.

Investors love to get itemized lists because they can beat up the contractor on prices. The problem is the contractor will have to lower the prices that are overbid, but he has no way to increase prices that are underbid.

Result: The entire project gets underbid, and the contractor is guaranteed to lose money.

The exception is that a contractor may itemize out a large item. It’s common to offer a price with 2 or 3 scenarios, such as “with and without an addition.”

buying-house

Good contractors don’t need your business.

The title of this section says it all. Good contractors are really busy and don’t really need your business. If you show any signs of a “nightmare” customer, they will simply walk away from the project.

I had one customer who I knew was going to be a nightmare, so I told them I was going to add a fee to work under their conditions. They accepted, and I added $3,000 to the project cost of nearly $30,000.

I still lost money.

Someone only needs to lose money once or twice before they learn from their mistakes.

That’s why really pushing for these can scare away the best contractors and leave you with a pool of people who will probably go out of business.

4. Your goals don’t align.

Another reason you may have a hard time finding solid contractors is that your interests don’t happen to line up.

Most contractors want to provide good quality work that they can be proud of, along with fair wages to support themselves, their family, and their employees.

Quality and good wages are both subjective, so it’s easy for your interests to not align. There is good quality in $100,000 homes, and there is good quality in $1 million homes. Also, a frugal contractor might think a lower wage is fair, while a contractor with a big family and new truck might think a higher wage is fair.

Many investors simply have different interests or goals than the contractors they are getting quotes from. If you want low-quality work at cheap prices, then you need a very different contractor than one you would hire for mid to high-end homes.

Make sure your interests line up.

Simply interview the contractor and get a good list of past projects. You can see what kind of projects they tend to work on, which categories look best, and what neighborhoods they are working in.

If they primarily do bathrooms and kitchens in high-end neighborhoods and you need a basement finished in a mid-level neighborhood, don’t waste your time or theirs getting a quote.

contractor-commandments

Related: 3 Ways to Ensure Top-of-the-Line Contractors Will Want to Work for You

Also, you need to make sure your needs line up with their business model.

  • If you want top notch customer service and follow up, you may want the contracting company that has a back office and a dedicated support person or two.
  • You may want to find a company that has salespeople or a design team if you need designs or engineering.
  • If you are just a one-person show trying to get a flip done in an average neighborhood, you may just want a small crew with no other support.

Changing Your Focus

It’s important to understand that finding good contractors is not the same as finding cheap contractors. If you are having a hard time finding and retaining good contractors, it is probably because you have the wrong focus.

If you are focused mostly on price, you will always find your way to the low-quality contractors. Instead, you need to focus on the service they provide and then find the fairest priced contractor within that subset.

[Editor’s Note: We are republishing this article to help out our newer readers.]

Is there anything you’d add to this list? If you’re working with a great contractor, how did you find them?

Let me know your thoughts with a comment.

About Author

Eric Bowlin

Eric Bowlin is a real estate investor and founder of IdealREI.com. He bought his first multifamily at the age of 24; it wasn't long until he left grad school to pursue real estate full time. Because of real estate investing, he became financially independent a few years later at the age of 30. Now Eric helps others learn about financial independence. His other passion is crowdfunding.

102 Comments

      • Suzanne P.

        Amazing blog post, Eric! And a great discussion as well. There is one question that i”d like to explore in further detail. I have several flip joint ventures in the United States and Canada, mostly as a money partner. Now I am forward towards becoming an active investor, and together with my business partner we will be starting some of our own active flips in the near future.

        I have been doing various joint ventures so far and I simply love joint ventures, bringing different people with different knowledge and resources together so that everybody comes out ahead in the end. I have been thinking about doing JV deals with contractors as business partners.

        How would I go about finding them and how should the deal be set up? I’d love to hear from some contractors as well and get their opinion on joint venturing on a flip.

  1. Tim Kunz

    Great post, as a fellow contractor I’ve had the same thoughts over the years and wanted to put them to paper like you did so investors understand the realities of finding good contractors. Thank you. We’ve been having a pretty good discussion in the forums recently about expecting free estimates from contractors and why it’s worth paying for them.

    • Eric Bowlin

      I’m really glad this article is resonating.

      You should drop a link here to the discussion and then drop a link to this article in the discussion. It will help people who stumble upon this topic to get a more in-depth discussion.

      Estimates are a tough topic. The reality is people will pay for estimates no matter what – it’s just a question of who pays.

      When they are “free,” the paying customer has to pay for all the other estimates. If you charge, each person pays for the time they use.

      I think if you are getting an estimate with no intention of hiring them, you should just offer to pay.

      Really complicated projects that include design should be paid for.

      Simple stuff like flooring, a roof, or a water heater…maybe not.

  2. Patsy Waldron

    Interesting post. I agree that contractor work is a service and, as with most services, you (mostly) get what you pay for. Your post seems to be targeting those with a fair amount of experience and several projects under their belt already (e.g. categorize the contractors according to their strengths and then decide which qualities you need). How do you suggest new investors vet and categorize contractors and ensure they get good value for what they pay?

    • Eric Bowlin

      I don’t think “new investors” is a category all by itself. A lot of new investors have a ton of experience with contractors before ever getting started as an investor.

      But, if you have zero experience with contractors you can still figure out exactly what you need based on the team you already have put together. You know your own strengths and abilities, so put together a team that fills in the gaps.

    • Eric Bowlin

      It was awesome to meet you too Mindy!

      Thanks for the compliment! If I remember correctly, you’re the one that got me on the tangent about investors & contractors and then convinced me to write about it.

      So I should thank you for the inspiration.

  3. Brad B.

    Good article Eric. Also as a GC myself, the best thing an investor can do to work through the points you made (very good btw) is to understand what the Scope of Work should be for the contractor to perform. Whys is this important? Well if, as an investor who depends on a contractor to figure out how to do something and how much it will cost and provide a quote, these quotes will be un-reliable since every contractor has “his way” of doing things.

    Newbie’s to fixing up / repairing structures, this is probably the most difficult aspect since they probably don’t know how to develop a Scope of Work document such that every contractor who receives one can quote based on it. It is also the best method to address several of your points in your article.

    Once the Scope of Work is developed and published, your contractor will be much more appreciative and responsive to achieving the project needs while providing the investor some meaningful numbers.

    (P.S. – EVERY level of govt. is wanting Low Bid,,not just the Feds!)

    • Eric Bowlin

      I completely forgot to mention a scope of work and it’s a great point. Try as much to standardize the project before asking for a price.

      It will clarify exactly what the contractor is giving an estimate for and help give a more fair comparison.

      I’d still find the contractors I can work with the best, then give the SOW so they are all bidding on the same work.

      • Matthew Shumaker

        Great article! As someone currently building his team that doesn’t have a contracting background, this is invaluable! I just met with 5 other investors the other day and at least 3 of them are currently dealing with contractor issues and one will lose money on his rehab due to rework. Makes me wonder where they could improve their process.

        Do you have a sample scope of work you could provide or know of one on BP I could look up? I am wondering what level of detail to provide when asking for quotes. Do you provide all the items you want installed in each room with exact details on work?

        I appreciate your time.

        • Chris Luksha

          Hey Matthew, I don’t know if its further down somewhere but I highly recommend J Scott’s book here on BP.. The Book on Flipping Houses and The Book on Estimating Rehab Costs

          You also get a great SOW attached to it. You can get it from the BP bookstore https://www.biggerpockets.com/store/store_front

          Well worth the money and the education to read. As a GC, I have found a ton of things even I don’t think of regularly w/o a good doc like his SOW. It is very helpful.

          Blessings!
          Chris

  4. Julie Groth

    Spot on with my own experience as a remodeling GC and investor.

    I had gotten to the level of my CG career where I didn’t really bid against others anymore. People wanted me and I gave them my price. The entire bidding process is a terrible business model, in my opinion. It sets up a sort of adversarial relationship from the very beginning. Whether it is with an investor or homeowner.

    I’d like to use a different biz model, but not sure how.

    I’m doing some new home spec building. Mid-range cottage style houses, about 2000 sf. Have 2-3 different models and do, maybe, 12 per year. Very rinse and repeat.

    I’d like the builder (yes, I will hire a GC) to ‘buy in’ and be part of a team. However, not sure how to structure this?

    Suggestions?

    • Eric Bowlin

      You could find a GC to partner with on the project. They could be a partial investor, float some of the costs for 0% interest, or whatever other things you can think of to get their cash involved.

      As part owner of the project they would have a vested interest in getting it done fast and for as cheap as possible. The more you make the more they make too.

      I don’t have much experience with building, so I’m sure there are other ways to go about it as well.

      • Julie Groth

        I’ve now been through the building of one new house with a builder. ARRRGH…
        Starting 2 more new houses and 1 rehab and this time IT WILL BE DIFFERENT. Ok, not exactly sure how.
        Eric, I love the idea of a GC being a partial partner because when someone’s cash is in the deal, then there is a buy in.
        There is plenty of profit in the deals I do so price is not as important. I need quality and speed.
        Suggestions? I’m also going to post separately because I have figured out a couple of things that will make managing projects and GC’s much easier.

  5. Mike Harding

    Great article. I have GC that I use on most of my flips. I found him from a referral from another tradesman and it has worked out great. After doing several flips together, expectations are clear and we trust each other. I have found it is way better to pay a little more but not have to babysit a project.

  6. You can have it done cheaply, quickly or well. Pick two.

    My contractor is cheap and does top quality work but has problem keeping appointments and sometimes doesn’t show up. I don’t ask him for quotes at all. I just tell him what I need done. He knows that if he overcharges me he won’t get another job from me or my network.

    Same with my plumber. My electrician started to over charge so hey presto new electrician!

  7. Stephen S.

    The Low Bid is always the wrong one to take. And the “get three bids” process was never intended to be used at it typically is. The original and most correct method is to get 3-5 bids and then add their totals together. Then divide that total by the number of bids and hire the contractor whose bid was closest to that number.

    BTW: Another name for the ‘Low Bidder” is: the guy who missed the most when preparing the proposal.

  8. Bo hardy

    I am brand new to this game but this has been very enlightening. I have been to a few seminars where they told the investors to build a material list with sku’s and everything in your SOW and have the GC bid on labor only and in the same breath tried to tell us to build a solid relationship with a good contractor. I am glad you pointed out that I probably will not attract a good contractor using those methods.

    I was also hoping someone could point out a good way to come up with a quick rehab estimate so that I can make an educated offer to the seller on the spot. Maybe with the use of software or something.

    • Eric Bowlin

      I can’t imagine that a “GC” would ever bid labor-only…since a GC rarely actually works the project physically. His time would be considered an overhead expense.

      They are essentially telling you to “GC” your own project and find subs, but use someone who is licensed to carry your liability. I’ve seen lots of people run projects like that.

      I found that It’s easiest to get some estimates for a decent project and then follow a project-based cost model.

      Maybe you know that an average kitchen costs you 10-12k and a bathroom costs you 4k. You can toss together working numbers pretty fast and then adjust.

      Perhaps the kitchen is a bit big so I’ll add 15% to my estimate but the kitchen needs only a little work so I’ll take 20% off that…etc

      • Julie Groth

        Robyn Thompson (rehab guru) tells story of very large investor who furnished 12 sheets of plywood for roofing for one of her houses. A helper fell off roof and died. Even tho investor had contract with GC and Roofer, they were found by the courts to have been acting as the contractor and therefore responsible.
        She’s a huge proponent of not furnishing one thing for jobs. I’ve taken this approach too and like it. It also keeps the management and responsibility where it needs to be…with the GC.

  9. duane kidman

    Besides real estate investing, I have a W2 job. In my and most industries, every contract includes a well defined scope of work. Why should real estate contracting be any different.

    This scope of work serves multiple purposes and should include key points: define tasks, deliverables, expectations, key assumptions, division of work, administration, schedule/timeline/deadlines and terms of acceptance, otherwise the work is “out of scope” and needs to be resolved separately. I find that once a contract has been agreed to, out of scope work tends to be more costly than if included in the original scope of work. This scope of work replaces the need for itemization, and provides a better understanding and justification of costs, and brings together alignment and focus that the investor and contractor can appreciate. Lesson, write a complete and well defined scope of work to minimize misunderstandings on all levels.

    As for costs. A good Investor should know standard costs for each task. I maintain a cost/sq.ft., cost/linear ft, cost/square, etc for all tasks in my cost estimating spreadsheet. i will not hire a contractor if they grossly underbid, in fear that they don’t know what they are doing and/or I will get nickel and dime to death later in the project because they ran out of money; nor the high bidder (here I assume they are overly proud or as mentioned above – don’t need the additional work, or cannot handle the project). I don’t mind sharing my spreadsheet, and remain open to correction. Although I use the same sku’s on all projects and built my numbers over time, they tend to be fair and accurate.

    My RFQ (request for quote) on each rehab includes pictures of each task, taken on either past rehabs or online photos of work that I really like. This sets an expectation for the contractor to gauge his pricing.
    The end result, a compete set of expectations at a fair price with no surprises.

    • Eric Bowlin

      A solid scope of work will help solve a lot of problems for sure.

      The problem is that a huge number of investors are small-time people that don’t have a high volume.

      These people look at their contractors from the point of view of a homeowner. This article is geared toward that crowd. The goal is to help people prioritize contractors they can trust and work with over finding the cheapest guy.

    • Alejandro Riera

      Duane, I like very much your comment. Tha is the way we real state inversotr have to do things.

      Have our own list of standard costs in order to make good estimates for our jobs and be able to analyze the properties.

      It is only a guide, but having that, you can be a better inverstor.

      Eric, excellent article.

  10. I know just about every guy on Angie’s list or in the phonebook does not even answer their phone or return calls. If I put an ad on craigslist, I sometimes get lucky and sometimes get Larry Since I am a DIYer and generally know I can do some of these things myself or I have a pretty good idea of how long something should take I am not an easy “mark” for these charlatan type contractors. For example I just had a guy bid $400 to change a couple of rubber boots on my roof, which we ended up doing ourselves in less than an hour My rule of thumb is if it comes out to more than about 50 bucks an hour I am not hiring you unless you are very very good I had a guy come bid a tile job for me. he told me five dollars Per square foot, and then he bid $1200 on the job, and I only have 60 ft.², so somebody can’t do math or thinks I am stupid. I had an unemployed guy on craigslist who really wanted something so I gave him a power washing job. Next thing you know he wants $50 an hour to stand there with a hose and do something any 12-year-old can do. Back when I was practicing law, there was a time when I worked as a contract attorney on multi million dollar cases, with a seven year degree, and a bar exam passage, doing very demanding work, and I made $30 an hour. I take offense at these guys who think they are worth exorbitant amounts and I don’t even have their own tools I once heard a contractor friend of mine say I can’t work for $30 an hour doing painting, while he was moonlighting at Walmart for eight bucks an hour So my response would be if your overhead is that high you were not a very good business person. Because if you can’t even answer your own phone, I’m sorry I don’t see all this is extremely exorbitant overhead What I do see our people trying to make a quick buck you have a very over inflated sense of the value they add

    • Eric Bowlin

      Mistake #1: Education is not in any way related to market supply/demand or value of your skills.

      You may have been paid $30 an hour but your firm billed you out at $120/hr to cover their overhead expenses.

      A decent contractor charging you $50 is really getting paid $35. That was pretty thoroughly explained in the article.

    • Sherry Byrne

      Amen to that. I have also experienced this attitude with laborers and contractors. Your example of the power wash job being something any 12 yr old can do, and thinking they can make $50 an hour! Crazy!
      I have a friend who is a Paramedic. She actually SAVES LIVES, and makes only about $17pr hour. So it is hard for her as an investor to pay somebody 25 or $35 an hour to do simple things like painting or simple carpentry. And then they don’t return phone calls, don’t show up at all, or take three weeks to do something that should’ve taken two days. It’s frustrating!

  11. Michelle Fenn

    My solution to this problem was to partner with my contractor, he contributed half the acquisition funds and materials were paid for with a no interest credit card. He kept track of his hours and all materials, he was reimbursed for all his time and we split the profits at the end.
    The quality of work was great, he was on the job everyday, this project was his priority. We pre-sold the project for full asking price barely past demo. From the time we took possession to close to an FHA buyer was 55 days.
    This was not a cosmetic upgrade, we undertook full renovations of the kitchen and 2 bathrooms, new hardwood flooring on first floors and paint and carpet upstairs and in basement rec room. A new A/C and Sump with a custom built enclosure were built.

    • Eric Bowlin

      Scope of Work is the job description. What is and isn’t included in the project, what materials you expect, etc. The more detailed the better.

      If there is ever a conflict about what was supposed to be done (or wasn’t supposed to be done) everyone can refer to the SOW to settle the dispute.

  12. Brian Horton

    This article should be required reading for ALL homeowners! LOL. Great insights, and hopefully this will help to set straight some of the misconceptions held by both contractors and homeowners. I will take issue with you on the markup, however. As a niche remodeling contractor (carving out a niche is the only way to go in my opinion), I was marking up projects 125% – 170% (2.25 – 2.7 cost multiplier), in order to make enough money to cover my costs and advertising, and still make good for myself. $80k doesn’t cut it for a business owner these days. The truth is that most contractors need to get a business education first, then radically re-think what they charge, and how much they can get away with charging. Success with this is 100% based on positioning and marketing. Ask for what you want, ask confidently, and 20%+ of the target market will go for it, whatever your price (assuming you are targeting the right folks). I contend that with few exceptions, the vast majority of remodelers in America (and probably the world) should shift their business model to completing many fewer projects with a (much) higher markup. Too many contractors burn out and have zero time to spend with their families because they chase ignorant customers with ridiculous expectations and then charge prices that are insufficient to afford them a good living.

    • Eric Bowlin

      Every business is different. You also might be looking at your markup differently than me.

      Just like an investor should count property management time into their numbers, even if they manage it themselves – your hourly wage on the job is included as “job costs” and your overhead expenses (part of markup) include all the work you do when you aren’t doing the 8 hours of labor at the project. You should actually be counting your “job” time and “manager” time separately.

      Either way, it doesn’t matter as long as you were getting paid well.

      Contractors are definitely a terrible group of business owners as a whole. As contracting laws get tougher and licensing becomes more stringent, I see contractors coming from more educated groups of people, many of whom have actually studied some business at community college or university.

      • Todd Hanks

        I’m one of the ones you are referring to coming from an educated background. I have a small printing & ad specialties (brokering mostly) business in a small town. A few years ago I got my MBA from the University of Louisiana – Lafayette (near me) but stayed with my business rather starting from the ground up at the age of 42 in another field.

        About that time, I started flipping houses, too. In the last 3.5 years, I’ve flipped 7 houses. Last November, I got a Home Remodelers License (along with insurance, worker’s comp, etc). After getting that, I also did 2 full house remodels, another half-house remodel, and a bathroom/kitchen job for other clients. Now I have 8 lots that I am going to build spec houses on.

        To do this, I have to study just a little more to get to the next level and get a full GC license. I mainly got the Remodelers license (and will be getting the GC license) so that I can do my own work, pull my own permits, build from the ground up and not get any flack from the city or state. I would have never dreamed that after being a minister for 11 years and owning my printing/promotions business for 10, I would end up with a contracting license. The good thing at this point is that, by having my own properties to build, I can pick and choose which jobs from others I want to take.

        BTW, I totally agree with your article above. I am new to giving people quotes on large jobs. I know how much it will generally cost me to flip a house because I know what I want, how picky I will be, what I will be worried about, etc. But trying to give line item bids is a royal pain. I told my wife that I hate it so much, it almost makes me not want to do contracting. I’m on that learning curve. I hope I can figure out the best way that works for me when doing jobs for others. Thanks for the article!

  13. Tony Castronovo

    Really good article @Eric Bowlin. I have a few different contractors. Some are very informal and highly competent handymen, while others are professional firms with high structure and processes. I have to look at the project and determine how much of my involvement it may need and how much I can afford.

    For example, I did a rehab that was a labor only situation and I was heavily involved (was there nearly every day bringing supplies, exchanging items, etc….despite my high degree of planning and experience with renovations). It was very economical, but if I put a price on my own time….well then.

    On the very next job I hired a more expensive contractor that was pretty much turnkey. It involved very little of my time and pretty much hassle/stress free. But I did have to pay more.

    On the next one I will assess the “stress quotient” to see which way to go. Your 9 item list is a good way to think about it.

  14. Sam Shueh

    Like every one else a professional needs to make a living. In our area a skilled craftsman is expected to receive that kind of compensation. Hey I have a section of fence needs to be done just 8 ft wide. Can you do it $15 and hour and get it done in two hours?

    Same with real estate business. Can you find some tenants to be my tenants? I will give you $250. I expect the following: ………….. blah blah…..

    What differentiate one is better than other is service quality. One needs to stay on top selection material, supervise. A good one will get it done as promised. The terrible contract substitute inferior quality and do not honor their warranty.

  15. Great article! Do you have any advice about where to go about finding the right fit contractor? I seem to have no problem finding the “fancy kitchen and bath guys” or the “pure labor, cheap project guys” but can’t seem to find middle of the road solid, but not fancy, contractors.

    • Eric Bowlin

      That’s a tough question.

      I like to ask other sub-contractors. For example, I ask every electrician if they know a carpenter and a plumber.

      They all know tons and tons of other contractors, so it’s great to pick their brain.

  16. I have personally flipped over 2600 properties , mostly for investors.(as a contractor). I get this business of getting properties ready to sale/rent/market. I have worked for ten’s and ten’s of investors.

  17. David M.

    Good article – it gets me thinking about getting better alignment with the contractor by focusing more on the qualities that are important for my projects, and not wasting their time when they provide (and charge for) qualities that I don’t need.

    I understand making a fair living and that GCs have overhead expenses, but what I don’t understand is why their markup is also based on materials. Whether the project uses 1/2″ drywall or 5/8″ fire-rated drywall, or a $100 toilet vs a $1,000 toilet, their overhead doesn’t change, right? I can see building in breakage to overhead – that $1,000 toilet will sometimes get damaged, etc. – but that cost/risk/overhead is typically built into the sub’s fee (the plumber in this case). So what’s the business case for including materials in the markup, other than to make the overall percentage look smaller because it’s based on a larger number?

    • Eric Bowlin

      There are a lot of reasons why contractors include materials in the quote. You mentioned one obvious one is the markup appears much higher when it’s just labor rather than L + M.

      A contractor would have to make adjustments to his pricing scheme if there were some extraordinary considerations like you mentioned. If the materials are a ridiculous percent of the cost compared to the average project then, of course, they would have to adjust.

      Another reason is because homeowners want to pay for materials to get cheaper prices and nickel & dime the contractor on labor. It’s one warning sign (to be considered among many) to contractors to not waste their time.

      The last reason that comes straight to my mind is that people want to save the money on the purchase, but generally have poor follow-through. Even if they make the order and coordinate delivery (rare), I’m sure they won’t be available to go grab 3 extra 2×4’s and an extra bucket of nails exactly when it’s needed.

      I’m sure the homeowner isn’t going to want to pay all the labor costs to go get the materials and definitely won’t want to pay for lost production time, wear and tear on the vehicle, and any allocated insurance expenses for the time they spent.

      It just creates unnecessary issues. The contractor can’t take the 3 extra tubes of caulking and use them on another project, even if they are half used. It’s technically stealing from the homeowner.

      Plus, imagine what they will say when you hand them a $45 receipt and ask for $62 dollars to cover the other costs I mentioned.

  18. Investors are so tight, everything is money, they will step over dimes to pick up nickles. I have seen some of the work construction on the low bid that takes 3 times longer to do then the next bid. Doesn’t time mater? Doesn’t quality matter? Doesn’t babysitting mater?

    Just food for thought!

  19. Cj Juan

    As a client driven GC I wish that I could stand up for other contractors but lets all face it.. Contractors can be a pain in the you know what!

    Eric your BLOG is right on point! Thank you for saying what I’m sure a lot of us are thinking on both sides of the fence. Bottom line is in my opinion if you find a Contractor that you are happy with try to keep them around, come up with a game plan that works for the both of you (scope of work), has the same end game in mind and wants the both of you to succeed. Always remember most Contractors are hard workers at hart and there strong point is not in the paperwork…

    Good luck to you all!!

    • Eric Bowlin

      Right on! I think the vast majority of problems arise from a lack of SOW and bad business knowledge from the contractor (allowing people to unintentionally take advantage of them).

      All this causes a breakdown in the relationship and it’s always the contractor that gets blamed.

  20. Want a great contractor, things to notice at first sight, His clothes, His truck, his handshake ,His teeth, His hands. It he is in G.Q. clothing, run, His truck is $55,000 and new, Run. His hands have no scares or no paint or caulking, run! His teeth are gone, He’s a druggie,

    Just food for thought!

    • Eric Bowlin

      I disagree. A contractor that takes the time to clean up and throw on a polo shows he is serious about his business.

      Truck…that depends on the type of contractor you are hiring. A 350 or 3500 style truck that tows heavy equipment is going to run well over 50k. A 3500 Silverado for a finish carpenter….probably overkill.

      High volume flippers and investors want a professional who runs multiple crews. He shouldn’t be covered as he should be overseeing and not actually working the jobs all day.

      A small flipper who needs the cheapest prices, I’d agree.

      Teeth..no argument here.

  21. Ashley Wilson

    Great Article! My father (and business partner) has had his own contracting business for 40+ years, and he is always telling me these points when we are reviewing the budget and timeline. I am going to send him this article to show him I am listening to him:) For us, we have fortunately we have found some really good subs. We are on the lookout for more, and we are also on the lookout for back-ups because when you find the really good ones (that fit most of your criteria) they are always in hot demand! Thank you again for some great advise!

  22. Hard to find contractors with a Investors brain. Curb appeal, cleanliness, on time, easy to get a hold of, keeps you updated daily, sends pictures of progress, these contractors are worth 15-20% more then the others.

    Food for thought!

  23. Patrick Desjardins

    I had a lot of issues finding reliable contractors this summer. 2 things stood out:

    – The ones with high ratings on sites like angie’s list were booked out for a month+, so I had to go down the list until I found some pretty terrible workers. Wasted a lot of time and money from it.

    – I got 3 bids for an HVAC job which I thought should be 5k. Bids came in at 6k, 10k. and 10k. All 3 gave completely contradictory information on what was needed and how to do it. Contractors will look you in the eye and quote a ridiculous amount without blinking. I ended up going with the 6k one and it went fine, though I still think I overpaid.

  24. Lee Carrell

    I enjoyed the article! It is very informative and helpful for anyone looking for a contractor or anyone who has hired a contractor.

    I’ve noticed that everyone on the planet wants low prices when they are buying, but high prices when they are supplying! Unfortunately, due to the bad actions of a few, contractors are in the group with used car salesmen and lawyers. You never know who you can trust until you find out that you can’t trust them!

    I’ve learned not to just look for the low price, but to look for the best price! After completing “due diligence” and with all items and issues included, what is the best price that corresponds with the quality, service, and completion time that I want to pay for. This is working well for me!

  25. sid harriel

    My compliments! You know you’ve done well when you spur this much comment. Looking forward to your next post. Perhaps one on identifying the potentially fraudulent or fly-by-night operator or options for resolving issue that may arise. Thanks.

  26. Bottom line from a contractors point of view. If a contractor has done over 500 flips, he know his business. He can get the property done in half the time, on budget, and will continue to make a living at it. You will continue to have him give you bids, you can always get others to bid it, just make sure it is apples for apples, time, cost and quickness should also be considered and also quality. In Ogden Utah you can have a B- Job, In Fruit Heights Utah you must get a solid A job. You get what you pay for and if you have a good reference then you have a good contractor. Remember theses three things, 1- quickness, 2- quality of work, and 3- price. If you can get a good bid that has 2 of the 3 your lucky. Most good contractors are more costly then the bad ones. Just like every profession. A good contractor is busy and you will need to wait for him, but sometimes even waiting up to 2 weeks is well worth it. Try and line him up while before you close and get he committed to do the job soon after you get your property. Most investors wait to close, before getting there contractor to the site for a bid. Get him there 2-3 weeks so you can get a business arrangement made prior to closing.

    Food for thought.

  27. Eric, I have flipped over 2600 properties , mostly in the Wasatch front almost half of the State of Utah, far east as Atlanta, West to Pueblo Co. and West to Weiser Or. Ogden Utah in the 90’s was my “Hay day”. Have flipped most of the 4 plexes their, some of them 3 times!

    Yes i have made hundreds of mistakes and I think , have it down to a science . I am presently the Southern Colorado area flipping. Hopefully within 5 years, retire and then move to either Florida, or San Diego.

    If we ( investors and contractors) could get on the same page. Mostly respect both ways, extra’s cost extra and need to be paid. Contractors need to communicate and get job done. Just need to get things resolved better. Life working with contractors and investors would be a simple task. I don’t see it in my life time, but hopefully my 2 sons.

    Thanks for your article, I do think most of it is pretty accurate.

    David Avery

    • Eric Bowlin

      Thanks David! That is a huge compliment coming from someone as experienced as you.

      I don’t think any short article can cover everything or get everything correct. I need to keep it broad enough to make it relevant to anybody but focused enough that everybody can take something from it. Inevitably something gets left out or glossed over.

      I was just hoping to get people thinking about creating a great relationship with another person rather than just racing their way to the bottom of the barrel chasing pennies…

      Thanks again for your compliment!

  28. Eric, truly welcome again. Very good article. Maybe we could team up on a similar subject. Just moved 14 days ago from Northern Utah to Pueblo Colorado. So my wife will get a picture and all that tech stuff so you can see a person with the comment. Can we give each other emails, phone numbers on this BiggerPockets on this site? I owned mortgages on two houses and a duplex at age 22.

    Thanks again Eric

    David Avery

    • Eric Bowlin

      Sure David! Your name doesn’t like to a profile so I can’t contact you.

      For obvious reasons I’m not going to put my personal email/phone up here, but you can contact me through my BP profile.

      You can contact me directly through the contact page on my website http://ericbowlin.com/contact. My site is also linked in my bio at the bottom of the article and in my profile.

  29. Fantastic article Eric! Very interesting perspective from someone’s who’s been on both sides as an investor and contractor. I admit, I’ve balked at extremely high bids and hourly rates that just didn’t seem right. I think many investors often see a contractor hourly rate through the lens of their own employee wage. Unfortunately, this is not an apples to apples comparison. The contractor is acting as a business owner with a ton more expenses whereas the hourly rate investors often compare them to, is an employee wage that doesn’t have the same overhead. Every business charges overhead for their services, which far exceeds the actual cost they pay their individual workers.

    • Eric Bowlin

      Exactly!

      An employee making $30 per hour is actually making WAY more than a self-employed person making $30. The benefits, time off, insurance etc are worth a lot.

      The self-employed person needs to earn something like $45-50 just to make the same as the $30 hourly employee.

  30. Chris Low

    This is a great article! Not only is it applicable to our REI business, it’s something I deal with daily as a Superintendent for an industrial construction company and that my wife deals with (on the other end) as an operations manager of third party contractors. There is so much disagreement about what constitutes “fair” markup, labor-only bids, etc. Your perspective was really helpful in dispelling some myths.

  31. Ivy Royster

    Number 3. “You get itemized quotes or push for “labor-only” quotes even on complex jobs” details can be true for just about any business, not just construction. You can lower your prices to stay competitive, but in the long run it can hurt a business unless that customer turns out to be a long time big biller or sends lots of referrals. However, when you lower your prices for a customer that makes you feel as though they think you are not worth your prices, respect that feeling that they really do feel that you are not worth the money. Those tend to be the most difficult customers to deal with once the project starts.

    Great article. Thanks.

  32. JL Hut

    One thing I’ve noticed that you all must be immune to and colored your vision as you look at Labor and contracts is health insurance. I figured I need to earn $10 an hour x 40 hours per week just to cover my health insurance cost weekly.. if you hire somebody at $15 per hour they should have bad teeth. In my small town all the dentist charge $500 per hour or more. So how do you all get free health insurance?

  33. Bevla Reeves

    Awesome article Eric, you broke it down so well! I’ve long since had these very questions and you answered them all for me!

    I still want to hire by the job though…do contractors get offended when you want to pay them for one job at a time to stay in control of your budget and to be able to part ways peacefully if you turn out not to be a good fit for each other?

    I learned the hard way NOT to give one GC the entire project!

    I hope you do a blog on Crowdfunding (if you haven’t already), you’re a good teacher! 😉

    • Eric Bowlin

      Hi Bevla, I could be wrong but it sounds like you are trying to GC the project yourself and hire subs.

      If you are doing something like this, then, of course, the subs would not get offended to do different parts of the job.

      But, keep in mind, you wouldn’t hire a GC for a project that you are directly managing and overseeing in this fashion.

      On my website I do talk about crowdfunding a bit. You can navigate to my site through my profile.

  34. Chad Gaglioti

    I like how this is written. I am not a CG but do professional renovations for myself and clients. I do understand the issue with finding the right person to do the work.

    I worked for a property management company and they wanted the best work at cheap prices. I walked away from them after about six months of the same thing.

    Yes, I am busy enough to walk away from those who want itemized prices. It is not worth the time. I am fortunate enough to have a great client list and have never been short of work. My clients hardly ask for a price anymore and just say what they want done and when I can get to it. Thanks for the article Eric!

    • Eric Bowlin

      Wow, this article must be circulating again!

      I appreciate the comment. It’s absolutely true about the value of time… You usually pay for what you get.

      The question is, can you afford it and are you willing to pay for it? Sometimes the budget just doesn’t allow for it.

  35. Duane Wood

    Good post! My comments are coming 9 months after the original post but still had to comment about the quality of the post.

    I am a longtime buyer of construction services (developer – investor) and have owned a commercial GC business since 2010 and I was reminded of the quality of the people in the process and to your point focus on fit. We all tend to go to price immediately, but I see jobs where I have taken bids and have a good set of pricing plans and get bids that vary by 50% or more. For me, the key to buying the right GC is asking the correct questions about means and methods of doing the work. Some GCs have better teams and better ideas on how to complete a job.

    I think always about the best way to complete any job and matching the correct GC to the job is a key.

    Thanks again for the post and reminder.

    • Eric Bowlin

      I really appreciate the compliment! I totally agree that matching a contractor the job is important and something I didn’t really cover in this article.

      I think one of the faults of most contractors is they think they can do any job. The reality is, every crew has what it’s good at and what it should avoid. As investors, hopefully, we can figure that out and place the right crew on the right jobs.

  36. scott holmes

    A couple questions from a newbie, so my apologies if I’m a little dense on the subject…

    Itemized quotes = bad
    Scope of Work = good

    …but doesn’t the scope of work just include the cost of each part of the project? Is it just less detailed than itemizing quotes for all materials and labor?

    How would most contractors respond to monetary incentives/penalties, e.g. a bonus for finishing within a certain timeline or within 10% of budget or a penalty for egregious cost/timeline overruns?

    • Joshua Howaniec

      It’s not the itemized quotes are bad, the article is saying the a contractor is goinig to overbid somewhere on a project and underbid elsewhere. The contractor then doesnt have the meat to cover the loss for that part of the job.
      This is probably the only place I would disagree with the article. If the contractor underbids or overlooks a part of the project then what he really needs to do is have a serious discussion with the investor. Sometimes a contractor just cannot forsee everything he will run into and he needs wiggle room for that purpose.
      I install floors only. I cant remember the last time I overlooked any part of the project that was worth changing the itemized estemate. And that’s because I do floors only. Contractors who handle multiple parts of the rehab process are more likely to miss something than those who specialize.

  37. Derek Christian

    I own a large Handyman company in Cincinnati, Ohio. We charge $100 an hour and we are booking 3 weeks out with 11 full time guys on payroll plus some sub contractors. The one thing I do value is people that will let me do will in work so I have a list of landlords I work with who always seem to need work. For example we had a large deck project scheduled for today but it is pouring rain so I have two really good guys with nothing to do on about 24 hours notice. I will offer these guys at big discounts, as much as 65% off, just to keep them busy for the day but it has to be last minute only.

  38. John Murray

    I’m very successful in the BRRRR. Here are some real numbers and I do all my own work. Each day in reno I spend about $100 per day in parts and materials (held true for my last 8) . I purchase all my houses with a 20-30% discount. Each reno is from 60-90 days. I increase the value of the house between $60-$90K in those time periods. If I had to deal with a contractor my BRRRR biz would break even. Each day would cost me almost $1000. The 90 reno house would cost me $90K. My BRRRR biz would be a failure. If you hire a contractor you need to buy at least a 40% in my market where the median value is $420K in Portland Oregon. In Seattle, San Fran and LA, forget it.

    • Joshua Goran

      60-90 days seems like a long time for any sort of rehab work done by a contractor, even if you’re talking about new kitchen and bathroom and other big stuff – do you think that perhaps a hired pro might get the work done faster, thereby costing less than you’re assuming? Have you tried having an estimate done on one of your projects to see how it compares to your budget?

      If your system works for you, great! I just am curious.

  39. joshua mccaffrey

    Fantastic!! As a GC who focuses on higher end homes and an investor in seattle and SE Minnesota myself I have written his same article countless times in my head everytiem i read a blog about not being able to find a good GC but get so worked up about the unrealistic wants us investor expect from their GC’s i have to put it on the back burner. I am a huge fan of Michel Stone and his mission to educate the renovation consumer and general public on the Contracting Business. Anyone looking to get a quality insight into what it takes to run a contracting company and provide stellar service and product while making a profit, (which is the only way to stay in business) should check out his website https://www.markupandprofit.com. it might open your eyes and help give a different perspective when selecting your team for your rehab. Again, Thanks for writing such a spot on post!

  40. Naren Gunasekera

    Great post. My experience from running an unrelated business and vendors was that if they provided value and the cost was in my budget, then I had a winner. Especially if they provided value and exceptional service, I didn’t mind paying a bit extra to make sure they valued me as a customer and continued to work with me.

  41. Herman Virgen

    Great Article. I don’t do much work for investors. I have my niche which is soundproof construction and acoustics. A lot of my clients are celebrities or big companies. You would be surprised that some of the richest people are very uneducated in business. They don’t understand mark up and profit, etc. Some of them never had to work and come from old money. Those are the people you gotta have patience with. Investors in areas like Los Angeles are also mainly a pain in the ass trying to cut every little expense. I have had a few instances where I was hired as a consultant because our design bid was too high for them. That never really works out but at least I do my job right and then it’s on them and their contractor.

  42. Joshua Howaniec

    As a flooring contractor myself I saw the title of this article and decided I was going to hate it. Just the opposite. You did a fantastic job be realistic about how realistic many investors expectations are. They almost always want the best for the lowest possible cost. Great article.

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