Advice for finding great subs and buying "scary" properties

[Dan Krupa]

Hey guys, I decided to post some tips I have picked up from flipping full time in Kansas City, Missouri. If anyone else has great tips please share them also below.

1. Finding great subcontractors. This is really tough when you are starting out and I get asked this question a lot at my local MAREI. Here are a few things to look for by trade:

Electricians and plumbers: They should be a master tradesman and willing to pull permits. I have found the sweet spot are businesses that have been around 5 to 15 years and are owned and run by two to four master tradesmen. Additionally, these companies don't have fancy uniforms, huge logo plastered trucks, or a brick and mortar building. Typically they have embroidered polos, a truck with their logo on it but maybe only one or two of these vehicles that are personally owned not owned by the company, and they have a small office where one person coordinates everything. These guys are who you want to call. Their prices are low but their quality of work is the same as the big guys but for a fraction of the cost.

How do you find them? Call around. Ask other local investors.  If you know of a large plumbing or electrical wholesaler/warehouse that sells direct - go ask them who is the best.  

*Please don't skimp and try to get a handyman to do the work that a master tradesman should do to save a buck. If you need a permit for work - have it done right. Reputation is everything in this business.

HVAC - if a HVAC company is putting up billboards and/or has radio/tv commercials spots - don't call them! (I repeat, DONT CALL THEM! How do you think they afford all that advertising?) A good price in KCMO for a 2.5-ton unit furnace, coil, and condenser installed is 3k.  If you call the "big boys" they will charge 6 to 8k for the same units installed. Same as above - looker for smaller companies that have a proven track record and love working with investors. Other local investors will point you in the right direction. 

*Please research HVAC units. We all know the big name brands but do you know those same companies produce less known brands? (think buying generic soda that is really Pepsi but packaged as some local variety for half the cost) You can get phenomenal units for literally thousands less simply because a different nameplate is put on the unit. Finally...BUY AMERICAN!

Roofers - ask around but before you hire anyone ensure the roofers are licensed, bonded, and most importantly PROPERLY insured! Find out what flashing they are using, what shingles they are using, how much they are charging a square, are they removing the old roof for you? If so, how much?  Finally, don't use anyone who will roof on a second or third set of shingles on your home. I won't get into a fight on here - bottom line that voids the warranty on your sheeting and shingles. Plus it is improper and puts unnecessary weight on your roof.  A good roof should cost you 3 to 5k installed based on the size, pitch, and how much plywood/OSB needs to be replaced.(please don't use OSB) 

Foundation Repair - this is hands down the biggest scam trade I have seen.  Not all foundation repair people are like this, many are honest. But I can't tell you how many times I have had someone present a quote from a big local company and their cost is 20k or more when in reality the repair cost was $1500 to $2000. (this is not an exaggeration) The best way to avoid getting conned, if you don't know foundation repair, is to call a structural engineer. You will pay about $450 for the engineer to come out and then another $250 to $500 for their report. However, they will have good recommendations of who to use to do the repairs, they have nothing to gain by padding how much work needs to be done, and the best bonus is - the foundation repair company has to follow the scope of work the engineer outlines. (additional bonus - with said engineer report in hand you can legally have a permit pulled for the foundation work) Again, find a good, long-term, probably family owned foundation company and call them. They should be smaller but with a great reputation. Skip the big guys.

2. Pursue the scary properties. Guys I just got a short sale under contract that was listed for 100k, ARV is 160k. I walked the property and the house is in great shape. It needs about 10k in paint, tiling, and some minor upgrades. It will be a perfect rental. However, no one wanted this property because a big name foundation repair company came out and quoted 25k in repairs to fix the chimney and foundation. I am no expert on foundations but I know just enough to get myself in trouble. I took one look at the chimney and foundation and laughed. I immediately drew up a contract. It was accepted and during the inspection period, I had a structural engineer view the property. Following that I had the foundation guy view the property with said engineer report in hand. My suspicions were correct and the total amount to repair the foundation will be $1300. The point here is - don't get scared off by the horror houses. The hoarders, the mold, foundation issues, smells of cat pee, etc... all of these problems are fairly simple to fix. Yes, you have to budget for them. Call a bunch of tradesmen and get quotes. When we first started I scheduled eight, yes eight, foundation estimates in one day. I learned a ton of about foundation repair simply by asking open-ended questions, and I quickly figured out what was a fair price to pay for the repair. You can do the same. Again, don't be scared off. Numerous homebuyers saw the aforementioned property before me and all of them passed on it simply because the showing description said the property was in need of "major foundation repair."

3. If you are going to flip - make sure you stage! Don't believe me? Check this out:

https://www.nar.realtor/research-and-statistics/re...

Yeah...I like earning 2 to 5% more and selling my house weeks faster also....  ;-)

Hope this helps guys. Go out there and get your first deal. Start building generational wealth and obtaining financial freedom. Best of luck to you in your endeavors!

Cheers,

Dan