Knowing what is a fair price for a contractor's work

[Michael Myers]

One of the things i'm most concerned about with being a REI is when I will need a contractor to help me with rehad, refinishes, etc. I know for a fact I'm not going to be efficient at rehabbing a house myself. For one I don't have the knowledge. Secondly, currently I work 60-84 hours a week and sometimes with no day off. Don't get me wrong I plan on learning what I can and can't rehab myself with youtube but the issue is time. I know there are certain things the federal government and FL will not let me touch as well.

What worries me is knowing when you are being fair with people and especially contractors and their hard work. I used to work with a contractor before the post office. He worked me so hard for little money and at that time I didn't realize that he was also a real estate investor. I had to clean up job sites(harder than it sounds), pick up shingles,break concrete up, and so on....very hard work and I live in FL. I don't want to be taken advantage of of course but I also don't want to be that kind of REI.

Are there any kind of guidelines or how do you determine if your compensating someone justifyably while still making a great ROI?

Whoever you believe in....God is watching.

[Chris B.]

Form my limited rehab experience, I find hiring a general contractor to do a job ends up being nearly double the cost of me hiring tradesmen directly.  For example, if I need some framing, plumbing, cement work, and cabinets installed, I may get a $20k quote while if I hire these tradesmen directly and individually, it might cost me $12k total.

What you get by hiring a general contractor is a manager that is supposed to keep the project going and deliver quality work on time.  This doesn't always happen and some general contractors save costs for themselves by hiring less than qualified specialists to do the work.

What you get by hiring tradesmen directly is the ability to select someone with a skill level you want to actually do the work.  If yo choose poorly, you still get poor quality work.  You also have to do more micromanagement with this approach.  I  have chosen this approach most often.  I've found tradesmen can range from very good to unacceptable.  This approach also takes longer to complete the job which means opportunity cost.  So weigh both choices.

As far as actual cost goes, the baseline for good work is the going rate of a tradesman in the field you need.  These rates vary depending on what the job is.  Then there is the marked multiplier.  In San Francisco electrical work may cost 4X more than the same work in Tucson for example.  This is a market multiplier.  Its the same work, takes the same skill, and the same materials.  However in one market you have people with million dollar+ homes paying you and the other market you have people with $200K homes paying you.  If the customers have more cash, rates are higher.