How detailed estimate should I ask from the contractors?

Question

Hello everyone,

I am a real estate investor and recently joined BP. I have been an investor for years but I have been very passive! :) Recently my husband and I decided to take the rental business to the next level. We want to get a $10000 monthly positive cash flow within the next five years! I have started building up my own team of experts but have been struggle with finding the right contractors.  I have a couple of them I used before and thought might be good to use but realized that I need more options.

I have a few questions to ask the fellow investors.

1. How many contractors you establish and keep a relationship and how to make all of them engaged

2. When you ask for estimates of work, how do you ask them for the detailed estimates? I have done a few estimates but they all give me a range and are reluctant to give me any detailed breakdowns unless I choose them for the job. Which is kind of a catch 22 as I need more information to decide if I want to use them or not. How do you deal with this situation?

3. Do you know any good contractors in Northern Virginia region who are reasonably priced, punctuate, friendly to investors, and with good quality of work?

I appreciate any suggestions or help you can offer! Feel free to send me email directly if you want to establish a business relationship.

Thanks

Jennifer

Manolo D. · Answer

@Jennifer Robinette

1. I usually have 4-5 per trade on my employee list, that could translate to 2-5 subs per trade on your end, however, these are my employees, and if I needed more, I'm sure I could double them up anytime, perks of being a self performing contractor. I have 20 special trades on my list, easily expandable employee pool when i need more.

2. If you already got the job, hire someone for estimates, pay for $200-$400 and let them know what you want or what the least your finishes, etc. After that, have someone bid it out, that way, when they install the finishes, you get what you want. The key is, define the scope for them, don't let them do the scope because they are going to install the cheapest item, that could be a difference in durability, and wouldn't really be a fair bid. Offer to buy all materials, you wouldn't get the discounts, but the least you will be controlling the money factor to it, believe me, it's all going to work out the same, or better. Just don't let them carry any materials on their truck at the end of the job.

3. In our trade, there's always a triangle constraint, time, scope & money. if you stretch one, you couldn't get the other two. Say you want to increase scope, you need to increase time and money also, if you want the cheapest, you need to reduce time and scope. There is no way you could supersize anything without sacrificing somethin, and it could be costly as sometimes its falling for a shady contractor, the reason is, they lose interest in the job, because there is simply no money to it, or they mishandled your funds.

Jennifer Robinette · Answer

Thanks everyone! I haven't got any email alert so I thought no one has answered my question! I decided to check today to see if I need to repost. I am surprised and very happy to see all the responses! All the suggestions make so much sense. I have met a good contractor from BP recently and I think will keep trying to get more so that I have a network of people to work with. I think it is long way and I will keep climbing!

@Ryan ShawHow is the market in Winchester? I am thinking to go check out the area and potential buy some rental properties.

@Hugh Ayles   @Colin Smith

I think line items make sense and I will be happy with getting that level of details for the estimate. It will at least give me enough information to check how different each item is from what I thought.

Ryan DosseyGreat idea to build a budget then work within the budget. I guess I am too new that I don't have much sense of each line item might cost. I will need to start building my knowledge base and my own cost/budget for different items.

Thomas Jensen · Answer

2. If they don't want to be more specific unless you choose them, I'd find someone else. It sounds fishy to me. How precise the estimates I'd ask for would depend on the size of the job. Contractors don't want to go through the hazzle and spending a whole lot of time doing itemized bids for small projects.

Manolo D. · Answer

@Jennifer Robinette That is the problem of most small contractors, they think all clients easily agree on one lumpsum, and the client wouldn't know if they are getting a laminate countertop or granite. That is also one of the reasons why contractors fail and legal issues come in, the two of you have different expected outcomes. For those contractors which are hungry for money, or tend to mismanage them, that's going to be their first move, legally, the law is in their side, since you hired them to do a cabinet, they could install a used cabinet just because you didn't say what type or what brand or if were new or used. On the contractors side, when a client asks for a detailed estimate, down to the last screw, it is a waste of time, and time is money, they'd rather be working than doing paperwork. You are not the only client, and they are not the only contractor. If you want to hire a good contractor, get an estimate, do the scope for them, buy the materials, then you could give a $300-500 in-store card (like home depot pro xtra reloadable card) for small items, like screw, tape, glue, etc. so you will only be hiring labor if you do this. You paid the estimator, and you'll get a fair bid on all labor, no more headaches on mismanaged funds, advances or whatsoever. It's easier said than done though, takes skill and experience.

Jennifer Robinette · Answer

@Manolo D, Thank you, I have lost one contractor when I asked for more detailed estimates. I am puzzled a little bit as the only thing I ask is to breakdowns of fixes but he never got back to me. I know it is hard to struggle wih time etc but I think certain effort needs to happen to get more work and who will hire you for just a one lump sum number.

I did find some good contractors who show more efforts and business acumen and hopefully I will develop a list of my trusted contractors soon.

I like your idea of providing scope of work and material to ensure quality. I dont mind paying a little more to good contractors to ensure the quality of the work.

Jennifer

Ryan Shaw · Answer

Line item budgets from a GC would be the bare minimum in my opinion.  You should get line item budgets from each subcontractor as well, especially if you yourself are acting as the GC.

A solid 10-15% contingency reserve that you DO NOT tell any of the contractors about is a must.  If they know you have extra cash allocated to the project they are more likely to come back to you with their hand out at the first opportunity.  Don't let the GC control the contingency fund, unless that GC is you.  If you get everyone signed up of a project that everyone agrees is to be completed for no more than say $20k, you should have several extra thousand dollars on hand to bail out the inevitable problem(s).

In terms of getting fast and accurate pricing, nothing beats being able to run the numbers yourself.  Try and build up a cheat sheet that applies to your target market.  If your typical kitchen costs $15k, know that and pencil it in.  This can be done more accurately as your experience grows, especially if you develop a "standard" model that you can repeat on each project, i.e. same cabinets, same appliances, etc.

Hugh Ayles · Answer

1.  I would suggest having 2-4 contractors per trade, including general contractors.

You never know your timing or when your contractors are busy, so ti si good to have multiple relationships.

2. On bids, I would expect to at least get a line item estimate.  That means they have a line for each trade such as demo, flooring, painting, etc.

In a perfect world, you get 3 bids.  Hopefully they are close.  If they are not close,start with the high bidder and ask what he has included.

Now you have a checklist for your low bidder as far as type of material and hopefully quantities.

If you get 3 bids and two are close and one is really low, it is best to pass on the low guy.  He either has mistakes, took shortcuts, or is using less expensive material than what you wanted.  If you do stick with the low guy, plan on carrying contingency that covers you up to the second bidder,

Ryan Dossey · Answer

Typically we hammer out a budget. We make sure they can do everything we want under X amount of dollars. Then we go through and build up an actual scope of work that outlines down to the . of what is to be done with the funds. Some folks will pay the contractors in sections to keep them motivated/honest. I would try to get some referrals from other flippers in your area. You want someone who does it right the first time at a decent price.

George P. · Answer

you can ask for whatever you want, but understand that most contractors dont listen. especially if you have not worked with them before.

you are climbing a steep hill.. get your winter gear, ice picks, snow gloves and bundle up. will be a long trip to the top. is it worth it? sure. but expect gray hairs along the way.

Colin Smith · Answer

1. I try to connect with as many good contractors and subcontractors as I can. I can't always use them all of course, but I use and recommend the ones that do a good job as much as possible, and I keep the rest in my back pocket for a rainy day.

2. Ask them for a line item budget. It still won't be broken down too much but at least it shouldn't be just a ballpark number. If all they give me is a ballpark number then  absolutely add a 15% fudge factor onto it because they frequently go over. Sometimes a ballpark figure is all you're going to get when you're in a crunch.

3. I would recommend reaching out to other investors here on BP in your local area and ask who they are using.

How detailed estimate should I ask from the contractors?

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