My contractor's overheads are too high. Any suggestions?

[Jarrid Dotterer]

HI all, 

This is my first post for info. So I am excited to read the great responses that I know I will be receiving. Let's get started:

My business involves buying cheaper houses that need a lot of work and rehabbing them to specific standards to create a cash flowing rental property. These are not high end, and the margins are pretty tight all the way around.  I have just come across a great opportunity which will force me to ramp up significantly in all aspects of my business. Starting with buying more properties then rehabbing etc. I am excited to take this opportunity and run with it. 

My problem is for me to ramp up to scale, I will definitely need a contractor who can handle the projects. My best friend is a newly licensed GC, here in Florida, and is running a successful business already.  So it's not an issue of knowing someone. It's an issue of keeping his overhead costs low enough to work for both of us! He says that automatically 40% of every dollar he pays his guys goes to workman's comp. With that factored in to his bids, he puts himself out of the running. The thing is, other contractors can come in at the right prices, so why can't he? What are the other contractors doing to be able to come in at the right price? Is there a legitimate way for him to cut his costs? 

I know that investors and contractors can have a great working relationship but I'm not doing one house with a 50K profit, at a time. I do more houses with a 10K profit. So rehab budget is significantly smaller per house. This is where we are having trouble trying to figure out the numbers... Anyone have any ideas?