contrators exposed (long post)

[Tony Reale]

OK so going to post as one of the HATED contractors!

First as explained on the podcast there are three tiers of contractors.

The cheap....Probably one guy with or without a license who works for food, rent, bills etc. His only motivation is making his rent and possibly nightly beer money and or worst causes. I would say this is an avoid category or POSSIBLY a great handyman if you can keep him busy, not a contractor.

The middle.....where most people focus......He is a guy trying to establish himself....much like young investors are.....as a player in the contractor game. He has overhead. He pays his taxes. He pays his advertising. He pays for marketing. He has a few employees that he is responsible for. His motivation is growing his business.

The high end....the company. They have multiple people to deploy at any given time. They have a higher marketing budget, they have a higher "holding cost budget" if I may. They have many employees. They have anything an investor wants but you will pay a premium for it!

So where do you go?

The better question you should ask yourself is where are you personally? As an investor you don't want to pay too much for a service you can get cheaper, but you also don't want to go for the cheapest to create a headache. Look at the middle but understand how to leverage that as you study how to use a bank, or private funds, or even equity.

You can leverage contractors as many of the high end flippers will tell you.

If you are a flipper on your first project you may get multiple bids and not like the results. Here are the reasons why......the contractor always bids on worst case scenario on unknowns. The drywall has a small spot of mold on it? We will bid the floors in case. You want a door moved? We will bid on the chance that plumbing or electrical may need to be moved. This is for first time investors but "small time" investors are even worse.

You do one or two flips a month, and you have a 3 week window to complete a project, and you call your contractor to complete it and he says I'll be there in 3 weeks. He has mouths to feed, he has employees to pay, he has overhead costs to meet. If you offer a guy more business, great but not. Don't expect him to jump to your standards. Now if you are serious and can flip many house a month and secure him, he will be happy to work for you exclusively. If you promise this and he (and his employees sit for a week) he won't look at you as anyone that is looking out for him!

Investors are just like contractors. They look for the money. I assure you no matter how good of a relationship you have with your contractor, if you are offering him 500 for a days work and he has someone else offering him 700 for a days work you won't be on the top of his list unless you can realistically offer him more in the future.

As for the other big deal with contractors....the phone answer question I will say this. I return any call I get, ALL THE TIME, but as far as answering all the time, my fiancé will tell most of you that I answer about 50% of my calls at work because for one, we have a lot of loud stuff going on around us and two. Investors make money talking on the phone, we make money sawing, hammering, cutting, and really getting sh!t done, not talking about it.

My challenge is to @Joshua Dorkin and Brandon Turner. Most of the problems here seem to be contractors and property managers.......so don't accept the norm, but get their stance Get a big name contractor and property manager. for an outside stance to give their take, on the podcast. Would love to hear it!

I would be willing to bet this! If you can take care of your contractor full time they will be willing to take care of you full time! If you can offer your contractor 6 weeks a year you are not on their priority list.

[Adam Johnson]

To expand a little more - for those contractors that are in the middle or high end of what @Tony Reale describes - we know what our costs are to complete a job and we are intelligent. In spite of what many of the guru programs say about low-balling your contractors during pricing negotiations, one of the quickest ways to lose a relationship with a good contractor is to continually want to lowball them while negotiating pricing. Your calls will no longer be taken and when YOU are in a bind and really need a helping hand, WE will be "too busy" to help you.

It is important to recognize good contractors as also being good business people, just the same as you are. Treat the right ones right and when you need something, they will jump at the chance to help you out. Kick them around and look down your nose at them, and they WILL get even! You may not even know how, but they will find a way to cost you more money than you thought you saved by beating them down to working for nothing.

I have been in construction for over 20 years and have worked everything from small remodels to major commercial construction and heavy/highway work. This is my world and I will make sure it is a win for me and a lose for you if you try to step on me. Conversely, if you are a loyal customer and fair in our business together, then it will be a win/win and I will go out of my way to help a good customer out of a bind.

Quick story for you to understand how it works - I was once working on a commercial development for a developer that drove very nice cars and was always dressed to the nines. He also looked down on his contractors as being "less than". One cold and rainy day, he rolls on to the job site in his $ 80,000 SUV, beeps the horn and motions me over. His wipers are going and the heat is rolling out of the window as he rolls it down just enough to talk to me. I'm standing in the cold rain answering his questions. On this particular day, I wasn't in the mood to be talked down to. I started asking questions about the grading on the back side of the buildings, areas only accessible on foot and the mud was a little over ankle deep. We had a schedule to keep and I know he didn't want to be the reason we fell behind. I acted confused and asked him to "show me" what he meant. Long story short, he was NOT dressed to be in the mud, but I knew him well enough to know how to get him out of his nice warm and dry SUV in his nice fancy shoes to ask stupid questions that I could have figured out all by myself. I successfully ruined his shoes and his pants and he didn't even know.

On the flip side of that story - I had a very good customer that always went out of her way to help me when I needed something or give me a little work if I was slow. She called and said she had a huge deadline with heavy penalties if she was late doing work at an airport 2 hours away. She needed me there the next morning prepared to run my equipment 24 hours/day OVER A WEEKEND! Her call was Thursday night and the job had to start the next morning. I made it happen. I was there personally and slept on the steering wheel of my truck 20 minutes here and 30 minutes there for the entire weekend. The job was completed on time late Sunday evening.

Whether it is a tenant, a contractor, a fellow investor, or somebody you are walking by on the street, treat them like a human and with respect, you never know when you might need the favor returned!