When to use contractor?

Question

Jeff Bridges · Answer

This is a catch-22 for all investors alike. You can't make an offer without knowing the rehab estimate and you can't get a contractor to give you one for free especially because you don't even own the property. For my first rehab/ buy and hold property, I was fortunate to have a mentor/friend of a friend investor do a walkthrough with me to help me create a quick estimate of repairs and scope of work as well as refer me to trusted contractors.  I knew nothing about where to start or if it was a doable project, but having an experienced person walk me through that was helpful. See if you know someone or a family friend that may accompany you on a property walk-through to help estimate repairs. If you don't have that, then you will need to pay a contractor to do a walk-through and provide you with a bid and general estimate on total repair cost. The above fees are accurate as I recently paid a GC $200 for his time to estimate a bid on a 15-20k rehab project, and yet I still went with another contractor who had a lower bid and good reputation in the neighborhood (always get multiple bids). I also got an independent home investment high-level inspection ($150-$200) by a certified inspector performed during the inspection contingency period to make sure my contractor and I didn't miss anything that could de-rail the project. Good luck!

George P. · Answer

as a contractor, i'd not be happy if i knew you were just looking for education.

i'd suggest to walk the isles of HD and get an idea how much things cost. also, sweat equity never killed anyone. or maybe it did, i am not sure. it's just sounds cool when i say it. ;)

Account Closed · Answer

@Lelith Walker - great suggestions on the contingency. Can you still write that in an offer on a foreclosure?

@Sean Ridlon - that is extremely helpful to know. I will talk with a few to see if they would be willing to do something similar. I appreciate your perspective. Thank you!

@George P. - I will do that. Walking the isles and taking general cost notes is really smart.

@Jeff Bridges - I actually do have a friend who may do that for me. Great suggestion! Thank you!

Sean Ridlon · Answer

As a contractor, I appreciate being told up front if there's a possibility my time will be wasted. I could write free estimates all day if I wanted. But "free estimates" aren't really free. It's the client who hires the contractor that eventually bears all the real costs of all the "free estimates" he's written. It's not fair to make the paying client absorb all the costs of my overhead and time spent on people who just wanted to "kick the tires".

What I will do is write a detailed estimate/inspection for a small fee. If it is a small job (under 5k) I charge $155 for my time and if it is over that I charge a percentage of the total estimate. Large projects' "estimate-only" fees are sometimes between $155-$800.

Of course you get what you pay for. My estimates are produced on professional software, not the back of the bar napkin.

Account Closed · Answer

@Jen Carlo

Sung-Yoon Kang · Answer

I am also a newbie in the world of real estate, but I would recommend "The Book on Estimating Rehab Cost" by J Scott. It gives you a comprehensive overview of estimating a rehab. Hope that helps and food luck!

Jeff Bridges · Answer

@Aleen Bobal Be sure to send gratitude to your friend if they accept your request for help on a walkthrough/ estimating rehab costs/ scope of work. Offer to treat them to lunch after and pick their brain on investment strategies and learn about their investment experience as a education bonus.  Try to use them on a property you are getting more serious about, because you might not get more than one opportunity to use their free goodwill. That one walk-through visit was basically my limit with the family friend, but your mileage will vary depending on how close you are to your friend and how convenient it is for them to do walkthroughs on additional properties... Good luck!

Lelith Walker · Answer

Yes a bank foreclosure will accept inspection and appraisal contingencies.  I did this with a Florida property I wanted to buy a few years ago.  I got all my money back because the water  company removed one of the meters after I looked at it.  Water company said it was an illegal 3 family house.  All I did was ask them why there were 2 meters instead of 3.  The lawyer from legal shield told me that "as is" means when you saw it.  Any changes made after you saw it you can choose to opt out and they can give you your money back.  I chose to opt out and got back every cent.

Sean Ridlon · Answer

@Jeff Bridges makes a great point for investors: he paid for a professional estimate then shopped from there. The difference between the original estimate and the lower bidder became built-in equity.

If you are factoring renovation costs into you offer, you can pass that savings off to your bottom line or the person you are selling to (if you are a wholesaler).

I'm always fine hearing a "no, thanks" on a bid, even if it's from the same person more than once if he/she have "kept current" with me by always being up-front about the bid being competitive and paying for my services.

Lelith Walker · Answer

You want to have contingency clauses in your offer.  Contingent upon inspection and its better to get an engineer.  Some contractors will low ball you so that you will hire them to do the job.

When to use contractor?

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