NEED HELP WITH Advice for good/solid business model please?

Question

My wife and I started investing in real estate in December of 2015. At this time, we have 7 buy and hold rental units as well as 1 piece of land.

What we do is find motivated sellers and buy their houses below market value at a large discount. We typically are getting between 20-40% returns on our rentals.

We have a maintenance man who does all of the remodeling for us when we get the houses. He is cheap but seems emotionally a bit unstable, he takes everything too personally. Although he does great work and is very dependable for service calls, he's a bit of a headache to work with. For instance, he says he prefers to work "alone" and seems to get personally offended when we have other people come in occasionally to do the painting, tearing out carpets, etc., to move things along. Even though we feel like it takes him a long time to get things done, sometimes. It took him 2 weeks to remodel a bathroom, recently. It's like no matter what we do, he seems to whine or act like a child over it if it's not exactly as he wants. BUT he's incredibly talented and can literally do it all. Electrical, plumbing, maintenance, building decks, framing, drywall, etc. He's a jack of all trades, and we definitely feel more comfortable having him to call than not. Because one of my worries is late-night maintenance calls. I don't want to be the one going over there if a pipe breaks, I want someone who knows what they are doing who will be reliable to go fix it and me have peace of mind. He states that he has liability insurance through Progressive, also, and he recently threw a hissy fit when we asked him to sign a waiver of liability for us, stating that he feels like he is getting shut out from us and that he feels like he is "just a contractor" and that he's not "part of the team" because we asked him, and said he feels like if he has to sign one, we should have to sign one too. It's just really making me question his integrity and makes me wonder if we should worry about liability with this guy. Is it reasonable for him to get personally offended over that? He literally threw down his keys when I pressed him to sign it and walked out. He says he feels like we are family and we've treated him like that since he started. When I called him about it after he left, he started to cry and said that we are like family to him and that he would never do anything to hurt us or even think to sue us, and he just felt so pressured and he has nothing in his life and he feels like we are treating him like we are just people who hire him and like he's nothing else but a contractor, etc.

Do you have this experience with your maintenance man and/or contractors that you work with? How have you found has been the best way to find a reliable maintenance man or crew who will do last-minute service calls and/or remodels for you? Advice on this?

We are looking to grow our business from 8 rentals to 10,20,30 and so forth. We are just starting out. Our business model right now is basically the BRRR method. Buy, renovate, rent, and refinance. Repeat.

To all seasoned investors, what advice can you give to us? What is the best way for us to keep growing and keep our headaches to a minimum?

Joshua D. · Answer

You hit the nail on the head, my friend. @Kristopher Smith

Kristopher Smith · Answer

speaking from an electrical contractors perspective there is no such thing as insurance for uncertified work done for mechanical work and electrical. These trades take licensing and all kinds of hoops to be a contractor with them. If he is doing that kind of work he may carry liability insurance but that will not cover him or you for that matter if he is doing work he is not licenced to do. As for a bathroom remodel taking 2 weeks. I would imagine every trade including demo being 5-6 days max. If he can't work with other people than you can't grow a team around him. Just saying

Kristopher Smith · Answer

you just listed 5 red flags in a row. You are not asking for an opinion you are asking for approval. Just saying. Go with your gut. We both know what your gut says I can tell by your words.

Kristopher Smith · Answer

you just listed 5 red flags...just saying.

Kristopher Smith · Answer

I think your business model is fine as long as you continue playing the role of gc you are just going to have to deal with these things. He definitely sounds like an explosion waiting to happen. He is acting like an employee instead of a sub. And a bad one at that. Don't let this deter you from your model just yet. This is just bad luck ending up with someone like him. Hire slow, fire fast. That is the slogan for many successful companies across the world. Now if the next I have had to fire amazing craftsman before because of their attitudes. I hire for attitude now and take a much longer time doing it plus I always get references now. Stay strong this is a great lesson opportunity. Hope this helped more:)

Joshua D. · Answer

@Kristopher Smith would you think that was a red flag if you had a sub like that refuse to sign a liability waiver and get angry over it to the point that they throw down their keys and don't show up for work the next day? He also was NOT happy that we planned on sending him a 1099 at the end of this year. He wanted paid under the table for his time working with us going forward and we just were not okay with that.

Joshua D. · Answer

@Kristopher Smith Thank you Kristopher, that is great advice. I feel like he is an explosion waiting to happen, as well. It's stressed us out to the point of wondering if we will do okay in this business, so I appreciate your comments about it not letting it deter us just yet. We will hang in there and stay strong, and you are so right. Big lesson learned.

Joshua D. · Answer

@Kristopher Smith You are correct. He also threw an absolute fit when we requested that he sign a liability waiver for us, and he didn't show up to work today. I just think it might be time to part ways with the guy and find someone else who would be a better fit. He causes us headaches because it just seems like he is so emotionally all over the place, and he makes a HUGE deal out of everything. We have always used him, so it's hard because we are nervous that we won't be able to find anyone else. But I'm sure that's just my nerves talking and my dislike of change. You're right though, how are we ever going to scale our business if he can't work well with other people?

Joshua D. · Answer

Thanks. Bump help with business model please and issues here