HELP! I can't Find a Reputable Contractor to Rehab my House!

James Wise · 2021-09-29T10:12:23-07:00

How many times have we seen a post on Bigger Pockets with a new investor complaining that they can't find any reputable general contractors to rehab their houses? Often times, these investors are looking for general contractors to give them bids on properties they are thinking about investing in and they can't seem to figure out why nobody is calling them back. From there we get a countless swarm of people who chime in with the same story and everyone talks about how busy contractors are. Folks, I am here to dispel that myth. Yes contractors are busy just as any business owner is but they aren't so busy that they aren't taking on new clients. No, they are not interested in taking on YOU as a new client. The reality is that if you want a general contractor to go out for free and bid a house renovation for you so that you can put your numbers together and make an offer YOU are not a lead they want to work. If they spent time working with you they would not make money. This is very different from being too busy to make money. They are not too busy to make money. It's just working with you that's the problem. Working with you does not make money.You are a bad client.You are a bad lead.You are not worth talking to.You do not represent a payday. Now, now before you all get in your feels here, don't think I'm dropping these truth bombs on all of you with facts and data to back it up. That's not my style. Recently I wrote an article and started a thread called THIS is why your Realtor is Ignoring you-DATA says they Should! If you have not yet read it I highly recommend you do because the same people who can't get a general contract to work with them are the same people who can't get a real estate agent to work with them. In that thread I broke down data from approximately 1,100 potential investment property deals I worked both as a Real Estate Broker and general contractor. From this data I determined that the average investment property deal close rate is about 2.9%. From there we need to take it one step further. I know you all are reading your "how to's" on hiring general contractors so you all try to go out there and get your 3 quotes. This means that a general contractor has a 0.9% chance of landing a renovation job out of the work they quote for you. Let me repeat that. A general contractor has a 0.9% chance of landing a renovation job out of the work they quote for you. So for all of you folks out there that are running into a brick wall trying to hire an "investor friendly contractor" this is the reality of the situation you are in. You represent a payday of less than 1% to these people. These people aren't too busy to make money. No, these people are intelligent enough to know that you can't run a profitable business spending time with clients whom have a 0.9% chance of paying you for your time. This is why you can't find a reputable contractor to rehab your house.

Mike ReynoldsPro Member

construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes

5y

It's even harder for a contractor to compete than a realtor because of the apples to oranges dynamic. I once lost a bid for a whole house for 100 dollars total. For starters, my bid had R30 in the attic and low E windows. What the low bidder gave them was R19 and single pane windows. There was a lot more but you get the idea.

The owner called me furious. How could this contractor do then this way? I said you did it to yourself when you didn't really read the fine print. He wanted me to come fix it but I refused.

Everyone wants Dollar Store prices but Bloomingdale work.

17 Reply

James Wise

OP

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

5y

Originally posted by @Mike Reynolds:

It's even harder for a contractor to compete than a realtor because of the apples to oranges dynamic. I once lost a bid for a whole house for 100 dollars total. For starters, my bid had R30 in the attic and low E windows. What the low bidder gave them was R19 and single pane windows. There was a lot more but you get the idea.

The owner called me furious. How could this contractor do then this way? I said you did it to yourself when you didn't really read the fine print. He wanted me to come fix it but I refused.

Everyone wants Dollar Store prices but Bloomingdale work.

I agree that you get a lot of people who want Dollar Store prices for Bloomingdale work. But I also think that just like a contractor using R30 instead of R19 you're going to get Realtors with varying levels of service they can bring to the table. Some folks think all an agent does is open the door to a property for showings. For some agents that's true that that's all they do. For others they know that being the guy or gal that is opening the door is not even the actual product they are selling.

3 Reply

Mike ReynoldsPro Member

construction · Nacogdoches, TX · Member since 2011 · 2k+ posts · 1k+ votes

5y

Originally posted by @James Wise:

Originally posted by @Mike Reynolds:

It's even harder for a contractor to compete than a realtor because of the apples to oranges dynamic. I once lost a bid for a whole house for 100 dollars total. For starters, my bid had R30 in the attic and low E windows. What the low bidder gave them was R19 and single pane windows. There was a lot more but you get the idea.

The owner called me furious. How could this contractor do then this way? I said you did it to yourself when you didn't really read the fine print. He wanted me to come fix it but I refused.

Everyone wants Dollar Store prices but Bloomingdale work.

I agree that you get a lot of people who want Dollar Store prices for Bloomingdale work. But I also think that just like a contractor using R30 instead of R19 you're going to get Realtors with varying levels of service they can bring to the table. Some folks think all an agent does is open the door to a property for showings. For some agents that's true that that's all they do. For others they know that being the guy or gal that is opening the door is not even the actual product they are selling.

Agree 100 percent. The main issue is the client has been told a lot of misinformation all these years and wonder why it's not really that way. They watch a show on TV that says the flipper only paid 800 dollars for the new driveway. I can build one for that.

In Columbia maybe. But only if I didn't eat while I was there.

2 Reply

Chris MasonPro Member

Moderator

Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

5y

I'm usually pretty quick to get the brand new HGTV folks off the phone, too. I'll return the call and share information, maybe I'm nicer than most, but I already know it's not likely to go anywhere if that continues to be the goal/agenda.

The very things that would make it a good fix-n-flip tend to be those same things that disqualify the property from traditional institutional financing. Specifically, that massive price cut that happens as soon as it crosses the line in the sand where it can no longer get a vanilla loan. An example of this, that isn't from the fix-n-flip world, local to me, but happening as we speak, would be all the "manufactured home duplexes" that some developer threw up in the late 1980s in Oakland (somewhere around a dozen of them exist). One is up for sale again, at a great price. And I know that, because the phone calls have started to come in. Yeah, it's a great price, with cap rates and rent:price ratios that'll knock your socks off. But guess what. The reason for that killer price (& it may very well not even go for over asking!) is because it's a "cash buyer only" property (which results in a super awesome price), but it still commands Bay Area rents. If you have the cash it's a slamming deal, but if you have the cash then you don't need my services, and if you want-but-don't-need those services then I can't offer them anyways.

The inverse is also true. Those same things that it make it more likely to be able to get traditional financing, will make it less likely to be a good deal for the new real state investor (meaning, less likely to win the bidding war), since now you've got a rational calculating buyer facing competition from owner occupants buying on emotion. Emotional buyers pay higher prices than calculating investment-minded buyers (and the HGTV effect includes owner occupant buyers, btw, "we're looking for a fixer that we're going to 'flip to ourselves'"), most of the time.

4 Reply

JD MartinBusiness Member

Moderator

Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes

5y

Originally posted by @Mike Reynolds:

Originally posted by @James Wise:

Originally posted by @Mike Reynolds:

It's even harder for a contractor to compete than a realtor because of the apples to oranges dynamic. I once lost a bid for a whole house for 100 dollars total. For starters, my bid had R30 in the attic and low E windows. What the low bidder gave them was R19 and single pane windows. There was a lot more but you get the idea.

The owner called me furious. How could this contractor do then this way? I said you did it to yourself when you didn't really read the fine print. He wanted me to come fix it but I refused.

Everyone wants Dollar Store prices but Bloomingdale work.

I agree that you get a lot of people who want Dollar Store prices for Bloomingdale work. But I also think that just like a contractor using R30 instead of R19 you're going to get Realtors with varying levels of service they can bring to the table. Some folks think all an agent does is open the door to a property for showings. For some agents that's true that that's all they do. For others they know that being the guy or gal that is opening the door is not even the actual product they are selling.

Agree 100 percent. The main issue is the client has been told a lot of misinformation all these years and wonder why it's not really that way. They watch a show on TV that says the flipper only paid 800 dollars for the new driveway. I can build one for that.

In Columbia maybe. But only if I didn't eat while I was there.

LOL.

My take, for what it's worth:

1. I agree that it's difficult to find good contractors who have time to do a project - good contractors are busy and stay busy from referrals. Lousy contractors sometimes have openings. Notice I said "do" a project, which is a lot different than quoting a project - which as James notes above is a long shot to actually getting a job.

2. Finding a good contractor is twice as hard if you've never done anything with them before. They don't know you from Adam.

3. If you reverse engineer the problem, what do good contractors want from clients? They want: clients that pay on time; don't spend a ton of time haggling over pennies; don't ask for/expect freebies to be thrown in "while you're in there"; don't expect a level of workmanship or material that differs from the quoted job; don't use their good faith quotes to window shop to 10 other contractors to save $100; will work with the contractor when unforeseen circumstances/emergencies arise; don't nitpick over things that don't matter. Nobody wants to work with a cheap SOB who expects the world.

4. The nature of contracting these days is that there's a high level of demand and a low level of supply. When that is the case, the contractor has the ability to make greater profit or get better terms or both.

5. I used to restore old cars. There was a saying: "You can have it done fast, done cheap, and done right, but you can only pick two". That pretty much goes for contracting as well.

6. If you've never done anything in this business, you should be prepared to either pay a premium on your first project(s) or work flexibly with the contractor's schedule. That will go a long way towards finding someone you can work with.

7. Once you've worked successfully with a couple of contractors, you find that it's a whole lot less difficult to find good ones and that they will come to you by referral. My drywall guy stays busier with more work than he can do but still found time to send a guy in to get the addition done at my house this spring, because not only do I keep him in work, I don't tend to have hard deadlines and let him work jobs in the down times when he has a day or two free here and there. He's not going to drop a $10k drywall job to do my $500 job, but if I am OK with him sending a guy on Tuesday and Sunday we can probably get it done this week.

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10 Reply

Jay HinrichsBusiness Member

Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

5y

where to begin.

you have a basically impossible mission with most of the rehab to rent model.

Investor needs rehab numbers to be very low so their numbers work .. So in most instances the budget they need to hit is not even close to reality of what a very busy successful profitable contractor is even willing to work for right off the bat.

And by my definition this is a contractor that can carry a job.. Gets paid net 30 just like I pay my subs on new construction they do the work during the month invoices due on the 25th checks are mailed on the 10th and if they miss the 25th their check does not go out to the following month. So what you have is contractors who have their OWN accounts have money themselves can pay their crews for months at a time out of their funds then get paid.

We would all like to have contractors like this and a lot of books say you should pay for work in place .. But then reality hits your asking a contractor to do a 75k reno for 30k because you bought a 50k old house and to make your numbers work you can spend no more than 30k .. so right there you have issues.

then you have contractors that are willing to do those really small jobs and forget about bids thats another subject but these guys dont have the money and they dont have credit so you as the investor have to front them 1.3 to start or half to start and then hope and prey it gets done.. Now you as an investor if you using HML then you know the HML wont front rehab they have been burned to many times so you the investor have to take the risk on being burnt. So even though you have a loan in place you still have to front the rehab and then wait for the HML to back fill you.

So to me for these old cheap house reno's its round hole square peg.. they get done but not without a lot of frustration and a serious amount of OOS investor having big cost over runs or work never done or put down the 1/3 and the contractor just goes dark and you flat lose the money.

these are the realities. so end of the day you get what U pay for and this is why Turnkey works at least those guys are there on the job sites daily to make sure the contractor does not rip them off.. but even the turkey guys to get best pricing will have to front materials and labor many times.

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David A.

Rental Property Investor · Los Angeles · Member since 2019 · 157 posts · 175 votes

5y

Can't agree more here, if you want a serious contractor you need be a serious client. My projects are $100k+ ground up new build homes and you bet when I meet a contractor for a bid the following things are in place and well known:

- I am on title (we aren't talking about something where I'm thinking of putting an offer in or still in escrow)

- I have building permits in hand and I know exactly what I want

- I am fully funded and will make draws by wire to make sure you get paid the day the inspector signs-off on that phase

- I have another project lined up for the moment you are done with this one.

10 Reply

Michael Ablan

Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes

5y

@James Wise - Construction is an insanely difficult business/line of work. I know this because we started our own construction company because of the unreliability of companies we'd hire for our projects. I give high level construction company operators a ton of credit for pulling it off. It's mind-blowing how difficult it is...and here's a couple reasons why

1.) You're pulling from a work force of highly volatile people, who're tasked w/ doing an extremely physically and mentally draining job (in whatever weather mother nature provides for the day). They're also usually not tech savvy.

One day you have the hardest working crew that's ever been assembled. But then the next day those same people are making stupid mistakes (if they're even showing up at all).

It's a revolving door business, which is incredibly difficult to manage without the proper systems/admin staff (which 95% of them don't have).

2.) Construction is incredibly complicated. There's 10+ different trades and they all require a different set of skills and they all attract a particular type of person. Pair that w/ drug & alcohol abuse....well, I don't need to say much more.

On top of that, you're dealing w/ code/permits, city policies, material delays/shortages, labor shortages, change orders, the weather, ect. This is a highly complex business that's normally run by guys who were able to get really good at a bunch of the trades. The better ones have some leadership attributes... but there's so much more to this than that.

3.) I don't think people understand how much time goes into properly evaluating a home and putting together a solid quote for work. On top of that, most people know nothing about construction. So when they get a quote, they usually say "a tile shower costs WHAT?! No thanks, maybe next year...." Or they agree to it and then change their mind when the idea starts coming into reality....

We get a ridiculous amount of people asking for us to come "give us a quote." We would need to pay a full time salary of $50-$75k for a proper takeoff estimator. I can tell you one thing...most investors don't have deals w/ enough meat on the bones to pay for a contractor capable of staffing a solid takeoff estimator. That means it's usually the owner/foreman doing it (whose also needed to work on the jobs/answer their phone/go on more job estimates).

Overworked & over-extended = poor quality of work, missed timelines, and way off budget

I could keep doing, but you get my point. Construction is hard AF and requires a significant amount of time and resources to do well. "Investors" who kick tires aren't at the bottom of the barrel...They aren't even allowed in it.

My advice is this. If you can get in with someone competent, then treat them like GOLD and let the small crap slide. Pay them on time. Don't do change orders unless ABSOLUTELY necessary. Be extremely clear w/ your expectations upfront and have an solid plan put together before you even pick up the phone.

As investors, it's your job to have the vision and end result planned out and put together. Do NOT rely on them to do it for you...you'll only be disappointed

12 Reply

Jim K.

Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes

5y

One thing I haven't written much of here but I spend a lot of time thinking about is that in addition to the simple, painful fact that there is a very limited supply and a very high demand for good people to fix houses, there's a quiet but very powerful culture clash taking place between many would-be real estate investors and many contractors/handymen/tradesmen. The two barely seem to be able to talk to each other in terms they both understand.

5 Reply

James Wise

OP

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 31k+ posts · 20k+ votes

5y

Originally posted by @Michael Ablan: