When accepting bids from contractors on a rehab do you....

Question

I'm interested to hear from other Rehabbers on how they communicate their budget to contractors.

Do you keep your budget to yourself until you collect all your bids?

Or do you hint or perhaps even come straight out and tell them how much you have to spend based on the level of rehab/finish-out you need?

Discuss..... :)

J Scott · Answer

It goes both ways.

You want to know if the investor's budget is realistic.  By the same token, investors want to know that prices are reasonable before they waste their time on contractors who overvalue their services and work.

Personally, I hate dealing with contractors who tell me they have reasonable prices and then come back at twice the cost of another contractor who will do as good a job, in as short a time frame and for half the price.

There are plenty of investors who are unreasonable when it comes to budgets.  The are just as many contractors who are unreasonable when it comes to prices.

Wayne Brooks · Answer

I've been on both sides.  As a contractor, you give me a detailed scope of work..I give you a price.  If you want a lower price, we change the scope of work.  I usually worked as a sub to GC's on projects involving earthwork.  I had to tell many GC's that I didn't care what their fantasy budget number was, or how they came up with it, but this is the price for the work detailed.  Realize of course that many times a quoted "budget" number is just some low ball BS number that's quoted in order to try and beat you down.  Obviously, you want legitimate prices though.

J Scott · Answer

Completely disagreed.  There are different types of contractors, and contractors have different levels of overhead and different profit requirements.  Just because 3 (or 50) contractors give you a specific bid doesn't mean there aren't other equally qualified contractors who won't give you a lower (or higher) bid.

I have contractors who will charge me $X for the work they do.  I can easily find other contractors who will charge $Y for the same work (where Y could be higher or lower) -- that doesn't mean they aren't both equally qualified.

Michael Woodward · Answer

@Paul Z. I think the answer to your question depends on your experience and level of confidence in your budget numbers.

If you're new to the business and you have no historical pricing data to work with then you will have to get bids from multiple contractors to figure out what the going rate is. In my experience, the bid amounts fluctuate by how "hungry" the contractors are so bid numbers can change quickly with the market.  You'll have to sort that out as you go.

If you're an experienced investor with lots of historical pricing data to work with then you will pretty much know what the bids are going to (or should) be.  This is a much better position to be in because you can negotiate with the contractors better.

You will probably run into some "take-it-or-leave-it" contractors but you will also find some that will care about your budget and work toward helping you save money where ever possible.  THOSE ARE THE GUYS YOU WANT!!

I've been doing this for quite a while so I'm pretty comfortable that my estimated budget is going to reflect reality.  When I meet with my contractor, I ALWAYS give him a project budget and ask for his help to get it done at that price.  He's great at finding ways to save me money including negotiating with material suppliers for discounts!  When my project succeeds, my contractor benefits so we're both motivated to work in cooperation.

Hope that helps!

Mike B. · Answer

I give the budget. I've worked with my crews for quite a while so I know what a fair price should be for me and for them so they can make some money. Sometimes I'll throw a little more in there and sometimes I have to cash in a favor with a tighter budget. It works well for me.

Account Closed · Answer

Tell the GC what you want done and let him give you a price, and if you like the price move forward or get another GC.

Joe Gore

Paul Z. · Answer

Thanks Nicole Grant !

Nicole Grant · Answer

I try to be realistic with myself by figuring out my ideal budget and knowing I might be around 2K-5K above that depending on how things go when we get inside. If that overage still works with my numbers then I can move forward with the deal. As far as my contractor goes, I never tell them what my actual budget is. I have a couple contractors that I use and I make sure I get at least 2 bids on all my projects. Sometimes if I prefer working with one contractor I will come back to him with the lowest bid and see if they will match that. A lot of the time it works.

@Paul Z. undefined

Paul Z. · Answer

Couldn't agree more @J  Scott . What you just said right here is large inner reason as to why I started this discussion in the first place. My time, reputation, and business development as an investor can't be wasted on anyone who is not willing to work on the same team and at the same level with a win-win scenarios.

Joseph Corlett · Answer

I am a licensed contractor in two states. If I don't know your budget is realistic for the work we're discussing, you'll get no free estimate from me. My time is valuable and I don't waste it on dreamers or on potential customers who don't value my reputation.

When accepting bids from contractors on a rehab do you....

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