How find a contractor to help estimate rehab costs

Question

Hi there!Been interested in investing for a while and been listening to all the amazing podcasts. Thanks to everyone for sharing their journeys. I'm Finally trying to move on this and am looking at houses for purchase as a House Hack (first home w/room rentals) and open to a few updates, but really don't want to tear it apart on my first rodeo. Been looking at houses in the suburbs of Boston, Massachusetts area and I have a real issue looking at a house and saying "yes, that will be 30K in rehab costs", or "oh man, redoing those floors, adding lighting, cutting out that wall will total $XXX" I've been thinking of getting a contractor or inspector to do a walk through with me on them before I even put in an offer because I really feel like I'm flying blind. Has anyone done this before? For a contractor, how much do you offer as a fee for the estimate/walk through? Do they even do that sort of thing?Thanks so much! I really appreciate any insights!~Anne

Mike Hurney · Answer

@Anne FaberWelcome.We've always got Contractors at our monthly meetings but they're reluctant to do walk thoughs with beginners because:They usually don't have the property under agreement. or they're looking to make a half price offer w/100% Seller Financing.or they'll try to use three other contractors for estimating and never call any back, even if they purchase the property.or they'll get the terms, then cold feet and they walk when the Contractor would have done the deal or partnered with them.@John Tower I know I'm preaching to the choir;-)So Anne, if you do meet the competent Contractors and establish some rapport, it usually works out for both!

John Weidner · Answer

I personally haven't read it but alot of people recommend @J Scott book on Estimating Rehab costs. I would probably start there. I base my repair costs all on my latest rehab pricing from the last project I do on any new deal Im analyzing. So the real true answer is you need to actually complete a project and have your team set up to have a ball park on what you would pay in repair. Now I always check my numbers on the next project again by getting more estimates to make sure Im still in line after I buy the house but Im usually pretty accurate on what Im going to pay for something.

James Bowie · Answer

@Anne Faber If I were in your shoes I would probably take the following approach: Try using a service like Angie's List to find 2-3 handymen/contractors that can walk through the property with you and provide you a bid based on a clear scope of work to get the house up to the condition you are looking for. Set these appointments up on the same day and space them about an hour apart or so. Next, see if you can find a contractor or experienced rehabber through your existing network of friends and family that you can trust, that is willing to be a neutral 3rd party as you meet each potential contractor on site. That way you have a second set of eyes and ears with you to help you determine whether or not your are getting a straight story from whomever you interview. If @John Tower is willing to drive down and help you that's great. But I think this only works if the neutral 3rd party knows in advance they are not a candidate for the job. @Mike Hurney also has a good point in that you might be best served waiting until you have the property in contract to get your estimates. Just make sure that you are still within your due diligence period and that your contingencies have not been waived. $30k is not an unreasonable amount of money to fix a place up, but here in California there is a distinct difference in remodel pricing between homeowners and investors. The same contractor may bid the job for us 30% lower than he would bid the job for a homeowner (and he will likely make the same money at the end of the job). The reason for this is that as an experienced investor we understand how pricing works and we have our scope of work, materials chosen, and all other decisions made before we start the project. All material is then delivered to the job exactly when it's needed and we don't make arbitrary changes during construction. This efficiency affords the contractor the ability to get the job done faster and with fewer resources than the typical homeowner who will require more time, attention, and changes along the way. The bottom line is that if you are able to work with a friend to get your scope of work ironed out before you start, you may be able to negotiate better pricing by showing the contractor that you can keep the job moving quickly. Good Luck!

Manolo D. · Answer

Interesting post, I would accept any form of payment especially if you are starting out, I would give away all my inputs to protect the client, educate them as much as possibly for a short time. Contractors have a budget in their day for opportunity costs, they also have their own criteria, or at least I do. Most of newbies that has not purchased a property, has only 5% chance of purchasing, so I might just as well sit on a couch and watch tv than to spend time and money to bid on that job. Long term relationship? Really? What if I ask the client, how much job can you give me within the next 12 months? Can they answer 50k minimum? Even at 50k, it is only a 3 week job for me or 1 week if I don't have a project on-going. If you are flipping 3 a month or more, yeah, the volume is there, and opportunity costs are much more lesser, with the 36 bids, there is a big chance a contractor can get 3 projects at worst, with 1 project, he can break even on all those walks and make profit on the other 2.@Anne Faber With the post above, I could say that you pay for education, $100 for 4 hours with a contractor is a good but average price. Make sure you make it clear to them that you want them to explain everything on how they arrived at their bid/price, asking on how much is not enough, you should also ask the why, or how things work (i.e. you should know that primer goes first before paint). 3 walks, you will feel like an expert. It will cost you 300-500, but a lot of education, it is way better than analyzing it wrong and spending thousands in mistakes.

Jerry Houk · Answer

I would be willing to help you with it, you can upload some detailed photos and measurements and i can give you some ideas

Carl Dean · Answer

@Manolo D. I can understand your points and I certainly agree with you. I have I very streamline system myself and to be honest I should have clarified my perspective a bit more. We have a formula that tracks the potential rehab cost base on sq. ft. If the numbers work when broken down in a spreadsheet then we send our guys out to bid (before purchase, assuming they can get in). At that point I'm purchasing at least 80% of the homes. Wasted time is something nobody likes. I find that with my consistency, my crews are battling to finish these and get the next rehab.

Jerry Houk · Answer

Any quality contractor ahould be willing to do a free estimate to establish your business if they feel your serious about it, i flip homes for an investor for a living and number can very but first thing make sure you have a contractor not a handyman huge difference between being able to do some work and managing a project. And not always but a rough idea on your labor cost is about twice the material cost at minimum. Good luck! And always be careful to pick someone who cares as much as you do about the rehab and can meet deadlines

Anne Faber · Answer

Wow. Thank you, thank you! you have all been so very helpful@Lydia S. - totally hear you on the networking. I have to admit, I was a little too theory based, and then when I started looking at places, was like, "how much would replacing windows actually cost me??" So in hindsight, definitely networking with contractors would be the way to go. and thanks for the advice, I plan on tracking every expense this time around so I have a better plan for the future, for sure. thanks for the help!@John Tower - Thanks for your advice! I appreciate the information, and realize I would definitely have to make it worth the contractor's while to provide an estimate. Thanks again!!@Jason Carter Thanks for the contact! @Mike Hurney Good to know! I know newbies are the worst! thanks for letting me know the pain points for those who would venture to work with them! @James Bowie You are totally right on the fact that I can have it under contract with contingencies and then get the walk through! That also gives me the best way to test myself and my initial estimates! Thanks!!! I also appreciate the "neutral third party" idea because I was also afraid of getting an inflated estimate, if the contractor assumes they will be the contractor for the job. Such great ideas! You have all really helped to clarify things that were swimming around in my head. I can't thank you enough for your help!I really appreciate it!

Mike Hurney · Answer

@James Bowie"Try using a service like Angie's List to find 2-3 handymen/contractors that can walk through the property with you and provide you a bid based on a clear scope of work to get the house up to the condition you are looking for. Set these appointments up on the same day and space them about an hour apart or so. Next, see if you can find a contractor or experienced rehabber through your existing network of friends and family that you can trust, that is willing to be a neutral 3rd party as you meet each potential contractor on site. That way you have a second set of eyes and ears with you to help you determine whether or not your are getting a straight story from whomever you interview. If @John Tower is willing to drive down and help you that's great. But I think this only works if the neutral 3rd party knows in advance they are not a candidate for the job."Did that work for you?

John Tower · Answer

Hi Again Anne, I have been a contractor for 30 plus years snd am currently working wit h someone who is buying, Rehabbing and flipping. As Lydia mentioned above networking and developing those relationships is going to be key moving forward. Speaking from experience I often times am hesitant to go walk a property with someone I don't know for a number of reasons. Iwork in the Central Ma area but would be open to looking at something with you to give you an idea on numbers. I wouldnt be a good csndidate for long term becsuse my drive time would be excessive.