Rental Property Investor · Columbia, MD · Member since 2019 · 52 posts · 64 votes
Needless to say I'm not having beginner's luck when it comes to connecting with a general contractor. I have attempted to contact 3 different GCs thus far and only heard back from one. The one that responded pretty much said "You're a waste of my time. I only work with experienced investors. Contact me when you have a property under contract and then I'll come out and give an estimate for $300." So let me get this straight. I'm supposed to put a property under contract before I even know what the construction costs are going to be for the rehab? Is there something I'm doing wrong here?
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Phillip S. No, you're just new and they see you as a risk. Just like everything else in this world, new people take time to be taken seriously. I had an experience similar to your experience, the GC ripped me a new one when he found out I wasted his time. Funny thing is, I own properties now and he calls asking for work. I hold up three fingers and tell him to read between the lines. Remember, what goes around comes around.
Rental Property Investor · Ithaca, NY · Member since 2015 · 1k+ posts · 1k+ votes
7y
@Phillip S. No, you're just new and they see you as a risk. Just like everything else in this world, new people take time to be taken seriously. I had an experience similar to your experience, the GC ripped me a new one when he found out I wasted his time. Funny thing is, I own properties now and he calls asking for work. I hold up three fingers and tell him to read between the lines. Remember, what goes around comes around.
My guess is you are in an area where there is a lot of work and they can be picky about what they do. It is unfortunate, but karma is a ***** and Nick's post is testament to that.
Having said that if you are looking for quotes on work that may be done and you don't own the home, they may see that as a bigger risk and therefore may charge you for their time. Some property inspectors are able to tell you how much things should cost to get repaired. Ask your realtor for recommendations of either a contractor or inspector with a building background.
Rental Property Investor · Columbia, MD · Member since 2019 · 52 posts · 64 votes
7y
@Max T. Thanks for the comment. Rough ideas can be a recipe for disaster if you are not experienced. A "rough idea" could be off by $20 grand and easily sink a project. I want to avoid making that mistake, which is why I'd prefer to get a quote before I even submit an offer on a property. I understand where you're coming from though.
Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
7y
You can always back out of the contract if your rough idea is significantly off from the GC estimate. Going under contract does not = buying the house.
Investor · Tallmadge, OH · Member since 2015 · 258 posts · 275 votes
7y
@Phillip S. if you can’t afford to walk away from a deposit, make sure you include an inspection contingency. Also, $5k is a huge deposit; what is the price of the properties you’re looking at?
Also, as others here have said, this is just one of the difficulties of getting in the game. Honestly, if you are expecting a contractor to come out and give you a bid before you’ve even made an offer, you need to be paying for their time. Contractors are busy. Many contractors won’t even want to come out until you own the house outright, so start networking now to find someone willing to come give you an estimate while you’re under contract. Also, it could help to tell them you’re not looking for a full quote (that takes a TON of their time), but are just looking for an estimate on the work needed.
Also network with other local investors. In my experience, many RE investors really love what they do, and unlike contractors, ARE willing to donate their time (well, in my case, I’ll work for a quality cup of coffee) to help out newbies. My husband and I have walked properties with many a new investor to help them with rehab cost estimates, and also refer our contractor contacts that we’ve developed.
Rental Property Investor · Columbia, MD · Member since 2019 · 52 posts · 64 votes
7y
@Max T. I suppose an inspection contingency is an option, but wouldn't that hurt my chances of getting the house if someone else who knows more about construction than I do submits an offer that doesn't have that contingency? I would probably have to increase my offer price to compensate.
Rental Property Investor · Columbia, MD · Member since 2019 · 52 posts · 64 votes
7y
@Jen R. Thank you for the comments and suggestions. $5K is a number I just threw out there, but around here (Baltimore market) that is not unheard of especially if the property is an a more desirable part of town. I really hope I can find someone like you described who would be willing to walk a property with me and give their opinion on the rehab costs. By the way I grew up near Dayton :-)
In the end someone has to take the risk. In the investment world that risk is traditionally accepted by the investor. Which is why when there is a reward at the end the investor gets that. You are asking contractors to come out and do free work/quickly enough that you can get it under contract before someone else does. Then when it works out you are rewarded. If it does not work out then they just lost their time and you didn't lose anything. If you want them to assume the risk of your project then you can joint venture where they get a share of the profits at the end. You may find a GC more willing to do it that way.
Investor · Tallmadge, OH · Member since 2015 · 258 posts · 275 votes
7y
@Phillip S. it often costs more to get started (in any ways), then yes, you develop efficiencies as you gain experience and assets. Yes, you will have a disadvantage compared to someone who can offer all cash, no contingencies, and close in less than a week. That is what my typical offer looks like today, but when I first started I needed financing contingencies and inspection contingencies as well. Contractors are typically going to charge you more than an investor they've already developed a working relationship with. It takes time to build those relationships and find the contractors who do quality work at a reasonable price. Yet another reason to get out and start networking. When you don't have experience or a ton of cash, relationships need to be your biggest asset. Join your local REIA and attend regularly. At least twice a year, our REIA does a rehab walk, where a few of the experienced investors will take a group through a few properties and teach them how to estimate costs. Look for BiggerPockets and other RE meet ups. Find investors who would be willing to let you pick their brains over lunch. If you have any kind of construction skills, offer your own time and labor in exchange for following along with someone else's project. Read as much as you can. Drive around looking for distressed properties that are off the market and contact owners.
In any case, those are just some of the things that I did when starting out.
I’m actually a New Englander who married into an Ohio family, and have been here ever since. Learning to love the Midwest a bit more each year ;-)
Rental Property Investor · Louisville, KY · Member since 2008 · 342 posts · 123 votes
7y
The GC has the business skills of a banana slug but I can understand them being hesitant if they don't think it will turn into a job.
My area $100 - $500 is more standard for a deposit so make sure $5k is normal for your area, that seems really high to me unless there is a full blown bidding war going on and it is a great property.
I would join your local REIA, they might have a website or facebook group where you can ask for advice on what certain jobs cost. Once you get a feel for it a 300 SQF hardwood refinish is going to be in the same range for the same type of anywhere in your area. A new kitchen of the same size, fit and finish in a B rental is going to be around the same costs. That's why you always hear experienced investors can go in and estimate a rehab in 10-20 minutes with 5% of the costs, they have a good feeling for what the cost is in that type house for a certain type of finish.
Rental Property Investor · Cleveland, OH · Member since 2016 · 653 posts · 769 votes
7y
If you're looking to take on a rehab project, you should be willing to pay a few dollars to learn the business you're attempting to get into. If you have to, pay a contractor a couple hundred bucks to walk you through the house/rehab estimate process with you and you'll actually get a feel for the business. If you keep doing it, you'll get a feel for the costs on your own over time.
In my experience (and many others, I'm sure) only a tiny fraction of wannabe investors actually pull the trigger an buy something. So you're asking someone to take let's say a 10% chance bet on you, when they might not even get the job anyway. If they're a respectable contractor, they'll value their time. And you don't want a contactor who doesn't value their time.
Rental Property Investor · Columbia, MD · Member since 2019 · 52 posts · 64 votes
7y
@Ryan Evans I think what you stated is the tack I will have to take to learn how to do this on my own. However the GC I spoke with wouldn't even do that unless I already had the property under contract.
Investor · Surprise, AZ · Member since 2018 · 156 posts · 110 votes
7y
@Phillip S., I may have missed, but do you have a property under contract? If so, and you have access to the property, why not go walk through yourself and make a list of things you would want done? This would be the start of your Statement of Work for the GC. Then if you get someone to walk through with you, you can give them your list and they can point out other things that you may need done and then they may be able to give you a better idea of what your costs would be.
Rental Property Investor · Columbia, MD · Member since 2019 · 52 posts · 64 votes
7y
@Michael J. $5K is just a number I threw out there, but in my market (Baltimore) that is not unheard of. The last property I bought was an auction that required a 10% deposit, which was about $11K.
I'm curious if there are "rules of thumb" that can be followed to get a rough estimate of costs. For example if fully renovated comps in the neighborhood have 4 beds / 3 baths and 1800 sq ft., and the subject property has 2 beds / 2 baths and 1500 sq. ft., and I want to add 2 bedrooms and 1 bathroom to the layout, is there a rough formula for that??
Rental Property Investor · Columbia, MD · Member since 2019 · 52 posts · 64 votes
7y
@Account Closed Nope no property under contract yet. I'm just trying to connect with one or more GCs now so when the opportunity arises I can call them up and say "hey there is this property I'm looking at making an offer on could you take a look at it and give me an estimate?" However what I'm hearing from folks on here is that is not how it generally works, and I need to get the property under contract first. To me that seems like putting the cart before the horse.
San Antonio, TX · Member since 2019 · 930 posts · 836 votes
7y
There would probably be too much variation between properties for any kind of rough numbers to work for the project as a whole. You could maybe work that way for a few specific project costs, like the painting and flooring, but things like plumbing, electrical and drywall will really depend on the level of work needed (think filling in a few nail holes vs repairing several huge chunks of missing drywall where someone tore out copper pipes).
Needless to say I'm not having beginner's luck when it comes to connecting with a general contractor. I have attempted to contact 3 different GCs thus far and only heard back from one. The one that responded pretty much said "You're a waste of my time. I only work with experienced investors. Contact me when you have a property under contract and then I'll come out and give an estimate for $300." So let me get this straight. I'm supposed to put a property under contract before I even know what the construction costs are going to be for the rehab? Is there something I'm doing wrong here?
I'd have to agree with the GC here. Why on earth would you expect the GC to commit their time to you if you are not willing to commit money to them for said time or even put the property under contract?
Rental Property Investor · South shore, MA · Member since 2017 · 1k+ posts · 1k+ votes
7y
I would be more concerned about the seller if I were in your shoes. Starts things off on the wrong foot asking to have an inspection/estimate done prior to making an offer.
Investor · Surprise, AZ · Member since 2018 · 156 posts · 110 votes
7y
@Phillip S., totally understand. I'm new into this and I called myself being proactive and wanting to build my team and get contractors lined up as well. But found out very quickly that is not going to happen without an actual property ready to go.
Once you actually get a property just make sure you do as much due diligence on your part first and then allow enough time to get some folks out to look at your property. But I would definitely have an idea beforehand as to what it is you want done, don't leave it up to the contractor to tell you everything you need.
@Account Closed Nope no property under contract yet. I'm just trying to connect with one or more GCs now so when the opportunity arises I can call them up and say "hey there is this property I'm looking at making an offer on could you take a look at it and give me an estimate?" However what I'm hearing from folks on here is that is not how it generally works, and I need to get the property under contract first. To me that seems like putting the cart before the horse.
You need to be able to give yourself an estimate of the work that needs to be done. Do this when you take a look at the property. Its pretty simple to get a general idea with some research online. If you know what your ARV value has to be, work backwards from there.
Put an inspection contingency on the offer, or re-word it somehow so its a contingency based on repair costs not exceeding x amount.