Plumbing Repairs - How to Save 50% on Just About Everything

My real estate holdings are by no means extensive.  I have six buildings for a total of nine rentals units.  In these units, I have:

1. - 9 hot water heaters
2. - 5 furnaces
3. - 2 boilers

Part of my buying strategy is to look for property that has these items at the end of their useful life.  This allows me to offer less money on the basis that I'll have to replace these items in the near future.  So far, only one unit had any of these components less than 5 years old when I bought it.

Companies vs. One guy and a Truck ... the Showdown

Big companies are great.  They have 24 hour emergency call support, you can call their number and someone will answer and dispatch a plumber to your rental.  It's great.  For $100 you can get a valve closed above a hot water heater, or the gas shut off to a furnace that went bananas.  This is approximately where the use of these companies ends.

This about it.  I mean, really think about it.  How did you know about that company in the first place?  Did you see a billboard, or a radio commercial?  Did you drive past one of their company vans that's covered in a giant phone number and a catchy slogan?  Were they the first google search result that came back on your phone as you frantically searched while trying not to tumble out of your bed onto the floor?  If you're honest, the answer is almost certain: yes.

This is the reason why you can't use these companies to do real work for you.  The money that they will charge you to do the work will fund so much more than their time and materials.  Billboards aren't free ... even the lowest quality bandit signs cost SOME money.  800 numbers cost money.  Having an answering service starts at 'not cheap' and runs all the way up to 'decadently expensive'.  This is why every estimate they give you is patently ridiculous.  They need to make enough money to pay for all the extra fancy things that they use to get your attention.

Examples

1) water heater rusts out, and dumps water all over the basement.  I had a 24-hr plumber come out and shut everything off.  He then let me know that for $2,400, he could have everything replaced, good as new.

2) Thermostat assembly malfunctions on a 30 year old boiler.  For $4,000 I can have a new boiler installed, plus extra for any unforeseen material (copper, etc.) purchases to fit the space.

The Little Guy

Little guys play the game differently.  The drive around in a Yukon, or maybe an F-250.  They don't have their phone number on the side of the truck.  They buy their invoices in a value-pack from Office Depot.  They put up adds on Craigslist, because it's free.  You call them and you get their voice mail, and often, the mailbox is full.

These guys are way more reasonable to talk to about what you want to do.  The biggest thing is materials.

The little guy will allow you to buy the materials yourself, or compensate him for materials at cost, which you will never, ever get from a big company.  But this is only the tip of the iceberg.  The biggest difference is the way that the little guy gets his materials.

There are plumbing supply warehouses that only contractors and businesses can buy from.  They have very little online presence, and they don't really advertise.  These places are so cheap it will hurt your face.  I've obtained big ticket items from these places (via the little guy) for 25% to 30% of what you can find them for at Lowe's or online.  I don't want to call out brands, but this means I can get a good brand name furnace for about $500 (80% efficient, 10 yr warranty).  I've had several water heaters replaced (parts and labor) for less money than it costs to buy a water heater at Lowe's or Home Depot, and I'm not getting some random 3rd world equipment, it's high quality brand names you'll recognize.

The last part of it is the labor.  I don't ever want to let the little guy think I don't appreciate him and his hard work.  In fact, I'll often pay him $150 or $200 an hour for his time.  I can do this because we had an honest conversation about what was needed and how long it would take.  

What that means for me: I know that it takes about two hours to swap out a furnace. 

What that means for the little guy: He can make a whole day's worth of income in two hours by prioritizing one of my properties and doing work for me.

Little Guy to the Rescue (Examples Revisited)

1) Had a new furnace installed (parts and labor) for $925

2) Had a new boiler installed for $2000 (was quoted $2200, but there was an additional  discount on the boiler, so I saved even more)

Important Notes

Don't even think about using someone to do this work that isn't properly licensed.  It's not possible to have the equipment warranty validated without real license information.  This means that you can't just hire a random $10/hr handyman to do this work for you, and expect the same quality result.  

The idea isn't to cut corners with the quality of the work, it's to understand what you have available to you.  I talk to other seasoned, wealthy real estate investors all the time that let their units deteriorate because they don't think they have the money they need to fix the things in their units that are breaking.  These are not dumb people ... they just don't know how to do it better.

The time you spend finding a Little Guy and building your relationship with him will pay off for you and for him.  He will benefit from the work, and you'll benefit by being able to maintain your units at the most efficient price.  And truthfully, building these relationships will help you find other Little Guys for other maintenance domains (electric, roofing, and so on).