All Forum Posts by: Alex R.

This is no laughing matter john and I kinda know what I am talking about. Let me give you an example to make it crystal clear:

I needed to replace my car passenger side signal lamp. A call to the dealership and they quoted me $ 85 for everything. I declined. Instead I went online: Purchased the part for $ 12 (took me 5 minutes or less) shipped free to me in two days (I have Amazon prime membership)
I took the lamp to one of those amigos who in the past replaced my car stereo for a fair price with good quality and asked him if he can do this too. He said yes and asked for $ 20 which I negotiated it down to $15.

After it was done and working I paid him a tip of $2 (No kidding) and now it works like a charm.
All in all it cost me $12 + 15 + 2 = $ 29 versus Dealership $ 85. Magnify these numbers 500 times and the same story may be applied to a flip project. :)

Hello Bill and thank you for your reply.

I wonder How did you pay the seller for that project. Was it a fixed price or a percentage of eventual selling price or you set a profit and expenses for yourself and paid the difference to the owner ?

Each of these methods have their own cons and pros.

For example if you promise the seller a fixed price and then later on house sells for less than expected then your profits will be marginal or you may end up losing money.

Meanwhile if you can sell it for a much greater amount than expected , seller might want to take a cut of your profit beyound what was agreed upon.

How did you go about this ?

J Scott

That's where the 5% contingency plan, comes to the picture since the contractor undountedly will add some kind of contingency for unforseen construction costs. Whether it is for vandalism, construction site theft, leaks, termites , bees and other issues that you couldn't know at the begining at the start of the project.

A good recommendation I hear is to incorporate a 5% contingency. For example if the rehab was budgeted at $10,000, you would add another $500 for your contingency

Not a major issue when handled correctly IMO.

Steven

$ 30 / day equals to $ 900 a month and for a $ 100,000 property i think it will more than cover the mortgage + holding costs + quiet costs as well.

The idea of setting a bonus reward also seems lucrative and fair.

But I also had the feelings that $ 30 / day penalty might be low. So what do you think would be the better numbers for Late fee AND early completion bonuses (Price / day). throw in some numbers

And if you want to watch them roll their eyes, and never talk to you again, ask them if they'll wait until when and if you sell your rehab, to get paid.

Point taken but i also don't want to pay them all upfront so I came up with an arrangement like this:

% 20 upfront to start the work and purchase necessary materials
% 30 after the first phase is done (you define what will be included in this phase)
% 30 after the second phase is done (you define what will be included in this phase)
% 20 upon completion of project minus any penalty fee for each day passed the deadline. for a $100,000 i am thinking of $ 30 / day late fee penalty so me as the investor will not lose any money and also the contractor is more motivated to finsih the job on time.

Also having a general contractor who does the entire thing for a fixed price will save you lots of time and headaches; even though it maybe a bit more expensive but in the long run I think it is well worth it.

Am I thinking correctly here ?

you've just perfectly hit the nail on the head with this comment

J Scott

I like to get more details about who are these PM, GC, investor level GC, Retail level GC and how is their duty statement (job description) different from each other ? (basic definitions)

The problem here is I live in a relatively smaller city (bakersfield) in California central valley and I am not sure when if there is really that many different options and different type of contractors available down here.

Maybe I should just do some research, then make an appointment witht few of contractors who pass the initial internet sceening test, show them the property and ask them for an estimate and the timeline of work.

This may give me a better idea which contractor to pick.

Glenn

... and I am making it even more stringent by saying find a contractor who is competent AND accepts payment after property is sold. but what if I somehow manage to do this ? at least I should try

Champak Shah

You just gave me a good idea: To pay the contractor AFTER house is sold and pay them a fair interest until it does.

This will motivate the contrators to finish the job fast, because they know the sooner the job is finished, the sooner they will get paid for it. So no room for goofing off and wasting time here :D

Another Point:

--It is not Wholesale or Flipping --the way you describe here --it is Fix and Sale --

I like to know what is the difference between Flip and Fix-Sale. Aren't they the same thing ?!!!!

Cheap though is often way more expensive in the long run.

nicely said and put