All Forum Posts by: Jess Paskach

Cheated and copied this from our website, but hope it helps you better understand the "contractor market"

Maintenance is very challenging as it’s never fast enough for tenants, or cheap enough for owners. 

Biggest challenge is the time it may take to obtain a satisfactory bid – and requests for multiple bids only increase this delay.

Another challenge is agreeing on what maintenance issues should be addressed.

• It’s not as easy as everyone thinks to find dependable, yet affordable contractors. If they’re good, they are booked weeks or months in advance.
  
• A lot of good contractors don’t advertise because word-of-mouth advertising keeps them busy. This makes it hard to find them.
• Contractors often want 50% down to start a job. We find the risk involved is too high to do this. Contractors claim they need these funds for materials, but the reality is they are often using the money to “rob Peter to pay Paul”. We prefer to cover materials and only pay labor when work is satisfactorily complete. Many contractors won’t agree to this.
• The cheapest contractors typically work for cash to avoid taxes and want to be paid immediately when they are done. We require them to complete a W-9 for tax purposes and also need time to inspect their work before paying them. So, they won’t work with us.

We’ve also learned that contractors usually fall into one of the following categories:

• They can do new construction, additions, full remodeling, but maintenance work is too small for them.
• Typically pay for advertising, have sales staff, separate bid preparers, inhouse designers, full office support.
• Equates to a lot of overhead, leading to markups of 50%+.
• Bids: Usually have a dedicated salesman that does their bids, so able to supply quality bids.

Comment: Usually have the highest prices & quality, and so these are the contractors you’d hire to work on your own home. Too expensive to work on rental properties.

• They rarely do new construction (except for garages), focus on additions & remodeling, no maintenance work.
• Often online advertising, may have one-person sales/bid staff, outsources design, office support typically consists of secretary and bookkeeper.
• Equates to a decent amount of overhead, leading to markups of 35%+.
• Bids: May take a while to get a bid from them because they don’t have dedicated sales staff. Often depends on how busy they are.

Comment: Contractors to work on your own home, flips, high-end rental properties. Usually too expensive to work on average rental properties.

• May build an occasional garage or addition, typically focused on remodeling and maintenance work.
• No advertising, the contractor is the sales/bid staff, no design services, office support is typically wife/girlfriend/mother.
• Low overhead leads to markups of only 25%+.
• Bids: Difficult to get a professional-looking bid from them because they would rather be making money working, instead of spending their time doing bids for free.

Comment: Contractors that are perfect for medium/low-end flips & rental properties. Because they don’t advertise, difficult to find.

• Not able to do any new construction or additions, rarely licensed, focused on low-end remodeling & maintenance work.
• Just one or two-person operation with no support staff.
• Very low overhead, markups seem low, but they often end up higher due to issues they didn’t price.
• Bids: Almost impossible to get a reliable written bid from them because they don’t have the knowledge to prepare proper pricing. So, they usually only give verbal pricing – that often changes once they start.

Comment: Contractors to avoid as they are unreliable in every way possible, including showing up. 2-day jobs turn into 2-week jobs, or worse. Forget trying to get them to return and fix poor work. They always want to be paid in cash as soon as they are done. We cannot hire these types as owners & tenants will not be happy with timing or quality of work.

We hope our categories make logical sense and help you better understand the challenges we face.

Check with your local REI group to see if anybody recommends a particular GC, although investors often guard good contractors because they want their own projects to be priority. Alternatively, check with good local property management companies and see who they recommend. These guys are often more familiar with day to day product instead of high-end/spec homes, and good property management companies will cull a list of responsive, reliable, and affordable contractors that are licensed (if required) and insured. Hope that helps you, and best of luck.

- jm