for those that have contractors on your team...
I was wondering if you would reply with some real world examples pertaining to working with general contractors on your investment props. Specifically, when you find a prop that needs a little more repair than what you can do, how do you structure the deal with the contractor (ie. cost of materials + hr wage, or %-age of resale, etc) Especially if he is going to be your "go to" guy 99% of the time. Also, the same scenario except when you have a prop that is a major rehab project. Thanks in advance.
[addsig]
Hi tworedaces,
From a contractors point of view,
I like a set fee. I no longer do cost plus percent nor do I do a cost plus an hourly wage. I do cost plus a set fee regardless
of the size of the job......
Everyone knows what the bottom line price will be as well as knowing when your getting paid.
With that said, you may ask them about working out a finders fee for properties that they might be interested in as well.
I currently have a property that I am in the process of purchasing....the rehab of the house will just about exceed my business expenses when comparing what the FMV will be for it, however the extra land that I can divide up makes up for the loss.....however if a REI with desires of rehabbing part of the job themselves would offset my business cost...then I would be agreeable to work out a deal with a person in selling them the rehab at cost.
You can never go wrong in asking....
I would advise you to develop a trusting / loyal relationship with a small contractor........both can be beneficial to one another.
Good Luck
Nc-Yank
I am new to investing and working on my first deal on a fixer upper. I was wondering if it is " Normal" dealing with a contractor and me buying the supplie for the job. i.e drywall, mud, plumbing and paying them for labor. I save on the mark up and the additional profits that contractor add into the estimates. Is this something you would frown on if presented to you from an investor.
Trace
Trace,
I'm sure that Yank will get back with you, but from your standpoint (investor/customer), I always as for a cost estimate of the job with a detailed breakdown of fees. If there are costs that I can get cheaper, I tell my contractor that I'll get that or have that done and he marks it off. Also, this way you will know exactly how much you are paying for what, including the contractor's profit. It is a better way to compare contractor's bids as well because one may be cheaper but uses cheap materials and 'increased profits' to make the difference.
Roger
Hi Degra,
I do not mark anything up for my clients.
This is why I do cost plus a set fee.
The cost is the actual cost of the project without mark up.
While I know this is not a norm...this is how I operate. It makes things easier for me when Im doing my paper work while at the same time my clients love it.
My set fees are typically based upon how long a job will take as well as the square foot of the job and it's complexity.
I do have minimum rates for all jobs and I do charge extra for my personal work.
My fees do not include me doing custom tile work or paint....those fees are the same as any tradesmen.
Sometimes it's easy for clients to forget that even though I know how to do virtually every phase of construction there is.....when I put my carpenters belt on or get out the tile saw....I am putting on a different hat other than contractor.
The reason I say to hook up with small "legit" contractors is because they often to have vast knowledge of the majority of the trades.....or at least they should. They also are more personable
and their is less layers of "managment"
to go through if there is a problem.
Large companies love to insulate themselves from problems.....that can be proven with any large tract builder.
The small builder lives by reputation...the large builder lives by turning out a product as fast as they can.......
Hope this answers your question and good luck at finding someone that can assist you in your REI adventure.
If I can be of assistance...then feel free to contact me....
All good advise Roger is correct allways get bids. Lic # insurance copy I have them bid the complete project. New or starting on there own remodelers are greatfull for long term work. A lead remodeler with a boss is good for $15 an hour. When they just go off on there own is the time to get them. Have them price all of it firm. Go with the lowest bidder and pay up front for materails weekly for labor. Do be willing to work with them on pay timing. don't pay for more than you get in a week. He will be learning what it takes to be in business instead of having a boss. He may plan 40 hour week and work 70 to finish.
You will notice his numbers are higher next job. get more bids.
I went through it years ago. we all have starting out in contracting. Most contractors go back to there boss. Hire them at there numbers then you will allways be giving them what they asked for.