How many times have i heard an investor say "If I could just find a good contractor"
Well, as a guy who has performed hundreds of rehabs over the last 20 years I am prepared to answer this question and shed light on other issues which plague the construction portion of so many deals gone bad…
- Many investors start off with a completely unrealistic budget for the repairs…How many times have I heard something like this “Can you replace the furnace, hotwater tank, remove the existing plumbing and install PEX, pull permits, change the electrical service, replace the cabinets and countertops, replace the subfloor and install vinyl tile, repair drywall, prep and paint the entire house, sand and finsish the floors…for $3,500.00”
This is when the qualified guy turns around and walks away…However, there is always some poor guy, desperate for work who accepts the job and after collecting enough money figures out that there is no possible way to see the job through. he disappears and the investor is stuck paying someone else to finish the job at a substantially higher price that what is left in the budget…
This problem seems to arise from an unrealistic expectation from the outset…Many investors have heard stories from their friends or associates who swear that they can get work done for such prices…If it looks to good to be true…You are probably being tricked.
- The investor forces the contractor to provide labor only prices, and plans to purchase the material separately. In this scenario the contractor often finds that the investor has purchased the cheapest materials possible which makes performing the project twice as difficult. Glidden paint, the cheap $.59 per sq ft floor tile, $25.00 toilets, $90.00 bathtubs, the unfinished Home Depot Cabinets, etc…make the job twice as hard…
In these scenarios the contractor finds that he hasn’t charged enough for labor…And once again he leaves…and well we know the rest…
- The investor refuses to take the advice of the contractor as it relates to what repairs are necessary.
How many times have I known an investor who is certain that a buckling ceiling can be repaired cosmetically with stucco, popcorn texture, etc…or want their contractor to re-shingle a leaking roof without tearing it off, or paint the wood flooring instead of installing carpet or tile…These things almost always end in disaster and frustrate contractors who know better but don’t want to lose a client…in the end when the job looks like crap, the investor often blames his contractor by saying things like “Well you are the professional, you shouldnt have done it if you didn’t think it would turn out right…”
Yeah…you are probably right, however if the contractor refused to do it the wrong way, would you have listened or just found someone else who would do it like you wanted???
- The investor makes the horrible mistake of hiring a property manager who happens to also be a contractor on the side…Now don’t get me wrong, it is okay if the Property Manager is associated with a separate contractor, however it is not good when they are the contractor…here is why…They are likely to look for any reason to undermine your contractor since the rehab is probably a bigger payday…
Property Managers are notorious for chasing good contractors away and ruining the relationship between an investor and a good crew.
Well there you have it…There is more but this should suffice…
I’m a landlord/investor . . . I do a lot of my own work and hire out what I can’t/don’t want to do. I hear ya! I hire quality contractors who will do the job correctly. This saves time and money in the long run.
Too many investors cut corners and pay for it in the end!
Mr. Rehab;
I sympathize with your dilemma and agree with much of what you say, However, there are a number of items I take issue with: I use Glidden paint all the time. It works great for me. It was rated second after Behr by Comsurer’s Report for about 2/3 the price of Behr. I’ll use $.50/sq ft tile in utility or mud rooms. When installed correctly I’ve never had a problem with it. Almost every problem I’v seem with cheap tile is due to poor installation, generally lack of solid base or failure to uncouple the tile from the subfloor. I shop at the local tile warehouse’s “odd lot” room looking for bargains before every tile job. I’ve never found a new toilet for $25 but I’ve trash picked numerous toilets and installed a $19 complete toilet rebuild kit after hoseing the toilet down with bleach and cleanser and cleaning the rim holes of any calcium buildup. I’ve bought a couple HD /Lowes $100 bathtubs and have never had a problem with installation or maintenance.
The quality of product installed has to be considered in light of the overall project. No sense in putting granite countertops in a $200k long term rental. Laminate or tile countertops will work just fine. Tenants will eventually ruin them anyway. However, a high end flip…knock yourself out with quality items as long as it fits with your exit strategy.
Not every job commands top of the line materials but there is no excuse for poor workmanship.
jmd_forest
Jmd, Glidden has a few good products, however if you purchase the $13.00 per gal. semi gloss paint or the satin, you will have to put three or four coats on to get a good finished look. I prefer Sherwin Williams 200 series. it is more expensive, but it won’t break the bank. It has excellent coverage and one application on top of a good primer normally will handle any job.
As it relates to the vinyl tile…Yeah you can use the really cheap stuff in a utility room, however, while it may lay flat in the beginning, when you get to the property management stage, and tenants start allowing water or other wet stuff hit the tile, you will find that the bond between the cheap tile and the underlayment will break alot easier. You also will find the cheaper tile discoloring after a short period. if you are forced to use a cheap slef stick tile it is best to add additional adhesive. You can get away with a .70 VCT commercial tile if you don’t mind the bland look andf the fact that this tile has very little sheen and is unattractive to women.
As it relates to the toilet for $25.00… Yep…Home Depot has a base for $25.00 that doesn’t include the tank. They crack if you breath on them the wrong way…
And for the love of God, the cheap tubs are the worse…they will scratch under the slightess pressure.
Just try the job with the better materials one time, and you will instantly realize the advantage.
I’ve had good and bad experiences and now have 2 teams built that handle any and all repairs. Setting expectations is vital as is being realistic. I treat my contractors very well and they return the favor by doing a great job and we repeat on future deals, it’s a win-win.
With contractors you want quality, timeliness and price. It is almost impossible to get all 3, but 2 of the 3 is realistic and any investor should be happy. After doing enough rehabs you will learn what materials and labor cost, you will learn prospecting questions, you can easily filter out the contractors that bid way to high or the ones that tell you what you want to hear then leave with the job unfinished. Like any relationship it takes 2. The more you work with contractors the easier you will find it to create a good relationship.
Finally, if you have no idea about rehab and contractors, hire a project manager who has a team and tons of experience to bridge the communication gap.