How to Find Contractors To Build a House | House Flipping 101

Yo, what is up everybody? Welcome back to the science of flipping podcast. I’m your host, Justin Colby. On this episode, we are going to be talking about contractors, everyone’s favorite subject, especially if you’re flipping homes or doing the BRRRR method.

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Now with that out of the way, let’s get into this subject matter of contractors. Now everyone realizes this is the bane of my existence, I have rehabbed over 600 homes and counting. I have also bought 14 homes with the BRRRR method. And so contractors continue to be the bane of my existence, I plan on doing more BRRRR methods, I plan on buying more Airbnbs that are going to do remodeling. So let me talk to you about what everyone wants to know? A: where am I finding these contractors? And how am I managing them? Now, most of you guys know for the vast majority of my career, I’ve been in the Phoenix market. Now over the last call it a year and a half, I have gone national. So there are some different perspectives on how I find in manage these contractors. And I’m going to talk to you guys about both you’re not going to want to miss the end of this, especially if you’re watching on YouTube. Go subscribe youtube.com/justincolby, because I’m going to talk to you about how I can actually find these contractors virtually and manage them virtually.

So first and foremost, where do I find these contractors. So if you are local to where you’re going to be doing this flip or BRRRR home, then I actually love the Home Depot method. And what that means is, you know, contractors are always buying materials and they have a I’m blanking right now, I don’t wanna call it customer service kind of desk. There’s a desk there. I’m blanking on the name as I’m doing this episode. But we’re all the contractors go to pick up the materials that they ordered excetera. So you want to go hang out at that desk, which for some reason, I can’t remember the name. Because you want to chat with the people who are in line, the people that are in line are your contractors, the best time of day to do this is in the morning for sure. Because anywhere from six to nine in the morning is when everyone’s going to pick up all their materials for the day. And you just want to have a normal conversation. Hey, what is it you do? Are you a subcontractor or a general contractor, I’m a local investor looking to find some more good talent. Now, doesn’t mean these people are going to work with you doesn’t mean they want to work with you. Some contractors only do retail jobs, they can charge more some contractors like working at volume, I can tell you right now is a moment in time contractors can be difficult because they’re all busy, right? There’s just a shortage in the workforce relative to how many deals are out there. So you want to make sure you’re talking to them about providing them value, like any conversation. What’s in it, for me is what they’re thinking, right. So you need to figure out what is going to be in it for them. If you’re doing one deal, that’s okay. But you’re not going to be able to paint this picture of doing a deal a month on a consistent basis that you’re only gonna use them. So you have to find a way to be able to make it worth it to them. Now, these are simple conversations. Sometimes you’re going to come up against a subcontractor, like a painter, or a carpenter, for example. Now, those people are great if you’re going to sub out your jobs, meaning if you’re going to manage each sub individually, which is totally fine. And if you have the time, I would tell you, it is likely the cheaper way to do it. You also are gonna come across general contractors. Those are the individuals that have a very expensive license and are insured, right mostly by the way. And so you’d also want to make sure that you look up their ROC license to make sure that they are actually licensed and it is active. And then you wanna talk to them about you know what it would cost for them To run a project, right? Because they are gonna go find the subcontractors, they’re gonna find the painters, the electricians, the roofers, the carpenters, etc. Right? Now, in my phase of business, I tend to go towards the general contractor route, it is a little bit more expensive. But I know it’s being handled, it doesn’t mean I fully trust them, it doesn’t mean I hire them. And then I walk away. And, you know, 45 days later, the project’s done perfectly on time on budget, that is almost never the case. This is why it’s the bane of my existence. So the place to find them is going to be Home Depot, or Lowe’s, right? Another place that I did early on in my career, which it worked every time and I don’t know why I stopped doing it. So I’ll suggest it here is I would actually go drive around the neighborhood where I bought the home, right? So if I bought the home in a specific neighborhood, I would take, I don’t know, a half a mile and drive around looking for other flips that were going on looking for other construction that was going on. And I would actually go walk inside and go talk to the contractors in there. Sometimes there’s just subcontractors that I would have to ask, Hey, who’s your boss, can I get his phone number, other times the general contractor or someone would be there. Again, it’s a decision you’re gonna have to make whether you want to sub out the process, such as have electricians, and roofers, and painters, and carpenters, and etc. And you’re managing each person, or if you’re going to just find the general contractor. But this is a great way to do it. I’ve heard around, you know, dumpster diving, so to speak, where you’re just looking for the dumpsters, it’s a great name for it, I would just drive around early in my career looking for those projects going on. It only worked every time. So of course, I stopped doing it. And so that’s a great way to do it as well.

Now, like I said, you can never have enough good contractors, I would tell you, the key to this will be, A: their willingness and then B: How good are they at detail. So here’s what you are really waiting for is if you’re doing this virtually So Justin, you’ve always told me you’re buying BRRRR method rentals, virtually well, how do I do that? Where do I find the contractors? And how do I know it’s a good contractor? Well, the system is all the same. While I can’t go to Home Depot, or lows in Oklahoma, because I’m in Miami. While I can’t drive around Alabama, and go find those contractors for those rentals. What I can do is I can ask people in those markets, through Facebook, through social media, the very best place to find good referrals is on social media and why I like referrals above all else is someone else’s actually taking the time to put their name behind the contractors name, meaning I had a great experience with Fred, he’s your guy call Fred. Well, now, that person is ponying up their reputation about Fred’s credibility. I love that, right? I love that there’s an investment there. Now, for someone who’s really really busy, you might find it hard to steal their contractor so to speak. But, you know, listen, you know, I’m an abundant person, right? If someone needs something I’m gonna give it so if I see stuff like that, and I have the resources, I’m gonna share my contacts right? Now, the thing about that is how you do this virtually is the same way as how you do it locally. So now you just found the person, let’s just say in Oklahoma, because you took in all this suggested referrals, I would encourage you to have three to five people that you’re talking to. And the way you whittle it down to the one that you are gonna be using is really based around their bid, right? I want to make sure they have a very itemized bid. I don’t want to see, you know, exterior 15,000 interior 25,000. I’ve seen that before they’re immediately out, because that does not tell me a single thing. I don’t even wanna have, you know, interior walls, you know, or paint floor. You know, tear down whatever 15,000. Well the, what is it allocated? How was that allocated across the five different items that you have, I literally want the items to be line itemed out for what those actual costs are gonna be. So that’s why I encourage you whether you’re local or virtual, doesn’t matter, the process is the same. Get three to five, make them bid out the house and make sure you’re finding itemized bids. So out of those three to five, you might have one or two immediately that their itemized bids aren’t itemized and you just throw those people out. Hey, listen, you’re not my guy. Because if this is how out of the gate, you’re trying to win business. This is not gonna work for me. You might have to or three itemized bids this awesome. At that point, you want to have conversations you want to go do a little more research on projects are actively doing slash projects that they just completed, you want to see the type of quality.Right? Now, if they came from a referral source, you might even call the referral source, hey, how many deals have you done with them? Right? I think he’s gonna be my guy, what’s his strength? What’s his weakness? What should I be watching out for? And then lastly, I want to make sure they’re willing to sign an agreement, the contractor agreement I get and I give to all my students, if you’re looking to be one of my students, and you’re watching this on YouTube, just write a comment below. If you’re not subscribed yet, you should first do that, go to youtube.com/justincolby, and subscribe. But I’m happy to talk to you about what that looks like. I will give you all those documents, but they need to sign that agreement, it lays out what they’re responsible for, and the pay structure.

And lastly, something to be aware of, if a contractor needs all the money up front, do not do it. At very best, the very best I’m willing to do is 50% up front. And that is to make sure they’re buying the materials. In fact, sometimes I go and say, give me the material order, I will pay for it. Because really, the first part of any rehab is very heavy on the labor, right, they do need to order the materials and they will have to pay for a fraction of it. But they don’t need it all upfront, because they usually pay it you know, a percentage down and then pay it once they get it. So don’t get bought into the trap that they need to go and paying for those materials doesn’t often happen that way. Right? You’re really kind of front loading their pay day. And I would encourage you not to right? So maybe 25, 25, 25 25 at best 50, 25, 25. But even then I would encourage you to maybe buy the materials. So if someone says hey, here’s a $50,000 project, I need all of it upfront, walk away immediately. That means they’re poorly mismanaging managing their finances. If they want 50% up front, you ask them why? You know the demo part is all labor. You don’t need that right. So I will pay you for the labor once the labor is completed. The materials part, show me the receipt from the order and I will go pay Home Depot, Lowe’s, Wells Fargo or not Wells Fargo, Home Depot, Lowe’s or wherever you’re buying it, but they don’t actually need it. So be very cautious there. Right? And that’s how you find in manage contractors. The last part of managing contractors are lien waivers every time you pay them, have them sign off on lien waiver.

Again, those are the documents I give my students and again, go ahead and reach out if you’re interested in being one of my students. I’m happy to have a conversation with that. Hopefully this helps. I look forward to seeing you guys on the next episode. Peace