Flipping Houses Blog: Find the Contractor

Twenty Seventh Week – Contractor Quest

Danny Johnson / 23 comments

Here is what happened during the Twenty Seventh week of documenting our flipping houses adventures. If you missed the first post explaining what I am doing, please visit this page: See How We Are Flipping Houses.

These are the things I did this week:

Spent More Time Trying To Find A New Contractor

The journey continues in my attempts to find another good contractor for the rehabs on the houses we are flipping. I had met several of the ones I felt the best about after some calls to give a bid on the work needed at the ‘honk your horn’ house.

Here is the post I wrote concerning the process: Finding and Interviewing Contractors for Your Flip Houses

One contractor stood out and seemed like he would be a good fit. His estimate came in a couple grand high, but he accepted my counter bid for the job and we agreed to meet at a restaurant to go over my contract and get the paper work (contract and W9) so that he could get started the next day.

This is where my patience was tried. Seems like I have less and less patience these days. First, he was about 30 minutes late. I accepted this because I called him with little notice as to when I could be there, so not really a biggy. He was off in his estimate of when he could be there though. Splitting hairs?

He sat down and started to read my contract and the scope of work (was not drawn up when we went over the job). I was very patient with him while he was going over the contract because I wanted to make sure he read the whole thing and that we were clear on everything that it states.

The key points of the contract being:

  • He will be an independent contractor, not an employee.
  • Agrees to do all work described in the scope of work in a professional manner and use the materials specified in the materials specification.
  • The cost of the job, including materials.
  • That they are expected to keep a clean jobsite.
  • That I have to approve all work to my standards.
  • All change orders will be in writing with accepted time estimates and cost estimates, before any additional work is performed.
  • I have every right to cancel the job if I am not satisfied at any point.
  • A penalty is given if the work is not done by the deadline (with consideration given to weather and other delays).
  • The contractor warrants the work performed for at least a year.

He started to hesitate as he read my materials specification. Specifically the cost of the bathroom vanities. The vanities cost $199 each at Home Depot. He informs me that I told him they would cost $59 each when going over the work at the house (a perfect example of why you should have your scope of work ready BEFORE you meet contractors – shame on me).

I’m not sure who in their right mind would not question $59 bathroom vanities with tops. I don’t think I’ve ever seen any that cheap. If I did, I’d sure question their quality and/or durability. At this point he started crunching numbers while hiding them with his folder. Very sneaky. Not sure what kind of math equations he was trying to solve as it took him nearly 20 minutes to crunch whatever numbers he was crunching.

After I’d had enough of this secret number crunching, I informed him that I was busy and that he needed to pick up the pace a little. I had figured he was starting to become concerned about how much I was going to control the job and was thinking it through while writing numbers in his binder. Maybe he was just trying to figure out the pay for his guys based on the work and time (something he should have done before agreeing to my price over the phone and possibly why he was throwing out wild numbers for the materials – so that he could negotiate with me at the table).

By now we had been sitting there for about an hour. He then mentions that he understands I have things to do and that he would look over everything at home and call me to schedule meeting at the job to get started the next day. I told him that if I did not hear from him that night, I would assume he did not want the job (can’t go chasing or waiting for someone for days to make up their mind). He assured me that he wanted the job and that he just needed to go over the contract really good.

I never heard from him.

I didn’t wait long and called more contractors to meet with.

This is an ongoing process that I wish was easier. But again, spend the time up front to find the right person so that you don’t have a lot of problems during the project and end up having to fire someone.

Closed on the ‘Front Yard Stink’ House

Finally closed the ‘Front Yard Stink’ house. Here are the before rehab pictures and details.

Work Still Progressing On Our House

Tiling is nearly completed and looks AWESOME! The wood floors will then go down, the vanities and bath fixtures will be installed, shower glass will be ordered and we will be set to move in. Oh yeah, still have to call the home alarm company, the cable and internet provider, family to help move, get boxes…oh man, what have we gotten ourselves into again?

Flipping Houses Discussion Facebook Page

Have you ‘liked’ the Flipping Houses Discussion Facebook page yet? What are you waiting for?

flipping houses discussion facebook fan page

Marketing

Total Motivated Seller Leads This Week: 16

Lead SourceLeads This WeekNotes
Bandit Signs1Wow. Some are still up?
Yellow Pages0For a picture of my ad, visit the ‘The First Week’ post.
Buying Website11For a link to my site, visit the ‘The First Week’ post.
Drive For Dollars0Have not done this in a while.
Wholesale Deals1Made Offer
Absentee Owner Mailing0Have not mailed in a while.
Probate1From non-specific letter.
Craigslist1Just a basic ad saying we buy houses.
Referral1From another investor that buys in different price range.

Total Leads To Date [406]
This is the total number of leads for each source since I started posting about the leads (late March 2011).

Lead SourceTotal Leads To Date
Buying Website:210
Bandit Signs:62
Yellow Pages Ad:45
Absentee Owners:28
Driving For Dollars:17
Probate Letters:11
Wholesalers:11
REO Realtors:7
Referrals:7
Realtors:3
Craigslist:2
MLS Search:2
For Sale By Owner:1

Leads Analyzed

  1. Manufactured Home In A Park

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 2 bath, 1300 sf manufactured home on a rented lot.

    Here are the numbers:

    Asking Price:Make An Offer
    Amount Owed:$50,000
    Repairs:cosmetic (unconfirmed)
    After Repaired Value:$??
    Max Offer:$??

    Seller is moving out of town and needs to sell this ’98 manufactured home. I do not buy manufactured homes that don’t come with land. Could not do this one. Next.

  2. Doesn’t Want Two Mortgages

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 2 bath, 1000 sf house in a so-so neighborhood.

    Here are the numbers:

    Asking Price:$50,000
    Amount Owed:$22,000
    Repairs:$12,000
    After Repaired Value:$65,000
    Max Offer:$23,000

    Want to sell this house because they have two mortgages and don’t want to be landlords. They are asking quite a bit, but don’t owe that much so I went to see it.

    Had to see this one on a Saturday. Sometimes you just gotta do what you gotta do. Wish I hadn’t. I really did not like this house at all. The neighborhood is actually somewhat of a bad one. The house needs a lot of work and has a horrible carport covering the length of the front of it. I told them I would basically need to buy it for what they owe on.

    They were not interested but I will follow up and see if that changes.

  3. Inherited And Does Not Want To Deal With It

    [Source: Website]

    Homeowner wants to sell a 2 bedroom, 1 bath, 1000 sf house in a not-so-good neighborhood.

    Here are the numbers:

    Asking Price:$50,000
    Amount Owed:Nothing
    Repairs:a lot (unconfirmed)
    After Repaired Value:$45,000
    Max Offer:$20,000 – repairs

    Mother passed away and the seller inherited the house. He does not want to have anything to do with it because it needs a lot of work. These situations will usually turn into a deal. He was not acting like he wanted to lower his price though, so I decided to just pass on the lead. I’m sure with some follow up this will turn into a deal.

  4. Living Out Of State An Cannot Afford

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 2 bath, 2200 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price:$125,000
    Amount Owed:$112,000
    Repairs:cosmetic (unconfirmed)
    After Repaired Value:$120,000
    Max Offer:$78,000 – repairs

    Seller has this house rented and needs to sell because they are not paying and he cannot afford. He lives out of state and is not interested in a short sale. Nothing I can do. Too much is owed. Next.

  5. Moving To Another House

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 1 bath, 1000 sf house in a not-so-good neighborhood.

    Here are the numbers:

    Asking Price:$20,000
    Amount Owed:$0
    Repairs:a lot (unconfirmed)
    After Repaired Value:$40,000
    Max Offer:$15,000 – repairs

    Seller is moving into another house. This one needs a lot of work and they just don’t want the hassle of fixing it up and renting it out. Don’t care for area and was busy this morning (seller was contacting other investors), so I passed it on to another investor that was able to see it sooner.

  6. Wholesale Priced Too High

    [Source: Wholesaler]

    Wholesaler wants assign a contract for a 3 bedroom, 2 bath, 1500 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price:$67,000
    Amount Owed:$64,000 (under contract for)
    Repairs:$12,000 (based on pictures)
    After Repaired Value:$95,000
    Max Offer:$50,000 – ($62,000-$12,000)

    Wholesaler assigning contract for a decent house. The problem with this one is that the comps that have sold recently were all rehabbed very nicely with more than what we typically do for this price range house. I had to adjust either the ARV or the repair costs to make it accurate. I adjusted the repair cost to reflect the higher cost in doing more to the house and the numbers just don’t work, no matter how you slice it.

  7. Girlfriend Pregnant and Need a Bigger Place

    [Source: Bandit Signs]

    Homeowner wants to sell a 3 bedroom, 2 bath, 1400 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price:$108,000
    Amount Owed:$85,000
    Repairs:cosmetic (unconfirmed)
    After Repaired Value:$105,000
    Max Offer:$68,000 – repairs

    Seller needs a bigger house. Not sure why a 3 bedroom is not big enough for three people, but they have more kids. It’s not for me to figure out unless there is more to the story. Which doesn’t matter much because too much is owed. They are not behind on payments, so I will just have to pass on this one.

  8. 2 Manufactured Homes On Single Lot

    [Source: Craigslist]

    Homeowner wants to sell two manufactured homes on a single lot outside of town. The mobiles are early eighties and need a lot of work. Definitely something I am not interested in, especially with the $90,000 price tag. Next.

  9. Father Passed Away

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 1 bath, 1200 sf house in a not-so-good neighborhood.

    Here are the numbers:

    Asking Price:$40,000
    Amount Owed:$0
    Repairs:cosmetic and updating (unconfirmed)
    After Repaired Value:$60,000
    Max Offer:$35,000 – repairs

    Son inherited the property when his father passed and he just wants to sell it fast. He was insisting on netting the $40k which I knew I could not do. I’m sure he would be willing to drop given some time. This area is not one that I prefer so I passed the lead on to another investor.

  10. Re-Evaluated Life Course

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 2 bath, 1500 sf house in a good neighborhood.

    Here are the numbers:

    Asking Price:$125,000
    Amount Owed:$121,000
    Repairs:cosmetic (unconfirmed)
    After Repaired Value:$110,000
    Max Offer:$72,000 – repairs

    Seller has decided to change paths in life and this includes selling this house. That is fine but it might take a little time and/or some money, because I cannot buy the house when more is owed than it is worth. Sorry.

  11. Divorced and Moving

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 2 bath, 1600 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price:$95,000
    Amount Owed:$53,000
    Repairs:cosmetic (unconfirmed)
    After Repaired Value:$90,000
    Max Offer:$59,000 – repairs

    Divorce situation and the seller just wants to get away from the house and all of the memories. Only got an email with this one, so I am waiting for a response on when I can see the house.

    Update: seller responded and I gave a ballpark that the seller become offended by and demanded to know why I would need to buy it so low. They were politely informed that I cannot pay full market value and so on and so forth. I also felt it prudent to inform them that tone is always hard to convey by email and that I was not trying to be rude and that it would have helped had they given a phone number so that I could call them. No go.

  12. Medical Disability and Behind On Payments

    [Source: Website]

    Homeowner wants to sell a 5 bedroom, 3 bath, 2000 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price:$90,000
    Amount Owed:$88,000
    Repairs:long list of repairs (unconfirmed)
    After Repaired Value:$110,000
    Max Offer:$71,000 – repairs

    Medical disability has caused seller to fall behind on payments. The days on market are high and there is just too much owed.

  13. Don’t Want Hassle Of Selling Through Realtor

    [Source: Website]

    Homeowner wants to sell a 3 bedroom, 2.5 bath, 1700 sf house in a good neighborhood.

    Here are the numbers:

    Asking Price:$115,000
    Amount Owed:$102,000
    Repairs:$4,000 (carpet, exterior trim, tile)
    After Repaired Value:$140,000
    Max Offer:$87,000 ($91,000 – $4,000)

    This one was a tricky one. The seller called me while I was headed out this morning to take care of business at several houses. He mentioned that another well known investor in town had made an offer a couple of weeks ago and he had accepted it. The problem was that the investor was out of town when he accepted it. So, he had to wait until he got back to get the contract signed.

    The seller started making plans as if the house was already sold. He put an offer in on another house and had mentally made the leap and separated himself from his house. It was sold. He had already moved on.

    Then his world was shattered when the investor came back from out of town and only then did he inform him that he was unable to buy the house at this point. This devastated the seller and sent his head spinning.

    He seemed really motivated to be done with the house when he called me. Guess he was having trouble accepting that his house was in fact not sold and still very much his problem.

    I was able to squeeze in a showing of the house between my appointments (not usually this busy) and saw the house. It did not need very much at all. Now that I had a repair estimate I needed to figure out comps. I ended up doing a market analysis at my attorney’s office while handling the closing on the ‘Front Yard Stink House’. I’d just quickly glanced over the comps and figured it should sell for about $150k.

    As I was leaving the closing, I kept wondering why the other investor had backed out and started doubting my quick analysis of the comps. I called an investor friend and asked him to run comps for me and give me his opinion. He figured that $150k-$160k was safe.

    Even with these numbers the deal would have been tighter than I’d like, but I figured I could find someone to want it at just above what he owed. My gut kept telling me to recheck the comps more closely though as the other investor had backed out without reason.

    When I got home, I checked the comps and realized this was a case where a thorough review of the comps was necessary. The houses in the neighborhood were very similiar but there was a bigger than normal difference between prices for single story and 2 story houses. There is usually a difference, but not one this big. The singles were selling for about $100/sf and the 2 story houses were selling for about $80/sf. That’s a big difference!

    He wants it paid off and would not consider sub2. Have to pass on this one.

  14. Ex Passed Away

    [Source: Referral]

    Homeowner wants to sell a 3 bedroom, 1 bath, 1700 sf house in a so-so neighborhood.

    Here are the numbers:

    Asking Price:$55,000
    Amount Owed:$53,000
    Repairs:a lot (unconfirmed)
    After Repaired Value:$65,000
    Max Offer:$40,000 – repairs

    Seller had separated from her ex years ago and he recently passed away. He was living at their house and was not taking care of it and had not been making payments. Now she is facing foreclosure and doesn’t want that on her credit. There is just too much owed to make this a successful flip.

  15. Assume Inside Needs To Be Gutted

    [Source: Probate Letters]

    Homeowner wants to sell a 2 bedroom, 1 bath, 1200 sf house in a decent neighborhood.

    Here are the numbers:

    Asking Price:Make An Offer
    Amount Owed:$20,000 (about)
    Repairs:a lot (unconfirmed)
    After Repaired Value:$65,000
    Max Offer:$40,000 – repairs

    Brother just died and he needs to sell this house because he lives out of town. The house is completely run down and there is a balanced owed. He told me to just go by the outside and make an offer assuming everything inside needs to be replaced, because it does. He is aware of the condition of the house and wants to see what I would offer.

    He just started probate and told me that he is in no rush. I will go by this weekend and have a gander.

  16. Unsure Why Selling

    [Source: Website]

    Homeowner wants to sell a 2 bedroom, 1 bath, 1300 sf house in a so-so neighborhood.

    Here are the numbers:

    Asking Price:$75,000 (least will take is $68,000)
    Amount Owed:$45,000
    Repairs:some repairs (unconfirmed)
    After Repaired Value:$65,000
    Max Offer:$40,000 – repairs
  17. This is a website lead and the seller did not leave any info about why they are selling. Probably was/is a rental property and the owner lives out of town a ways. Too much is owed for what it is anyway.

Summary

Calls were more steady throughout the week this week instead of all flooding in on Monday. I’ve slowed down a little on the marketing because I need to get the rehabs under way and get the new house ready for move AND coordinate that move in. Lots of work ahead of us for the next couple of weeks.

Plans For Next Week

  • Update ‘Honk Your Horn’ house post details with scope of work and cost.
  • Get estimates for work at the ‘Front Yard Stink’ house.
  • Send out some more postcards.
  • Get new house closer to move in.

Please ReTweet and Like this post because it’s the nice thing to do and I truly appreciate it.

-Danny

Bonus: Click Here to Download My Top 5 Motivated Seller Marketing Methods Guide pdf that will show you, in awesome detail how to use 5 different marketing methods to generate great leads consistently.

“If you want to reach a goal, you must ‘see the reaching’ in your own mind before you actually arrive at your goal.” – Zig Ziglar

Thank you for following along with us on our adventures in flipping houses. We hope you are enjoying it and that it is helping you to learn how to flip houses or improve your house flipping business, whatever the case may be.

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23 awesome responses to “Twenty Seventh Week – Contractor Quest”

  1. Bilgefisher on

    “Oh yeah, still have to call the home alarm company, the cable and internet provider, family to help move, get boxes…oh man, what have we gotten ourselves into again?”

    That made me laugh. Seems were all gluttons for punishment, but you gotta love the reward at the end.

    Jason

  2. Donovan on

    You should put a purchased and sold counter next to your leads. I’ve read all your posts but I’m not sure how many you’re up to so far. It’d be nice to see leads vs. deals comparison weekly. LOL as if you’re not doing enough for us! Good luck with the contractor search, I know how painful it can be!

  3. Jon on

    I wanted to ask you about lead #13. I’m not sure I understand how this is not a deal. You said homes were selling for $80-100/sqft, which would be $216k-$270k depending on levels. I don’t know if the subject house is 1 or 2 storey but if you buy it for 115k + 4k = 119k. Since the repairs are so minor, holding costs should be nearly irrelevant. At 150k sale, thats a $31k possible profit with a quick sale. What am I missing? Also, where do you come up with the 91k? Thanks.

  4. Jon on

    Thanks for the response and that extra 1000 sq ft changes things a bit. My holding cost comment was made with the assumption of a 150k sale price with 216k arv on 2700 sqft.

  5. Erby on

    Hey Danny, curious to know how are coming up with your ARV’s on properties? Are using some sort of software or your lead manager? Thanks

  6. Pete on

    In todays market, isn’t ARV irrelevant? or at least trying to determine ARV….

  7. Justin on

    I’m having flashbacks as I ready your contractor story. So annoying!!

    Excellent analysis on #13. I definitely wouldn’t have spotted the $/sq.ft. difference. When you relist your properties are you listing them at FMV or slightly below to make a quick sale?

  8. Justin on

    Haha. Thats hilarious. Some people just have no conception of reality.

  9. Don on

    I enjoy your page – lots of useful info here. I have been buying and renting houses for about 4 years – I now have 14 rentals. With that number I am starting to stay busy responding to tenants, calling contractors, etc. I would like to try flipping on my next deal.

    My experience with renting in similar to what you have discussed. I still have to find the houses and handle repairs. I work with local banks that require me to put up 20% and then finance at 7.5% on a 3 year balloon. However, I have no experience selling houses.

    I expect to close this week on another house. The bank order appraisal is $85k (Billow says $104k) and I am getting it for $33k. I expect to spend about $20k on repairs and be in it about $56k after closing and repairs. It should rent for $950 in about a month – maybe $1,000.

    The neighborhood is about 50/50 older homeowners and renters. I am considering flipping it, but I am a little worried about letting it sit for months without a renter.

    Also, I am wondering how the rehab for a flip will differ. For example, I never upgrade kitchens or bathrooms – I just fix problems. This may add another $3k to the price.

    After flipping and paying commissions and carry cost I would make about $22k – then the tax man comes. If I rent, I get about $300 cash flow (above payment, taxes, insurance) and I can depreciate (and some of that payment goes to principle). Still on the fence.

    Do you always list through an agent?
    How long does it usually take you to sale?
    How important is the neighborhood? I have a lot of houses in neighborhoods that primarily have renters. Can you sale these houses quickly?
    How do you price the house?

    Any advice?

  10. Dave Tower on

    Danny,

    I had a question for you regarding the TX real estate market in general. I met with a realtor while I was down there who showed us several houses. I asked her about list price vs. sales price and she said that houses (in the DFW area) sell for nearly 100% of list price.

    Being from the northeast, I wondered if this was realtor BS, or if it could be accurate. Then I asked about the REOs in the area and she said the same. I have a hard time believing that the banks are not willing to budge on their sales prices.

    I understand that an agent doesn’t want to deal with a buyer who wants to lowball a bunch of properties, but could she be right?

    Thanks

  11. Nate K. on

    Danny,

    Just wanted to thank you again for this website. Truly a huge life saver. This has been my bible the past couple of months getting off the ground. As my name has been getting out there, im starting to get a little more attention. I like it, just gotta be patient and dont give up!!! Sounds like something my Mom tells my Dad at the beginning of a diet. >.<

  12. Eric on

    Do you have 2 cell phones? One for work and one for personal.