BiggerPockets Real Estate Podcast - 399: Solving the Investor/Contractor Relationship with Jeff Thorman of HomeRenovisionDIY

Episode Date: September 10, 2020

Today we’re swerving a bit from tradition to bring you a guest who is not a real estate investor. Jeff Thorman spent years as a general contractor, built his own company, then started his own YouTube channel, HomeRenovisionDIY, to teach people how to renovate their own homes. Learn from his years of experience renovating in this episode. Jeff brings us incredible tips on building strong relationships with contractors - from inquiry to project close. We discuss the importance of using quality materials in any project. We even dive into some projects you should absolutely be able to do-it-yourself as an investor. As a real estate investor, you will have to complete renovation projects at some point - use this episode to make sure those projects are seamless and successful! In This Episode We Cover: Learning the contractors’ perspective The importance in using quality materials and building long-term solutions in your properties Shopping directly from suppliers to save money on big rehab projects Creating systems to retain quality contractors Understanding the real cost of low-cost materials  Upgrades to improve your rental property and decrease vacancy How to ask a contractor to walkthrough a project before you buy it How to spot houses with cosmetic fixes vs. big, expensive projects Newbie DIY projects anybody can tackle And SO much more! Links from the Show BiggerPockets Forums BiggerPockets Bookstore Virtual Wealth Expo BiggerPockets Calculators Home Depot Joanna Gaines Ikea cost vs value report BiggerPockets Insights Marr Risinger's Youtube Channel Check the full show notes here: https://www.biggerpockets.com/show399 Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Bigger Pockets podcast show 399. There's always going to be a renter who's got money, who wants a nice place, who isn't leaving anytime soon because life has just done that to them. If you're a real estate investor, that's who you want living there. You're listening to Bigger Pockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about real estate investing, without all the hype, you're in the right place. Stay tuned and be sure to join the millions of others who have benefited from biggerpockets.com. Your home for real estate investing online.

What's going on, everyone? It's Brandon Turner, host of the Bigger Pockets podcast here with my co-host, Mr. David Green. Welcome, David. Once again, how you doing, man? Thank you, Brandon. It's still going good, selling homes, pushing things forward, helping people build wealth. And today we have a fantastic show, and I do not say that lightly, about a topic that is very rarely covered but often asked about. about remodeling and construction methods.

Yeah. Yeah, now a lot of people are listening right now. There's going to wait, we're modeling construction. Like, I want to know how to buy a duplex. I want to know about the house tech and I want to do the birth strategy. Here's the thing. The topic, the stuff we covered today is everything you're going to need to know to be successful at any type of renovation you're going to do your future.

Everything from like how to find good contractors. We talk about how to, I mean, his advice on like referrals. Like something I had never thought about before. What is just spot on when you're getting referrals from other contractors. like why flipping he talks about like integrity and flipping something we've not talked about on the show before how to be the ideal client for a contractor like how do you how do you find them and how do you make sure that they come back to you over and over and over and want to work with you like his advice like it's one of those things that the stuff you'll learn today is going to

benefit you on every project you ever do forever flipping landlording wholesaling doesn't matter this stuff is solid so I think how to pay your contractor that's a big one yeah that we had some really good advice on how simply you can set up payment so it works for both people Yeah, yeah, so good. So anyway, that's the show today with Jeff Thorman. It was so good. But before we get to that, let's get today's quick tip. Your quick tip today is, did you know BiggerPockes has a rehab estimation calculator?

I think it's called the Rehab Estimator. It's over at BiggerPock.com. CalC. Basically, it allows you to break down your property rehab into categories, which the categories are actually straight out of Jay Scott's book, the book on Estimating Rehab Cost. And it breaks me of the categories. and then you can like basically track whether it's cost per square foot or whether it's a total job or whatever the time of material.

You can track it in those different ways and it adds them all up at the end and prints it out in a nice PDF report that then you can give to your contractor or you can take his numbers, put it in there if you'd rather or you can do it. It's awesome. I think you'll like it. I really, we put a lot of work into making this thing awesome. So check it out. Again, bigger pockets.

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There are two kinds of real estate investors, those who have reviewed their insurance, and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs, short-term rentals, or LLC held properties. These gaps surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection. One claim can erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NREG.com slash BP pod. That's NREIG.com slash BP pod.

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book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. I think we're about ready to get into this show. It's an awesome show, lots of great content with Jeff Thorman. And he has actually a famous, I'm going to even go famous. He's got a huge YouTube channel, a lot bigger than bigger pockets on home renovation. And his show is called Home Renovision DIY. You can find that on YouTube. You might even be a subscriber because he's got millions of subscribers.

He's a big deal in the home renovation space. So again, we are super honored to have Jeff here today. And I think we might as well just jump into it. You're ready to bring him in? All right, Jeff, welcome to the bigger pockets podcast. man. Good to have you here. Yeah. Cheers, Brandon. Great to be here, man. Yeah. So today is a different type of a show, as we mentioned during the introduction. Because, Jeff, we're not talking to you about how to buy a department complex or how to buy an apartment complex or how to, you know, buy a

mobile home park. We're talking to you about how to fix things when they go wrong in that duplex or in that mobile home park or in that apartment complex or whatever, whether you're flipping houses or whatever. We thought it would be good to just really dive in deep into the world of repairs and maintenance. Whether you want to do your own work yourself, like DIY style, which I started doing all my own work, or you want to be like David Greer. reading over here and just hire everything out from the beginning, it doesn't matter. We still need to understand how the world of construction, contracting, handyman stuff works so that we can benefit everyone.

We're not taking advantage of the contractor. Contractor not take advantage of us. Everything gets done responsibly and well. So, yeah, it should be a fun time. There you go. That's well said. All right. With that said, why don't we just get a quick background on you?

I mean, who are you? What do you do? What's your story? And then we'll get into some contracting questions. Yeah, I'm just a guy from Ken. Canada that ended up getting married way too young and had to find a way to make a living. So I got into the contracting world and spent a few years being proficient at a trade and then moving on to the next one with the ultimate goal of being a GC, running a big firm.

And somewhere along the way over the last couple of years, we got into the world of YouTube so that we could create a pension plan for myself, oddly enough. And now here I am. I'm out of the contracting world. I'm 100% YouTube. absolutely digging the lifestyle of helping people become independent and renovate their own houses. Yeah, that's cool. And so is there something that you specialize in more, like, or that you were really good at? Like, you were like the flooring guy. Or did you really just do over your career,

do almost everything? Yeah, that's, wow, that's a tough thing. I guess I think my specialty is a century homes, the older, the better. Really, I grew up in an area where the average home was 80 years old. And so spent a lot of time with real old houses. As a result, problem solving is probably my best gift because, you know, there's no such thing as a standard when we started with these old houses. And so to bring them up to a standard, required a really good understanding of all the building practices and what technique blends with another one and it doesn't cause another problem. So that's kind of where I am. I mean, by trade, I'm mostly a finisher. But as a contractor, the phone always rang, hey, I've got this unique problem. How do I solve?

So you mind sharing an example of how what you just mentioned, how one technique can blend in with another one or it can kind of butt against it? Yeah, sure. But like plumbing, for instance, right? If you have steel pipes in your house, that goes way back before copper. The thread sizes on steel pipe are still compatible with copper threads today. So if you don't know that, and you open up an old house and you've got nothing but steel, you wouldn't realize how easy it is to tie into an existing line to convert from one to another system. And it's more like Lego than a big problem.

The other example would be basements used to be there to facilitate your waistline getting below the frost line. That's it. It was structure. It was a room for mechanical, not designed to be finished. And to be honest with you, they're not really designed to be finished until almost 1990. Up until that point,

they're still just a mold and mildew trap. So you can't just watch a show today and see them finishing a brand new basement and think you've got the technology and just go do it. You're just going to run in and nothing but hurt and waste all your money. That's actually incredibly useful tip because you saying basements weren't designed to be used

to be finished, meaning it could be a live-in space until after 1990. So if you know you're trying to houseack and you want to buy something that you can finish the basement, you set your search to 1990 and newer and you save yourself a lot of time. You can, yeah. The rule I use is if your basement has a rough-in bathroom,

the plumbing is sitting there coming out of the ground, then the entire basement was designed to be a finished space. If it doesn't have rough-in plumbing, you've got a lot more prep work to do on your foundation and your waterproofing and everything else. And by rough-in, we mean if the infrastructure has been run to the area, but they haven't actually developed a bathroom or a kitchen or something. Yeah, that's good.

All right, so while we're on top of basements, I want to start there because sure. One of the things that freaks me out most as a real estate investor. So I find a house and it's got a basement. There's such unknown there, right? Like I don't know if it's going to be an $800,000 fix or if it's going to be a $12 fix if I get water, right?

Like how did somebody know? First of all, like, I mean, how do you know how bad water in a basement is when that happens and whether or not the thing is water? And what do you do? I mean, if there's water in your basement, how do you deal with that? Well, I guess I break it down into two areas. You either are prone to water events, which is a lot of water at a particular time for a particular reason, or you have insufficient vapor and water protection technology in your basement, and you always have a high relative humidity in the basement. Those are two different issues. That has to deal a lot with climate, soil conditions, what's the grading around the house? A lot of that stuff can be dealt with from outside, not letting the water get to the foundation wall.

and that's usually the cheapest way to fix, right? Grade the property, put in French drains, make sure you got good work in eavesdraves, clean them, all these little things that keep the water from coming down the foundation wall. And remember that every foundation other than stack stone has a footing, they let it dry, and then they build the wall. So there's a place there where the water can infiltrate underneath the wall. So you're looking for effervescence, that salt crystallization, that'll tell you water's coming through.

You're looking for cracks, if it's a block wall on the upper third, is there discoloration in the mortar joint? You can even look at the history around the building, find out if there were insurance claims made against it or the building permits ever pulled for a basement work that's already existing. But really, when it comes down to water, the best plan is to just take pictures, take all the information you can and then ask somebody who knows better

because I can't even tell you right now if you were to give me a particular house you wanted to know about, I can't give you the answer that's seen in pictures. Which is way too much that goes into the formula, right? So over the years, the building industry has tried to come up with these clever little two-by-two-foot panels to solve a lot of issues. But even at that, I mean, you can still be just building everything to have it go to garbage. It's the point being, and I'm glad you brought this up, is at some point,

especially things like basements. And we're going to need some more issues today. I want to talk to as well. But especially things like base, like that's something, it's okay to take pictures and call up a contractor and explain like I have this problem. I mean, like when are you taking advantage of the contractor? When do you call them and ask those questions? Like, are they going to answer their phone and be able to help you with this stuff without getting paid for? I mean, like how do you see that arrangement working between an investor and a contractor for an issue like a basement or if it's another larger issue?

Well, that is going to be an issue of relationship. So if you have a contractor that you're working with regular and you're part of his meal plan, I like to say, right, where he knows there's a certain amount of work coming every year from you, that phone call is going to get answered. You're going to get an honest answer from him. You guys are going to be working together to self problems. But like you said earlier, if you're somebody new in the business, you don't have an advocate. Contractors are going to hold that information tight to the chest because those are opportunities in their mind of a one-off opportunity to make some money.

right because if the guy's asking a question it means he has nobody else to go to because he's asking a perfectly stranger and that's where you make yourself vulnerable so what do you advise how is an especially a new investor or somebody trying to not a new investor but just a new a person meeting a new contractor how do you set yourself out how do you show that you're not just a one-off necessarily that you're you're worth talking with are things that you that you find is like an ideal client when they're new wow this is one of those things where you've really got to know your own business, right? If you're going to get into the real estate business and you're going to own rental properties, that rehab budget better be spent

on things that you have a clue about. Or you're just taking your car to the auto mechanic saying it's making a noise and saying fix it, I don't care what it costs. And they're happy to help you. Now, I have a rule, Brandon, and my rule is this, most guys in the business, they want to just do good work, go home at the end of the day, get paid, and be happy. Contracting is not a get-rich-quick scheme. The average guy out there is making $50,000 to $70,000 a year. They're not getting rich on this business. They're not looking for ways to get rich.

They took this job because they're good with their hands. They enjoy building. They like fixing things. They like being able to have steady work and enough money to live comfortable life, go home and play with their kids and just be happy. So as long as you go into any kind of understanding and negotiation with that attitude, you should be okay. But if you go and thinking everyone's out to get you, man, you're just, you're going to lose so much sleep. Like, it's just not right. But understand, I mean, if you need information, get it before you call the contractor. Don't let him be your educator.

And then you can protect yourself from bad advice. Yeah, that's really good. So for example, check out YouTube videos. I mean, that's how I learn almost Yeah, I don't want to push myself all day long here, but yeah. No, please. When I got started, that's what I would do. I was like, well, how do you lay laminate flooring? I was like, I don't even know what that is. They go on YouTube and like laminaet flooring.

And you figure it up. Now, you don't even have to lay the lamat. You can still call a contract to them. But at least you have an idea of what you're doing. You can get general costs. You can get ideas. Do a little bit of research out front, which we can spend a whole hour talking about why people don't do that.

They want to take the easy way out and just have somebody else solve their problems for them. But that is, that is basic. Like, if you're going to get into the. rehab business as a real estate investor, know your business, like have an idea of what you're doing. And the other side of it is if you're going to be in the rehab business as a real estate investor and you don't have confidence that what you're going to do is going to hold up long term. And I use long term the 50 year plan is when I hire a structural engineer, they're working on a 50 year building model. And the idea is if it lasts 50 years, it'll last

100. And that's their mentality. So when you're renovating a basement into an apartment, apartment suite, you might be doing practices that will only get you 20 to 25 years that are still decent practices. But do you want to hold that unit for 25 years and then try to sell it because someone else is going to have to walk in there with a rehab budget and you might be shooting yourself in the foot? So maybe a good time to hold that would be 10 or 15 because you know what you've done isn't going to last the 50 year mark. And that doesn't make you a bad person. It just means that you're wise to the fact that basements are tricky, maybe holding it long term.

There's a comfortable cutoff there where you're not screwing anybody over and at the same time you're maximizing your return. You know, this reminds me of a situation early on in my investing. My very first property is my duplex that I lived in half of it and rented the half out and I had to remodel it and I was doing it on the super cheap

as low as I could. They go to like Home Depot or whatever it was and I buy the faucet. And the faucet I get the cheapest one there is $19, right? And it's all plastic, plastic bottom, was plastic parts, everything plastic about it. And I'm like, why would, why would some moron pay $100 for a, for a foster when you can pay $20 and $19? So I put the $19.

It lasted me, I think, six months. And then I had to go put another plastic one in as I did that, right? It took me a couple years. It would be like, like, am I investing for the next six months or the next six years or the next 60 years? Do I want the contingency plan to own this property forever? And if so, I need to start treating my business with materials and products that are going to last a lot. period of time. And so just shifting my perspective on how long I'm going to own property for it. Now, again, like, I might not own them for 50 years, but I might. And so I want to make sure that

I'm buying the material. Now, what's the difference, though? Do you actually notice a big difference between those, like the $250 faucet and the $100 one? Like, is it as big of an interest between 20 and 100 as it is between 100 and 2, 3, 400? And the answer is yes and no. I've had experiences all over the board. There are lots of high quality, like $600 catch and faucets out there that have plastic parks that move in the handle, in the cartridge. And you just kind of shake your head and go, why? Nobody puts plastic wheels on a train, right?

And at the same time, if you're limiting your shopping experience to Home Depot, then you're only buying what they're making available to you out of the tens of thousands of faucets that are on the market. And it's because that's got the largest margin for them. And every time there's an increase in price point, they've done the science that if you're not going to buy the 20, you'll go to 50. So don't put a 30 on the table. Yeah. Right. At the same time, every product that's on the market can be available through different suppliers that most people don't even know exist. And they're always available from the same manufacturer, almost the same exactly like a model, but in a solid metal version. So you can get a $20 plastic faucet from the same

company made in metal that's going to cost you $50. And you don't have to buy the expensive $50 plastic from Home Depot. So there's options out there where you can get quality for a much lower price. But you've got to invest time to research your suppliers, open up some cash accounts, right? Or credit accounts if you want to get into that world. But I've been preaching that for years. I know contractors who shop at Home Depot really, religiously, and they're throwing away 30 to 40, 50 points on everything they buy and giving it to a local variety store of home renovation. Is that something that makes sense for your average do-it-yourselfer as opposed to a contractor to go and find some of these suppliers you're talking

about? That's a million-dollar question. If you're a do-it-yourself and you're doing new siding and windows on your house, yes. Go spend 20 minutes, sit in a chair, answer a couple questions, open a cash account because your windows are 70% off retail price as a contractor. Your siding is 60% off retail price as a contractor. So instead of spending 30,000 on material, you're down to 8, 7. That's money in the bank. And you're saying you're not going to get that from like the big box stores. No, you won't get that from your contractor either.

Yeah. Because you're paying full retail when you let him go shop for you. And that's where he's going. Yeah. Think about that one. That's something I talk about in long distance investing, as I mentioned, when I'm working with a new contractor, I don't know if this person's on the up and up yet because we haven't done business.

I will pay for the materials. I will have them delivered to the job site and I will have them just quote me on the labor. That way I don't have to worry about are they cooking anything extra into the materials. Is that the same principle that you're getting at here? Yeah, it's a concept. Plus, when you hire a contractor you don't know for material and labor, they generally want the material money up front to go shop with it. And that's the one place as a new relationship where it's like, God, okay, now I got to

give this guy enough money that he can go on a three or four week bender and hopefully he comes to work tomorrow, right? That's the million dollar question, right? Like maybe $5,000 off of a guy you found on Craigslist that said he's a good dude that may or may not be in Washington. Yeah, so this is what happened to me, Jeff. I've told us on the podcast before, but I had this contractor I found in Craigsitz.

He shows up. I like the joke that he had the hat. He had the truck. He had the like, I mean, matching outfit. Like, like,

we don't even get that where I'm from very often. Like, this guy, I was like, wow, like this guy's impressive, right? So he shows up and he gives me a bit on windows.

And he says, I need $5,000 for just the, for the, it was only a few windows or whatever, a dozen windows. Wanted the material cost, so half down $5,000 bucks. So I give him the $5,000.

And he leaves and he never shows up again. Just disappears. put a lien against it. I ended up getting paid back like years later. But how do we? It was a lot of work. It was a ton of work. Like what an annoying situation to go through. Now at the same time, I understand in the shoes of a contract, because I was a contractor for, I don't know, a short, a minute back when I was younger. I got my GC license and I went and did people's decks and whatever. So I remember like not having any money. And so like I can't, like, I couldn't just go and buy my own material necessarily. I needed the material money. So how do we balance that? How does the

average investor balance the, the, the investor, needs the material cost up front, but I don't want them to just walk off with it. Should I just do what David said and just buy the material myself then until I have a relationship? Yeah, I think so. I think that's probably the wisest way to go about it. Yeah. Now, when it comes to getting a contractor, we can't just use the word contractor. That just means a guy that's doing a certain amount of work for a certain amount of money. There's a lot of different business models there that, you know, someone new in the business needs to be able to discern between. Is the person you're talking to an actual business or is it just a guy who's swapping his

own time for money and hiring a helper? That's a major difference because if you're hiring a business, it's going to be more expensive. It's a lot less stress because if somebody gets sick or somebody, you know, the crew leader's wife leads them and he comes up to work the next. day and he's a wreck, you call the company, and they replace that individual on the job, right? If you hire an individual who's pretending to be a company and he's got two or three employees and he's got a sweet-looking website, he's got some referrals, and his wife leaves him, you're in deep trouble. We've all been there, right? Now, at the same time, there's a lot of guys out there who end up in contracting for a lot of different reasons who do good work.

who don't have enough money behind them that they can say, yeah, I'll take this job, and at the end of the job, you can pay me. Okay? If you hire anybody in an HVAC, electrical plumbing world, generally speaking, these guys are big enough and they have enough of money in the bank that they can get paid when it's done. And their business model is to do that on purpose, because when it's done, if you don't pay them, it's worth it for them to go after you, right?

A lot of guys like to pay contractors a little bit at a time. Well, if at the end of the job, there's only another thousand or bucks on the table, maybe they don't finish. Yep, yep. Right? Maybe you don't pay them. That's the other side. Is the contractor going to get screwed, right?

So there's all these different formulas. For me, the best formula is this. If you're going to hire a guy, you ask him, anything under a month, I think any trades in the world should be able to do the job and get paid when it's finished. If he can't afford to do that, now you know he's broke. Yep. So you hire them, you buy the materials, you pay him weekly, right? You get a schedule and make sure he's on it, but you pay him weekly.

Doesn't mean he's a bad contractor. It just means he's in a rough place. And you can generally negotiate a better price there, but don't try to take advantage of them because he'll just be gone as soon as somebody better comes along, right? There's no commitment to you. So again, you know, like there's the one-off situation, getting the best deal. Are you going to do this over and over and over again, looking for good relationship, make sure you pay the guy out, doesn't, decent wage.

Google for your area. What are the average guy getting paid? Right? I mean, you might be in L.A. and then move to the Midwest. Well, don't be paying L.A. prices for contractors out there. You made a point earlier that I really liked

when you said, the average guy doing this job is good with his hands. He wants to make a decent living and get paid a fair wage and have a good life, play with these kids. They're not business people with entrepreneurs that want to go grow and scale a huge,

thing like you could be Jeff and I am and Brandon is and many of our listeners are. They're here because they want to learn how do I build a big portfolio of houses so that I can have an awesome life. And what I learned is that when I was first dealing with contractors, my assumption is you're like me. You're going to be professional. You want to scale. If you do a good job, I'm going to give you more business. So you're going to be approaching this like, oh, I want to do a great job and maybe get a tip or a bonus. And I learned that is not the case. This isn't a, a, a, dig against people that think this way. But if you're good with your hands, you probably value that. You probably don't value how to run a profit and loss statement, how to hire employees, how to make

sure that you have insurance, how to have skill with finding the people to go do these jobs for you, to be organized, right? It's very rare that you find someone that's good at managing the cash flows of a business like this. Money's coming in. Money's going out. They're paying wages. They're paying materials. So they frequently run themselves into, we have no money. And my guy's asking to get get paid and I don't have it because I went and bought materials on the last four jobs and haven't been paid yet. Now I got to ask David to pay me to pay these guys when they're on someone else's job. And if David's already paid me and that person has it, and I need money, well, guess where the person's going, right? Right. There's nothing wrong with having some wisdom as an investor and

understanding the person you're dealing with. And like you said, Jeff, structuring the relationship to incentivize them to take care of you, it's much better than just getting pissed and saying, okay, well, I won't pay you at all. And now you're in this big legal battle where everybody loses when that happens. And that was something I've learned like you guys said earlier. And I think Brandon mentioned it, know who you're working with. You should know how appraisers work. You should know how contractors work. You're going to be working with these guys all the time. Do you have anything you want to comment on what you've seen? Because you can kind of see both sides of this argument, both the investors who follow you and the contractors who are learning to do their

trade better. Yeah. Wow. So let's assume for a second that everybody in the investment real estate business is also a stand-up citizen, right? And it's, it's always the contractor that's the problem. Yeah, that's a very good point. That's a very, very good point. Right. Okay. So on the other side of the scale is the contractor, who usually, by the way, brings the contract to the party. And I would say 90% of them don't have a sweet clue about contracting. Sorry, guys, but you didn't pay 40 grand to get your contract written up. So when you go to court, you lose. That's just the way it is. As a contractor, to protect yourself, you want to make sure that the old days are gone, right?

We used to be able to just do the job. If we didn't get paid, we were actually getting payment while standing in the front room of the guy's house with our hammer in our hand. And if you didn't pay, no problem. I'll take my kitchen back. Thanks. Yeah. And as soon as that hammer goes in the air, the guy's got money all of a sudden, right?

But now that's illegal. God, I don't know if it is in California. Yeah, I'll just clarify that. The answer is yes, it is illegal in California, no matter what the question is. So what society has decided is that the courts are the best place for us to solve these problems. And as soon as they did that,

they also allowed the courts to be biased against contractors. So we're kind of screwed on that end of a stick now. If you want to do business with somebody who's never done business with before, you've got to make sure that their money is good, right? So you don't take charge. checks. Do you transfer. No, e-transfer is a wonderful way to pay a bill, right?

Don't go home from work on Friday until the bill's paid. If you don't know, clean up all your tools every day after work. Make sure at least have your tools of the trade with you. Never invest more than a week without getting money. Yeah. Because you're only going to want into one of these guys once a year. I love what you're saying the whole weekly thing, because what you're doing is you're getting both sides to invest a little bit at a time.

I will give you a week of work. It's sharing risk. Yeah, you're sharing risk. That's exactly right. And as each side gets more committed, trust slowly gets built. The person says, well, I've already paid this much. The contractor says, well, they paid me this often. I should keep going.

And you get to that point where both sides can feel good. I really, really like that. It also is much closer to how the mind of a normal person is used to working. Because at a W-2 job, you show up for a week or two, you get a paycheck. It's the rhythm that we're used to. A caveat on this. I agree 100% that you want to pay regularly, right? I'm a big fan of that.

You don't want to have them go a month or two without getting any money. At the same time, one of the biggest mistakes I've made as an investor is paying people, whether it's contractors or anybody, employees or the matter, for time spent versus the results, right? And there's definitely a time for time and material. Definitely I do that still for occasional. But I did a rehab one time on a property. And I mean, I was kind of thinking to be around seven.

And but it was kind of an up in the air project. Cause we, there was a lot behind the walls. We didn't know we were going to do it. So we just said, hey, let's just work it out. It was like 65 bucks an hour. I'll just pay you every Friday.

We'll be fine. Well, $140,000 later, like we finally wrap this project up where when I look back, I'm like, yeah, and I'm like, now I'm not saying he ripped me off.

I'm not, he was not dishonest at all. But I know that people think and act and live differently when they're paid by a job versus being paid by a thing. So the way I, I've kind of married these two together is what I do is I typically will sit down with the contractor

and we'll say, okay, this is the project that I expected to take four weeks. Let's divide this into four categories or four phases at the end of each phase, which you should be about it every week, you get paid. And what's amazing is when they know

they're going to get that $2,000 check on Friday, they will sometimes spend Thursday until midnight working on the project just so they can wrap up Friday. Or if they get done early, they get paid on Thursday because they don't have shown Friday. I don't care.

Like I already, I paid them for that thing that they did. And then I make sure that the, not the bulk maybe, but at least a sizable percentage is at the very end. Because one of the biggest things I also noticed with contractors is and myself as a contractor and just as a DIY guy, the end of projects tend to trickle. Right? Because at the very end of the project, if you're getting paid by the hour, it's like, well, I got to go put those outlet plate covers back on. But I got this other job that's going to pay me a lot of money. I'm going to go do that. I don't want to go put annoying outlet plate covers on or go culk the line on top of a whatever. So by having a sizable chunk at the very end.

end now ever was incentivized to finish the project and get on with it quickly. And they can earn a higher dollar per hour wage by just working faster and be more efficient. Do you agree with all that? Yeah. Look, I guess there's two differences. If you're going to get a project, man, you can renovate just about anything in four weeks, right? Most people get bills months a month. Tell that to the guy who took nine months to finish that project.

Yeah, right? Yeah, yeah. I've seen those. That's a two-bedroom apartment. Yeah, it was a while. But the reality is, is if you're going to renovate, most experiences are going to inside the month. And the guy that's are working for you, their bills come once a month.

So that's where they need the big chunk. Yeah. Yep. Right? Start your project on the first. Wrap it up by the end of the month. You don't want to go into another month anyway because now you got overhead and carrying costs. You want that rented. That's good.

Right. So focus on the three week period, put in a amount of money that's punch list, right? So that they can stay focused on getting to three weeks. And if they don't finish punch list, Dear God, grab a paintbrush and a screwdriver and do it yourself. You got a whole week, right? Or hire a handyman.

If they want to walk away from that money, that's their business. But understand that the punchless payment should be the biggest part because that's the one they need to pay their bills. Yeah. That's really similar to how I do other things in business as well. So let's say that I have a house that needs to be renovated. And I'm going to say to the contractor, because they know more than me what has to be done, what do you have to do to renovate this house?

And they're going to say, well, first I got a demo. I got to rip it all apart. You got to haul everything off. Then I'm going to have to fix the infrastructure. Rerun some plumbing, fix some electrical. I got to see if there's a problem with this or with that. Maybe some of the windows need to be replaced. Then I can put it all together, more or less.

When we're choosing materials, that's usually only happens in the put-it-all-together phase. What finishes do you want? What kind of flooring? Okay. The demo part, I can easily say, what do you need to do that? I need a dumpster. We're going to have to make some runs to the dump. What does that cost you?

They can show me this information. So what I like to do is split it into those three chunks and say, okay, how long will it take you to do phase one, the demo? This long, how many guys are you going to need to do it? They tell me, I look and I see, okay, I can pay you this much money to do that part. Now, if he does all the demo and then I pay him and he walks off the job, I can still hire someone to finish phases two and three. And so I'm only going to pay him for phase one and only when phase one is done, is he going to get that chunk of money? And then I repeat that with phase two and then again with phase three. And I found that as odd as this is, they like it more when I come up with that system

because they didn't think like that. Their brain thinks, what do I have to do to get it done? Right? And do I have the manpower? They don't have that vision of how to construct this. So it's almost a relief to a lot of the contractors when I simplify it and I say, here's how it's going to work. Now, another thing I want to ask you, Jeff, is this is something I've noticed. when you go shopping at Home Depot and you're like, well, that tile's $2 a square foot.

And that one's $5 a square foot. I'm clearly going to buy the $2 tile. Okay. Your brain is looking at that thinking it's 40% as much money. So I'm saving 60%. But when you look at the actual cost to get the job done, more of it is going to be labor than it is material. Okay?

You're not saving 60% on the job. You're saving 60% of a smaller piece. So when I asked them, give me the quote on labor and materials. see, labor doesn't change whether I bought the $2 tile or the $5 tile. It completely changes the formula that you're thinking of in your mind that's helping you make the decision. Can you comment a little on how people step over dollars to save pennies when it comes to picking these $20 faucets? Because what I was thinking when Brandon said that is when I got to pay the plumber or whoever to put it in, he's charging me the same. Every time he goes out there,

that is so much more money than the extra $40 that I saved on the faucet because I'm going to pay like 200 bucks, right? What percent did that make? All you got to do is cross the plastic for one turn or you're done. Well, here's my thing. I did tile setting for three years professionally, really proficient. And every time I had a client say, who I'm buying the tile, I'd say, where are you shopping? And if they said Home Depot, I said, well, I have to change the contract price. And they go, why? I said, because you're buying cheap ceramic and every tile is a different size. you just added eight hours of labor to my job. Why don't you go down the street to a tile supplier who's selling the $5 square foot tile,

right? Because it's rectified porcelain. And you're going to have a sexier look. And then it'll be a lot cheaper and I can install it in two hours. Yeah. And even if it is a little more expensive, it's not 60% more expensive. Right. Like it's 70 square feet for a tub surround.

And if it's $3 a square foot, it's $200. bucks but if I got to spend a whole day fussing around with it versus two hours you're actually going to be a lot better ahead yeah and what would you say let's say that tub surround you're doing what would the labor be on an average deal how much would a what a tile person charged to put that together yeah good luck you're not going to get a square foot price from a tile guy well let's just say well i mean just come up with the number of hours he's going to charge a half a day minimum probably charge of the full day so how much would that be you're probably in the six to eight hundred for a tub surround.

So that's what I wanted to get at. Just a tile, right? Yeah. Right. Let's say he's $800 of labor to do that tile on the tub. Does saving, spending $200 on the tile instead of $400 on the tile to get something twice as nice, it doesn't double the price. It takes you from $1,200 to get a way better look in the end.

You're only spending whatever that comes out to, like 15% more to get a much nicer thing because that labor price doesn't change. And that's the point I want to make. If the majority of the work is in the labor, spend more on the materials, make it look nicer, get a better ARV on your house. Generally speaking, materials are less than 25% of the whole cost of the project without even trying. I should have just let you say that in the beginning.

That's my point. Thank you. Anywhere you look, right, if you cheap out, you're saving 10% of the cost of the project. The unit looks like it. Yep. Nobody wants to pay top dollar to be there. Yeah. You're saving 50% of the 25%.

So congratulations. That's just explained about 400 TV shows. right make it sexy they'll pay top dollar yes they will yeah right even if it only lasts 20 years because you did it in a basement and this applies to rent as well this is somebody i think i think people don't a lot of landlords they put the cheapest thing possible in their unit because they're this this and i hate this phrase it's just a rental right i hate that phrase and i hate when contractors say well it's just a rental because like people have this thought like i mean investors say it's just a rental and there's like this idea that's like this idea

that because it is a rental property, we can do worse quality. I can have cheaper material and I don't need to worry about the looks of it as much. And I think that's such misguided because when I spend the time, I mean, sometimes it doesn't even cost more money. It's literally trying to find out what paint Joanna Gaines is using and using that versus white or whatever color they have on stock.

Like that little shift of doing a nicer job gets me way more rent, attracts a way higher quality tenant who then stays way longer. And then they don't damage stuff when you do the higher quality stuff Because they're just there So I hear my question for you. I'm wondering what do you see as like trends in the industry right now that are like I want to call it tenant proof. I like saying tenant proof.

So like or in other words, they're long lasting. Like what things are you installing? Are you guys seeing people install right now? They're like, oh yeah, people should really like we gave a good example earlier. Metal versus plastic faucets. Like that's a good like we should be using metal faucets. Like the more metal parts in there the better. Yeah.

What other things do you notice that are just really beneficial for landlords? All right. So number one, stay away from the cheap floating floors. What do you mean about that? Like the cheap laminate? The laminate and vinyl. Yeah. Okay. Okay. Now, vinyl is relatively resistant to a lot of different problems. But the one problem it has is a click floor is if the floor isn't perfectly flat. Mm-hmm.

Okay? It'll open up. It doesn't stretch to meet the contour of the floor. So if you have a wooden subfloor system, don't use vinyl there. unless you've poured floor leveler reinforced with a beam in underneath or something. There's a new product coming on the market called a floating engineered hardwood plank. I don't know if you've seen it yet. It's coming brand new. You'll see it later this year hit the market.

But it's engineered flooring. So you get hardwood floor. It goes over top of a sound dending underpad, right? So you get that beautiful separation from tenant above and below. But you get to sell your unit as a hardwood floor. and it stalls in like an hour and a half. That's cool. It's almost the same as Llamat or it clicks together.

Click flooring hardwood floating floor. That's cool. Yeah. So it's just like a lamonet plant, only it's a lot bigger, and it's a finished hardwood. So that is going to be huge for real estate investing because now you get a quick, easy floor. It's a DIY project. Price point, it's just a couple bucks more.

But like you said, there's always going to be a renter who's got more. who's got money, right, who wants a nice place, who isn't leaving anytime soon because life has just done that to them. Right? That's who you want living there. Yeah. Right. If you're a real estate investor, to me, the idea of making a living on the rent of people who are struggling to survive is insanity. Make a living on people who've chosen to rent for whatever reason outside of survival. Get yourself into that price point. That's where you want to be. be. So that's a huge product. That's a huge product. The next thing is going to be open concept. I mean, every time you open something up, it seems dirty. It seems like it takes a lot of energy,

but there's less materials to finish everything else. Yeah, that's a good point. Yeah, I'm a big fan of opening up that kitchen to the living room or kitchen to the dining room. The more you can expand that. Yeah. People love that. Well, A, as soon as you go open concept on the kitchen, now you don't have the third wall. So you don't have to buy a custom kitchen. You can buy RTA cabinets. It always fits because there's no wall. You can save a fortune. You can design everything so you're never,

you're never buying extra material you're not going to use. If you're into natural stone, you design your kitchen to be one slab size, that's it, right? Don't go 1.3% of a slab because they're going to make you buy two slabs to make your countertop. Yeah. Like little tips like this that go along.

I mean, whenever possible buy materials from your contractor, pricing. Right? You guys were in the game of return on investment. And if you want, you can put everything on credit and pay all the materials back over time, too. Yeah. I got my,

all my first flips started with that Home Depot, like six month, no interest, no payment credit thing. I did a ton of that. That's a whole way to start. It was a great way to, yeah, find it. Then I ended up not flipping those, like selling those houses. I ended up with a ton of credit card debt. That's a whole different story.

But yeah, I, yeah. I got one other quick thought. When you're designing your kitchen, stay away from upper cabinets. I've been doing the same thing. I put shelves now. Most people who rent don't have 12 boxes of kitchen gear going around town with them. Right? And the open space is a lot more attractive than upper cabinets.

And upper cabinets cost twice as much as lower cabinets and have half the capacity. So it's insanity, really. I mean, think about it. So you use lower cabinets and then floating shelves up above? just for decoration. Yeah. Like if you put in open concept kitchen, your base cabinets,

it's all you need, right? What else do you need? Throw maybe a floor to ceiling pantry cabinet or even better yet build in a pantry and throw a barn door on it. Now you're all the rage. Oh, I got a pantry and a barn door.

How sexy. It's so cheap. It's so cheap, right? Just add shiplap and you've hit the holy trilogy of a, God, right? I'm trending it. Ship lap, yeah. You know, the best thing I guess for trends now is big bathrooms.

Yeah. Right? If you're looking to rent a bathroom, do a flip. Rent it. Okay. So here's my bathroom design. Ready? You go tile floor.

You go shower pan, not custom shower floor. Because you almost 95% of your risk of water damages is eliminated. Right? The bottom line is in the tile world. Go ahead. I also don't know what that is. Can you explain shower pan versus custom? What does that mean? You buy an acrylic base for 150 bucks. As opposed to making a tile or a stone or something.

Here's the thing. The tile industry is a little bit sketchy. There are only really two actually approved methods for building a shower in North America. According to the tile setters manual, 90% of the showers in North America, and I'll include Canada in this, actually fall short of the installation guidelines. And if you were to take their builder to court, you'd win every time if you held up that tile book. Because these guys are licensed. They're trade pros.

They have a standard to have to meet, but nobody builds that way. So if you use a shower pan, it has an integrated wall, a piece of tile flange, about an inch and a half high. Your tile comes down to meet that. All your water is going down the drain, right?

So you put a fan on with the light as a renter. So the fan's always going. You put it on a timer if you want to. Or you put a humidistat fan in. So it doesn't turn off until the air humidity meets a certain standard. But for 150 bucks, you got a pan. 200 bucks you can tile the wall with subway tile. It looks great.

It's still all the rage, right? Yep. You buy actual a good quality shower system. And you're rocking it. I mean, it's just a no-brainer, right? you can put in a glass door system for that shower for less money than waterproofing a shower floor and you never have to have a risk. Yeah.

Right. That's so good. And I wish more investors thought this way because like there are ways to make things look really nice. Like you don't have to go with like crap shower. Like that's a really nice. We look really nice. Same with like we talked about earlier. Like the cost material, right?

You could buy a cheap $5 shower head or $10 shower head for your shower. Or you can spend $80 or $100 on a nice like rain kind of shower. or a couple hundred bucks, maybe something nice. Now your tenant loves that shower. And they're not thinking, what is this cheap, crappy landlord who put up this $5 plastic showerhead. And it doesn't cost of that much more in the long run. Like you'll recoup your cost just by happiness of tenants.

One of the best tricks out there is if you have an old tub shower combo, don't rip out the tub. Just re-glaze it. Yeah. That functions similar to a shower pan. Right. Same as a shower pan. Let's say you live in a place where you got weird water

or somebody was using hair colored dye shampoo and God help you, the pan turns pink over time. When you go to get a new renter in there, you can have it reglazed and it looks brand new again. A couple hundred bucks. Yeah. That's brilliant. I tried it.

I tried it myself. One time they sell a kid at Home Depot. That's not the same deal. You can tell how this ended up. It was awful. It was awful. Home Depot's awesome for that. You can always go there to solve a problem

that makes you spend even more money next week. Yeah, I had to rip that thing out and then put a real bathtub in later or not. other bathtub and later. Oh, man. Hey, you mentioned cabinets. Let's talk about them for a second. Because there's a wide variety of qualities when it comes to cabinets.

I mean, you could spend 50 grand on cabinets or you could spend, you go to, you know, any big box store and they have them in stock there for 12 bucks. Like, where do you see, like, what are the best long lasting cabinets that are, that are, you know, not going to cost you 50 grand, especially for an investor. But you want them to hold up for a long time. Like, do you see a certain type of cabinet is better or worse? Boy. Yeah. Yeah. I mean, there's all kinds of standards, right?

I mean, wood is always better than particle board. IKEA makes a pretty decent particle board. I hate to say it, but yeah. The thing about IKEA that I like is their hardware systems hold up as long as their cabinets and panels do. A lot of the RTA cabinet systems that are out there or the stuff that you get off the shelf of the box store, it's not the cabinet per se that's the problem. It's all the hardware and systems around it that fail first. And you'll never get the parts because they're always changing their suppliers every five years, right?

They're famous for that. So just about the same time, you need to go back and get parts for it. They've got a different company on the shelf. Yeah. So at least with IKEA, it's consistent long term. So I like going there. I hate their feet. But the easiest thing to solve that problem is just to build a quick one by four box and put all the cabinets on top of it.

Yep. Yeah. And you don't have to worry about those stupid plastic feet. The little feet at the bottom, yeah. Yeah. I want to jump in with a question for you here, Jeff, that I know a lot of our listeners are asking because it comes up with me all the time. We have something we call the Burr method. It's an acronym.

Brandon came up with that stands for Buy Rehab Rent Refinance Repeat. Part of doing this well, there's really two things you got to get right. You got to buy a property under market value or with enough value add that you can get your money out when you refinance it, which usually means you're buying a fixer up for property. So this contract questions come up all the time with the Burr method. I wrote the Burr book on it. Brandon came up with the word. We talk about this a lot. It's a great way for people to scale a portfolio without needing millions and millions of dollars.

Right. Where this comes up as a problem a lot is you have to know what is it worth when I am done and how much do I have to spend to fix it up, okay? You can't help us with what's it worth when I'm done. That's an appraiser question. But you can help with the fix up part of this. every investor wants to bring a contractor with them to look at all 25 houses that they're considering buying, have him lock the whole thing, give them an estimate of what it's going to charge to fix it up,

and then they decide, oh, yeah, you know, I don't think I'm ready. I'm not going to, I'm not going to buy it yet. Can you share with us a reasonable system that you think is fair to all parties as far as when you bring a contractor, should you pay them for the estimate that you're getting? Oh, good. What I usually tell people, because I'm a real estate broker, I help people with buying, is we will take a video and pictures and send it to our contractor and we will get an idea what he thinks it could, like a ballpark for you. Yeah. And then when it's in contract, it makes sense to have that person now walk the job because they're actually applying for a job. They're not just helping you with your investing journey. And if you don't buy the house, then you should pay them for their time.

That way that they'll actually come with you on the next one. Can you tell me if you have a different system that you think would work for both contractors and investors. So what I do is I set that up as a consultant fee, and that fee's paid regardless as part of the contract and it's included if I get the job. That's cool. It just makes sense. Now you're not just asking me to do a job. You're asking me to give you the sum total of all the value of my experience.

Yes. So you're not going to get me for $25 to $50 an hour on that. having said that, really, if I'm going to sit down and use that as an opportunity to quote on a job with competition, then the job better be in the six-figure range, or it's not worth our time and energy to do the quote lightweight, right? There's lots of jobs out there in the $50,000 range. I don't have to spend half a day going through video and doing numbers and quoting. Most contractors don't really operate in that realm. They're handy.

They're not doing that paperwork in the background. Yeah. But there are systems that with experience you can apply to rehab that can save you a ton of money. I had a relationship of the contractor. I'd done a bunch of jobs for him. One of the things we used to do, well, I used to show him is when you get an old house, if you take apart the ceiling between one unit and another unit, now you've interrupted the effect of grandfathering in that ceiling as a fire separation from one unit to the next. And that's one thing most guys in this business don't understand is the cost of fire separation when you do these things properly. If you have an existing ceiling and you want to rewire the unit, strap the ceiling with two by fours, run all your wiring in between all those two by fours, rewire the building, and then put a new sheet of drywall over top of that. If you don't disturb the ceiling, you don't have to do a fireproofing permit.

Oh, interesting. Yeah, I never thought of that. Leave that stuff alone. Electricians can drill a hole and put fire cocking around that hole. And a 120-year-old plaster passes the inspection. Yeah. Now, I don't know if LA is the same as over here and a lot of other jurisdictions. I know the West Coast of Canada, we also have the permit officers have the ability to say, I don't like it, fix it.

But in most of the country, that's not the way it works. Yeah, I think most of our stuff usually gets grandfathered in if it's existing. It's pretty common. Yeah, yeah, yeah. So if you don't open it up and you'll see this a lot and you just find creative ways to go from an eight foot ceiling to a seven and a half, which doesn't affect anybody, especially a renter. Yep. Then you can rehab without doing a lot of demo and save you a lot of time and energy in the process. On a related note, sometimes I'll take properties that have like a popcorn ceiling or something like that.

And now I might be dealing with asbestos. I'm not really sure. I don't want to even dig into it. So I just take quarter inch drywall. and just shove it up on top. And then now we have a brand new ceiling and we don't disturb anything. That's right.

You just get that drywall lift and you just drawl on some drywall adhesive on the back of it and slap it up there, right? Throwing some laminated screws and off you go to the races, right? Yeah. And I know every time Brandon's done that because he has to get a haircut because he's so tall that his head is like now brushing

on the top of that ceiling. Oh, he must have put in some drywall over his acoustic. Well, it's funny because my feeling right now, if you look, I drywalled it, but I haven't actually mudded and taped it yet in my, some rapper's going to put a song, drop it like branded ceiling. Yeah,

anyway, I have not yet done my ceiling yet mud and taping, but I'll get there eventually. All right, so here's what I want to discuss for a second. The idea of like, I'm going to call a contractor. I'm going to have them come up

and meet me at a property that I don't own, that I don't even have under contract. I'm going to make them walk for two hours to this property with me or an hour, tell me everything that they know because you know what? I might give them business someday. They should be happy to work for me

for free to do that. That's the mindset a lot of investors have when it comes to contractors and agents and anybody. It's like, you should be honored to work for me.

The funny thing is, like a lot of contractors hate working for investors and a lot of agents hate working for investors because investors can just be jerk sometimes because they get this like, I get this air of like,

I got a lot of money. I can give you a lot of business. Yeah, I'm the guy on top of the jungle gym at school. Yeah, yeah, exactly. So I want to encourage all the, all the investors

is listening right now. It's like, like you said earlier, contacts are real people. They want to provide a good, you know, they want to have a good life and they're not trying to rip you off. Most of them are good, hardworking people. Just remember that. And like their time is valuable. And you do not, they do not need your business. Especially right now, it is like,

contractors have like the choice. There's a supply demand curve right now. That is the, yes. That's the million dollar question that everyone who got used to operating that way in 2010 when those guys were begging for business thinks they can still do it. they're all on the forum saying, how come I can't find a GC? Why are they so expensive? How do I get a good contractor?

The last seven that I walked the house with I didn't like, how do I get the good one? The good one's not going to work for you if you're walking it with seven people. It's probably not the contractors that are probably. And the same goes for agents. Even on this podcast, we have made a habit because during the downturn, it was just fire off offers, right? 500 offers if that's what it took to get a deal. And people will come to me and now and say, hey, David, I'm going to want you to write 40 offers a week. I don't think I'll get any of the houses, but eventually we'll get one. And I'll be like, then you need to go find an agent that doesn't have anyone to work with because that's not how I work here. I'm going to look for a deal that you can actually get.

I'm going to expect you to write the offer when we find it. And I can promise a lot of people that aren't having success are not looking in the mirror. Because Jeff has made some very good points. It's not always the contractor's fault. A lot of the time, the people are being ridiculous. I've seen this, right? The person hires the painter that works for like $1.50 a square foot. And then goes and complains, look, I can see,

brushstrokes, your paints running there. And I'm like, the painter almost had to be running when he did this job to make money off what you paid him. He just stuck his thing on the wall and ran right through. Of course you're going to have. He just blew the pan can up in the middle of the room. Yeah. There you go, right? That's what you paid for. That's not fair to plain and ask that person to come back when they painted your whole house for $200 or something like that. And it definitely pays to understand. Yeah. Managing those expectations is huge. Like I tell people, I say, you get a referral for a contractor. Step one, go see him on his job site right now.

Yeah. Is he organized? Is he clean? Is the client happy today? Or is his crew happy? Those are things that you need to know today because the referrals that he's got were maybe last week or the month before. And it doesn't reflect his current condition.

Like I said, if he's not a business, he's a guy or a girl and life happens, right? And, you know, I'm not going to get down anybody who's going through it. but I don't want you on my job. Jeff, let me share. I want to say something. I want you to either give it your stamp of approval or not. Here's the last three problems, significant problems I had with a contractor.

He broke up with his girlfriend, who was the one who was the real estate agent that was referring him all the business. They had a nasty breakup. He stopped answering his phone, stopped working on the jobs. That was the first one. You mentioned that, like the personal problem, okay?

Yep. The next one was they were unable to manage the stream of employees that they needed for the business that they had grown to. They started hiring people that ended up being addicted to meth, who stole their tools, left the job, and would go on a bender for like a week. And then when they needed money, would come back and say,

hey, can I go back to work? And he needed people so bad, he's like, yeah, go back on, yes, he would take them. So the inconsistent results I got were the natural consequence of his inconsistent people that he had hired. And the third one was the cash flow problem, I told you, that he was doing good work, but he did not manage money coming in versus money going out, that they really had no idea what they were doing at all.

And it was purely infrastructure business principles that they weren't able to follow. Is that similar to what you see? It's a real life thing. If you're running your business on cash flow, right? Like if you've got to take a bunch of stuff that's laying around back to Home Depot to go shopping for today's material, you're in trouble. And that's real world, right? The second one is I see contractors all the time. They go through the spring season of I'm going to go sign a bunch of contracts.

and then I'll solve the problem of where I'm going to find the labor to fulfill those contracts. Well, God help us all, right? Because every time you talk to a contractor, almost inevitably they'll say the same thing. It'll say paint and drywall on the truck and you'll say, do you do additions? Yes. Well, why the hell does your truck say paint and drywall if you do additions, right? Because those guys went through those lean years and they won't turn a job down. Yeah.

A good contractor has enough business sense to be able to adapt to the season. And there's a lot of guys out there who are still working for food because then they haven't adapted yet. They don't realize that they're valuable. Maybe we shouldn't be telling everybody. But the point is, if you can find nine guys to walk a property without a contract, you found all nine guys that don't have something better to do with their time. Right?

Wow. What a pool to pick from. in today's marketplace you're in trouble if that was 2010 you might have had some of the most talented artisans in town in that group but times have changed right so you got to be able to be flexible to change with it i want to throw in one thing real quick you know the human aspect of hiring people when you get to the job site Friday afternoon to inspect their performance are you on schedule you already know because you were there the night before or you were there that morning you know if they're going to hit their target e-transfer the money

money before you walk through the door. And then when he turns to you and asks about, oh, no, no, it's all taken care of. It's already in your account. Oh, yeah. That guy will be the most loyal employee of your entire life because you beat him to the punch on the money question, which is his only fear in life. He's not afraid if he knows what he's doing. He's not afraid if he can get out of bed and go to work. He's afraid if he's going to get paid. And once you remove that from the equation, now you've got relationship. Ten minutes. That's all it does. Ten minutes. You beat him to the punch by ten minutes. And now you've got somebody you can work with the rest of your life. It shows that you respect them.

You know, in property management, for those people who are landlords out there, our own parental properties, if you're dealing with a property management company, everyone I've ever dealt with, they do like 30 day, 60 day billion sometimes. I know most contract, when I was a contractor for a while,

I hated working for the property manager because it would be like two months before I got paid. If I got paid, I have to go hound him a bunch of times. So in our business with our rental properties, we make it a point to like do exactly. Maybe we don't, I'm not really good.

We don't do a lot of the electronic stuff, which I should do more of. But like we will pay them like before they ask or at least have a check. If we do a check with them, we'll have a check ready for them right away. We'll find a way to make it so that that's the easiest thing for them. They never have to worry. Am I going to go do this job for this company over there or am I going to go work for

Brandon? Oh, I get paid immediately when I go work for Brandon. Like same day next, you know, it's there quick. They will always come. Yeah,

they always come to me. Even if I pay that like give them less work, they want the stability. they want knowing that they can always rely on me. And so just have that reputation, start building it now with your contractors that I'm not going to take advantage of you. I'm not going to try to nickel and dime every single bid that you give me. Like I want you to make money.

I want to make money if I need to just pay a little bit more once in a while, that's fine. Like the relationship with matters because when that leak happens in the middle of the night, I want to know that that guy can call him and he'll get out of bed. Is he the solution or yeah? Because he knows what's going on in that house. He knows if it's his leak or not too. Yes, exactly. Yeah.

Yeah. It's a very delicate balance of treating people with respect and holding them to account so that they don't take advantage of it. Yeah. Right. So good. Yeah. You got to call them out if you see it, right?

Like I'll tell you this, I had a painter who trained me, and he had this one saying, you're going to love this. Ready? There's no such thing as a drip of paint that fell on somebody's floor that the painter doesn't know about. I, okay, so you're sorry. I hired this guy one time. We call him Fell and John.

You can guess why. And Fell and John was a painter that lived out in the woods. And we hired him for very cheap because I had a friend who had used them. Anyway, so he came and painted an apartment for me. And it had a stairway up this apartment. And he painted like it was like the common area of the hallway. And so rather it was carpeted stairs, rather than taping off the floor as you would normally do, he said, I don't need to worry about that. So he just painted.

I'm an amazing painter. Yeah. But what's funny is he didn't even try. Like, he literally just sprayed. Like, you know, sprayed the carpet on the way up the floor. Like, it was just continually sprayed the, the floor. It had like a two, three, four inch mark of carpet. Wow.

And fell in, yeah, Felon John, we don't, we stopped hired him after that. Wow. Yeah. But he knew about it. It was so much easier to replace the carpet, right? I know. Yeah. Like, yeah, we had to actually hire someone else to go there.

And they got like just scrubbed and pain and like all this stuff. And it was just, anyway, don't hire Felon, John to do your, to do your work. By the same time, you don't necessarily need, like, like, a land. handlers don't need to go higher the, you know, $200 an hour guy who does all the resorts down by the beach, right? Like there's a, there's a whole variety. Where do you see like the, the felon John and the, you know, $900 an hour guy who's union, whatever? Like, how do you, where do you see, like, that range? Where should people focus on? What kind of, what kind of levels do you see there? Wow. Now, it's a vague, very big, vague question, but I'm going to what have you seen in terms of,

like, quality and what do you get the best work? I've done a lot of research. And the, hourly rate for a skilled trade, a guy with a license, you know, they're making 50,000 here, 70 on the high side if they work their butt off. They can push to six figures if they hire a helper or two and can charge an hourly rate for them that gives them some buffer and they should because why would you hire somebody and not make money on them? Yeah. And you can make a good living, but you need to understand, like I used to have this thing. I live in a government town, right? So we have a lot of government employees. They got great benefits. They get good salary and they had no idea of the cost that they were as an employee. So they took their salary and

they looked at everybody else and said, well, I can't hire somebody to do labor and pay them more than I get paid. And then they didn't realize that they have average salary, but they had 40 year pension. They had 30 to 50,000 dollars a year to have a desk. You know, there's all these other overhead costs. Businesses have costs too. Yeah. Right. So I mean, you've got to understand if a guy's billing you out at $100 a hour, it's because the government's involved and he's legit.

Yep. Yeah, it's true. The guy that, the guy that's working with $25 an hour is usually not paying the government anything. He's pocketing $25 an hour. And that's not a relationship you want

because he won't be there next year. He'll be in jail for tax evasion. Yeah, exactly. Right? Or some other reason he's in jail. Yeah, living in the woods so he doesn't get caught. Like, if you want a relationship with somebody, I mean, you could always find somebody

to work by the hour. Right. But man, that's not a good long-term success formula. Don't be afraid to spend good money. Because the guy who knows what he's doing and he does good work, you're going to get that return investment. I mentioned before to my members, there's a great little thing online. It's called the Cost versus Value Report. And what it is, it's a national, I don't know, it's a newspaper or a magazine, but they do this in an annual report. And it basically outlines different costs of different types of renovations and how much return investment that got them when you pay full market price. The irony is, is that almost everything to do with lots of sweat equity, like not the technical

trades, but the painters, the tile sets, the window installers, the vinyl siding guys, the fence guys, the deck and crews, they're all getting 80 cents on the dollar return right up front. The painting guys are making you money. You have 5% return on your investment when you paint a house on the value of the property. That's a great place to start, eh? Yeah. Like, holy cow. If you want to get into rehab and you don't know anything about the business,

you don't want to go buy a century home and turn into a fourplex and learn the hard way. Yeah. Right? Start with something that's ugly. That's not too terrible. And then fix that up, even do a little DIY on it. You know, and then you'll have some appreciation for how much work it takes to do something right.

Maybe that's part of it. It's the appreciation factor. Well, there's a hidden cost to trying to save money all the time. And here's what I've learned. If I go with the guy who's a little more expensive, but I get a good experience, I am more likely to do another deal. And ultimately, looking back 30 years, the more deals I did, the more money I made. It's that simple. If I own 30 homes, 30 years later, they're worth four times what I paid for him. I will not even remember how much money I saved or spent when I had the contractor. I will just know I bought this house for 300 grand. Now it's worth 900 grand. because that's what happens over a long period of time.

If I skimp on the contractor or anywhere in there and I get a bad experience, what that does is make me not want to buy my next house. And that, when you look at the millions of dollars you're losing over long periods of time because I had a bad experience, it's so much more expensive than spending an extra $5 to $10,000 or something to hire the good one. And no one thinks about that in the moment, but it is playing such a huge factor in wealth creation. Yeah, they see all that as a cost, not an investment. There you go.

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sponsor job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's Indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. I wanted to shift subject a little bit and I know we got to start wrapping things up pretty soon, but I'm wondering like what makes a good investor client? Like, what do you, like, for example, what's the best working relationship you've ever had with an investor? What makes an investor, like, you just go, I want to work for that person. I mean, besides the, you know, they pay you early on time. Like, what are the things make you value somebody?

Because in this competitive market, it's hard to find good contractors. I want to be the best investor I can to them. So they come and work for me. Nice. I like that question. So that every time you hire that same guy, he already knows your system. Expectations have already been established. It's not reinventing the wheel.

He doesn't have to call you every two hours or. wait to the end of the day to have a walk through to get permission to do something else that he knows what you're looking for. Yeah. Consistent work is nice. Yeah. Right? Like if you're in the investor game and you're constantly doing projects and you want to guys say, hey, I'd like you to work for me on a regular basis. Have that conversation. He might not want to have all of his eggs in your basket. He might want to do every other job. Yeah. And that makes a lot of sense, too, from a contractor perspective. Because what if your life implodes? Yeah. Yeah. I always tell people as a contractor, I love the small jobs.

Get me in and out of there in one day, make somebody happy. That referral is just as powerful as the one I spent six months on. And it's only one referral. Two of those big jobs a year and leaves you two people who are talking about you. So we used to like having, you know, come and do my kitchen backsplash, whipped together a deck on the weekend because it was just really quick way to get the word out about who you are and what you're doing. And those long projects, it's a nice blend, right? Because so you've got that rehab of a two or three months project. It's a nice, steady revenue, right? Especially at certain times of the year, you want to be indoors instead of outdoors. But on big projects, your likelihood for something to go wrong exponentially increases, and that means unhappy people are more likely to come up.

I've learned this in my business. If someone says, hey, David, sell my house, and it's in a super hot market, and I go in there and I list it for a million, and I sell it for $1.2 million, and it took me 10 days, you are thrilled with me. And it took no, very little of my time, right? Just my skill. If I go in there and you have a house in a tough neighborhood to sell that needs to be fully renovated, we can't buy your next one until we sell this one. You try to do it at the same time. You're super stressed. It takes me four months. You hate me every day for stuff that isn't my fault. Then we couldn't get the loan, right? I did 20 times as much work and you were one-tenth as happy with me.

And it's like a recipe for disaster. And that's something I've learned. Those ones you can get in and out quick. You make a happy person. That's a referral partner for the future. I had a better experience. They had a better experience. The minute that they start throwing all these variables into the equation, I start to go, oh, God, no, there's no way I'm making it out of this thing unscathed. Something's going to go wrong and I'm going to be the one that you're yelling at. And I look for a way to get out of it. I think that's a really good point that you mentioned. Well, it's like, it's easy to have a first date. Yeah, there you go. But being married is a different ballgame. So that's why a contractor, kind of like

to be able to come and go freely, say, yeah, I like that job. I'll take that one. No, I'm busy right now. He doesn't want to be married, right? You know, to another point, though, as a contractor, when I go into a job, maybe it's just because I've got such a broad range of experience, I don't even put in the contract for unforeseen. What do you mean? There's no such thing. Like, because you're saying, I've seen it all already. I can smell you from a mile away. I know exactly what happen to that house. I know I know exactly what I'm going to find when I open that up. It never surprises me. It's always an excuse to charge money. It's a big point of contention with the person paying for the job and the contractor who says,

well, it'll be this much unless I find something else. Because how do you know if you want to do it if the budget's going to double? Yeah. Well, what are unforeseen? Structural issues. If you have a structural issue, you can tell by the finish. If you don't see that walking through, you shouldn't be in the business messing with people's structure because you don't have a clue. You're going to have mechanical issues? Yeah. Okay, I know. The house has got 1970 day core, right? Poorly done. Boom. The guy did his own electrical. There's hidden boxes everywhere. Big surprise. Yeah. Right. Throw it in the quote. Yeah. And then if you don't have to do the work, maybe you take something off and the person's

thrilled. You came in under budget. And as a contractor, if I'm surprised that it's not as bad as I thought, and I go back to the guy and I say, listen, you know, we're going to take this off the bill at the end of the job because it never happened. I had contingencies that already built in. It's a lot easier to, but that's a relationship. That's such a better business model, though, because I look at what other business gets away with that? When I sell your house, do I get to say, you know what? The offers that came in fell out a contract. It took me more time. The commission is actually me 9% and not 6%, right? I love it. You go to a restaurant and like, well, your steak's going to be 50 bucks unless you make me fill up your water this many times, in which case it's going to be $85 or something, right?

No other industry gets away with it, but contractors go in there and they say, here's my best case scenario. This is what you're paying because it sounds really good and you'll do the job. And then once you're hooked, I'm going to start adding stuff on like you just said, Jeff. I'm so glad that you mentioned that there's a better way to do it than that. I had an experience with the company. I was working doing subcontract work for them years ago. They did a simple contract for a bathroom in an unfinished basement.

We get down there. We're looking at the job. No problem. There's nothing on the walls. It's just skin back to concrete. I got plumbing line, got all the space I need. Looks like a drain. I look at the plans, and they hadn't made an allowance

for moving the plumbing off the wall so we could insulate him behind him. And in winter climate, if you don't do that, your pipes burst. Because you now isolated the water and the copper where the freezing point is. So it's standard practice. It's like, yeah, you're buying a car. You get four tires, not three.

Like, it's that obvious, right? right? I call up the project manager from the company. He comes over and he has a conversation with the homeowner. Got an unforeseen. I got to call the plumber in to move this copper line. Man, what the hell you mean unforeseen? It's right there on the wall, staring you in the face. Why wasn't this addressed earlier? Next thing you know, 10 seconds later, this guy's writing a $400 check to move a copper line. So when the plumber came in to do his job, he added 35 seconds to put on a fitting an extension to the plumbing work he was going to do for the bathroom anyway. And the company is up 400 bucks.

Yeah. What the hell is that? Like, that's just being a crook. But if you don't know a contractor's job as the person paying them to do it, you don't know that that wasn't unfair. I think that's the problem. That's why we're telling people understand what contractors do. Listen to Jeff on YouTube.

Listen to this podcast because. And here we are, right? We're in the age of information. Yeah. So if you don't know and you get taken, it's because you chose not to invest your time to know. I love that. No more excuses.

There's a story in the Bible about like the Queen of the South or the Gorsiba, maybe or was her name, traveling hundreds and hundreds or maybe thousands of miles to listen to Solomon talk because he was the wisest man that ever lived. And I can do that now in three seconds to open YouTube and go listen to someone who's one of the smartest people that exists. Yeah. Yeah, yeah, yeah.

And we act here. Like we got to call our friend and say, hey, what do you think we should do here? But we haven't made any effort to learn it at all. It's kind of amazing how much access we have in the palm of our hands and our phones and we won't take that, you know, an hour a day to listen to people talk to educate ourselves. Yeah. And that's the fascinating part. I mean, if you're in the business of being a professional athlete and you're never trained, good luck with that. Yeah. That's, you know, that's such a good example, Jeff, because they watch hours and hours of film. They go do their job and then they go watch film and see how could I do it better? As real estate investors,

why would we not do the same? Why would I not talk to the people that are going to be helping me to accomplish my goal, whether they're contractors or handymen or appraisers or property managers or study the data. Bigger Pockets now has a service called BP Insights where they go collect all the information on different markets and they share it and they say, here's the trends that we see. Here's what the data shows for where you should be investing. And people won't even look at it. Yeah. Which is amazing because the numbers don't lie. right when you compile information like that and you're not just talking to one real estate agent or just one market the guy down the street like when you do comparables for trying to figure out

your investment like how much should I put into rehab well comparables exist you know don't ask the contractor the contractor's not yeah I know if you say hey contractor I want to get this fourplex let's walk through this the comparables are this one over here this is what it looks like can you make this one look like that one for X number of dollars. I'll give you an honest answer. Which one of these comparables did I use? Right. But nobody ever wants to do that. They want to hold that card close to their chest and say, I could make 150 grand here. And I want, I want him to do it for 60. And the 30,000 in, you're only got $10,000 of production. 20 grand's gone. He's off and on the rail somewhere. And now you're starting from scratch with another contractor.

That guy comes in and says, he didn't know what he's doing. I got to start from scratch. And what are you going to say to him? Because every contractor I know will say the same thing. No, I'm peeling it back. I'm starting over. Oh, yeah. Because I can't trust what he did. That's true. So now you're doing it twice. Don't ask the dishwasher if you should get the ribeye or the filet mignon.

So that's another good piece of tip. If you're getting your work done and you're not on a permit, that's exactly where you are. Yeah. Starting from scratch every time you need another contractor. If you're on a permit, then the permit officer comes in and says, yes, your structure is approved. Yes, your installation's approved. Yes, the wiring is approved. Then you can get a contractor.

And he says, I've got to start from the beginning. And you can say, well, That's a load of crap because all of that's approved. Just take, go start from. That's so true. Hey, AJF, before we get out here, two more quick questions from you that I have anyway. Sure. First of all, this is a quick one.

Would you partner with a flipper in exchange for, like, as a contractor, would you partner do you think with a flipper on a profit share instead of making money as the contractor? Like, is that something I, we should be a, as flippers should be approaching contractors. Like, hey, man, let's just split it 50, 50, but you do all the work and you'll get, you know, you'll make more at the. end of the day? Or is that a bad idea to align an incentive like that? Wow. Jeff, is part of what you're trying to figure out, would a contractor have the capacity to run

the numbers and know if the deal will make sense because they just don't think that way? Are you appealing to the greedy side of human nature? Or like, I guess the question is, as a real estate investor, are you concerned that he's just going to run the numbers up and I'm not going to get any money back anyway? So are you trying to protect yourself? I think what Brandon is thinking is, how do you get the contract? Contractor's interest to align with yours so that they do a better job. And I've never done it.

But I know I'm always tempted to like split it with the contractor somehow. And so like they get it done faster and do it cheaper or whatever. They find a way to make it better because they are incentivized. The more money I make, the more money they make. But at the same time, like I also know that they're not in the business of that. And so I don't want to like, I don't know. I'm not sure if it's a. That's so much like a marriage that's not even funny.

Because now he's going to judge every time you do something he doesn't like. Yeah, because it takes away from his pocket. He's going to get under each other's skin. Right? Yeah. He's going to go to do a doctor's appointment on Tuesday morning. And you're going to be like, where the hell are you? Yeah, that sounds great.

That sounds great. Yeah. Oh, yeah, I want to see that invoice at the end. I noticed this and this and this. Listen, if you want to flip a house, that's a different beast. That's not investing. Yeah. That's, uh, yeah.

For me, it's a different world because I don't find, I don't find enough integrity in flipping. How so? on the building anything. Oh, you mean that they'll cut corners when they know they're flipping it. Yeah, you know, it's easy to make something look sexy. You can dress up any pig and put lipstick on a dress and have it ready for the dance. But, man, yeah, there's, like I'm doing an 1880 farmhouse right now on my YouTube channel. Half the work we've done in there, no one's ever going to see.

Right. Yeah. Because it was, it was necessary to make sure that that house was going to last another 100 years, not just 20. And no one's going to understand that. And so because I put all that work in, I'm going really nice on the finishing. I'm making sure that I'm bringing the value of that property up to the point where I can sell it and get the return for all the hard work. I find the flipper mentality is a one top dollar, but I don't want the hard work. Yep.

If, has that make any sense? No, it makes perfect. I mean, it's just a scary place. Like, it takes a lot of integrity to do flipping well, right? I have some friends that bought a property in Tacoma, Washington, I don't know, 10 years ago. And they, it was a flip. So they bought this flip from somebody. And, you know, within the first two weeks, like water started coming in the basement.

And they started, like, I mean, it was like, that was the worst of it. But there was a problem after problem. The problem because all it was was lipstick on a pig. And so that's just encouragement for everyone who's out there flipping houses right now is like, you are not just making money. You're like the house that you're fixing up is the house that some kid is going to live in. and that some young family is going to, you know, raise their family. And it's like real people. And so like it does.

It takes a legitimate amount of integrity to flip house as well and not just do the quick lipstick that they have to deal with the rest because they were never going to find it in inspection. They're never going to find it before they buy it. You know, it's, it's so tough because I think everybody in this business on every side of each fence has got an opinion about the other side of the fence and what's wrong with third part of the business. Right.

And so I'm not a big champion of flippers because my experience has been poor. I know that if I was to flip a house, I could buy a house and flip it. And I could do a spectacular job and make a ton of money. But that's because it would be me buying it and flipping it. And I know exactly which one to buy, right? Because I know how to get to the end from the beginning. And I don't have to do things twice. I'm not changing my mind halfway through.

I'm not doing the traditional TV show and creating drama for myself. I mean, flipping a house should be pretty much limited to remodeling. Yeah. Right. Yeah. Don't change your mechanical systems. Don't get into behind the walls. Right.

And if you can take something ugly that's been treated poorly, especially if the outside of the house needs to be rehabbed, that's brilliant. Because outside of the house is where a lot of your return investment is anyway. And it's where it takes the least amount of skill. Yeah. 10 gallons of paint, a rental paint sprayer, you're good. With the buyers I work with in the Bay Area in Sacramento, they will almost, like 80% of them will skew towards the beautiful house, amazing pictures,

the same four freaking houses that everybody else in the Bay Area wants to buy that are listed for 800 and are going to sell for a million because everyone goes there. And it feels, that's a tight margin. Half of my job is convincing people. It's okay to look at the houses that are ugly. And these are people, mind you, that are coming with a quarter million dollars and they don't need it all as a down payment.

They have plenty of money to rehab a house, but it's just so hard to convince them, you're so much better to buy this house at a better price and then fix it up after you buy it. Take a month, maybe 45 days to get it remodeled like what you just said. You know the work that was done. You ping the materials that you wanted. There's just something about human nature that loves the whole, I don't have to do anything. I could just move right in. But your point is really good, Jeff.

That's not necessarily true. You don't know what you're moving into. You move in and then you see the leaks that start to show. show up six to 12 months later that weren't there originally. You see where there's actually mold and buildew because like you mentioned, they put the shower in wrong or there was a problem with the basement. You just don't know what you're buying when you buy a house that somebody else has already fixed up. No, that's true. And we have a unique opportunity in the renovation market now because our mechanical systems have been pretty consistently standard since 1980 without thinking

about it. Right. Your power supply, anything after 1980, it's going to be copper wiring. It's going to have a ground. Okay, problem solved, right? We don't have to worry about the aluminum or a non-grounded wire. Your plumbing and drain system, it's going to be made out of a material that's not degrading, right? Whether it's copper, ABS, or CPBC, if you don't get into tearing that out and starting over and moving it, it's going to produce for you. It's going to be solid. The structure, we've had a huge advancement in the building code as far as structural awareness, all right, and thermal systems and all that sort of. 1980 is a nice line.

If you can buy between 80 and 85, 1990, even, you're 30 to 40 years old, right? These things are ugly because they're old, not because they're broken. And so you really have the ability to go grab something like that and give it that facelift. And then now you're not a flipper that's renovated.

You're just making it what it could have been all along, right? Every house needs updates. So you buy one of those. You don't even need a building permit. You can put in a brand new kitchen as long as you don't move the sink. Yeah. Yeah, I love that you said 1980 because I have 19, in my head, I've always kind of had like 1978 as a line.

And part's because of the whole lead-based thing. Yeah. But it's more of an arbitrary date that. That's a thing. Yeah, yeah, yeah. So like 78, like that range, older than that, I'm going to have more repairs and maintenance, more capbacks, more. And it gets worse as you go older.

Right. Newer than that, I'm just going to get better and better. And so, yeah. And there are some great houses in 1978, too, that had that really long, linear stone, multi-colored look, right? And you spray paint that gray and trim out a house. 100% grade. Man, I'll tell you, that looks freaking amazing.

That looks like brand new ledge stone. Yeah, I totally agreed. It's a good look. I'm going to change the name on my social media accounts or my tagline to, I'm ugly because I'm old, not because I'm broken. I just need a faceless. I love that line because that's about how old I am. I was born in the 80s.

Right? I'm ugly because I'm old. Not because I'm broken. See, I was born in 70, right? I still got all the toxicity. that's funny. Jeff, do you think we're going to look back 40 years from now at all these gray houses that we've made and people are going to wonder why we were so depressed? Like how we look at the green shag carpet. It's not going to take that long.

20 years later, we're going to say, what was your obsession with everything gray? I'm going to tell you. Yeah, great. I'm going to tell you right now. And here's the weird thing. We're building two neighborhoods and up the street from where I live. On the left hand side of the road, they're doing all brand new thermal systems, zip wall, insulation exterior, down the foundation. top of the line looks exactly like the house on the other side of the street that has none of them. And they're all just these dark boxes, right? And so there's a whole neighborhood that's overpaid for their product. And they're going to find out on resale that they don't have as nice a house as they think. But you know, yeah, all the dark, I think it's just about we like change.

There's always the next generation wants something different than the last. Right. So we're going to end up changing that again. And sooner or later, you know, like here we are falling in love with pink toilets and blueberry sinks all over again. That's funny. God help us all. Yeah, it's fascinating. You know, if you've got those old things, just get them painted, like I said. Don't change it. Re glaze the bathtub. Yeah. Re glaze. You're in a green bathtub. Re glaze. And the secret is, the secret with owning a house is if you have products on the exterior that can be painted, you were always able to change and be with the times. So when you're out there shopping,

vinyl siding is your enemy. You can't paint that. But if you see an old house from late 70s with aluminum siding on it, dear God, you can modernize that in about an hour and a half. All right, right? Same thing with stone brick.

I said I had two more questions for you. I actually have, and then I gave you one, but now I actually have two more. And we can just do this all day. I'm not in a hurry. You can go as long as you like us. All right, here's the question.

The one that came to me was, I want to ask you about how to find contractors, and I'll do that in a second here, like how to find a good one. But first, I want to know, what are those things that you would recommend somebody who wants to be more handy? Somebody like you or I, like, you or I, like, David doesn't like to be as handy, right? David, I'm not making fun of you. You literally would rather hire people. No, it's a different part of the business curve, right?

Like when you're getting started, maybe you want to. Yeah, and I like that. Maybe you've got time and you want to learn and get dirty. Yeah. What should they focus on? Like, what are those things like that do you think are easier than most of? people expect or at least like worth learning versus what are those things people should just yeah just go ahead and hire that out it's just best to have somebody who's he can do that

like what are the newbie DIY things that people can take on okay so number one is learn how to paint right and if you learn how to paint and you can watch your videos i got a great teaching video for that it's not the fastest system the world but it's the cleanest and it'll get you a great result as a newbie if you learn how to paint you can finish any job You can take care of transitioning from a unit who hasn't taken care of it to the next unit without worrying about hiring contractors and the timeline. It gives you a lot of peace of mind. Anyone who knows how to finish a job can then take that experience to start contracting

up until where they can take over if they want to. Right. So if you learn how to paint and then you learn how to install flooring, now you need a contractor to a certain point you can take over and finish. and it's an incredible amount of freedom to know that. Like when I was in contracting, I didn't bid on a job that I didn't know how to do myself in case the people that work for me quit or went to do something else.

I didn't want to be stuck in a place where I needed to hire somebody. I didn't know what was going on. For DIYers, it's the same thing. You don't want to know, you don't want to have a skill like, I'm going to be the electrician. Let's pick on these guys for a minute. There's a lot of skilled trades out there that want to be in the rental market, right? They want to be investors.

And they want to hire a contracting crew. And then they say, okay, now get out of the way because I'm going to come to the electrical. Problem is for him, it's a hobby. And maybe he doesn't show up on the right day. Maybe he waits a couple more days. And now the contract crew is mad because they're being delayed, right? So if you're going to get involved with the DIY aspect, this stuff, start at the end of the job and work your way backwards. So at least you can finish reach their contractor, have a good experience, and then take a-

Great point. So a piece on that. One thing I used to do a lot is I would have the electrician come through and do the electrical work and then I would trim it out afterwards. And they would always happen to have me that because they hated. I feel like they always hated doing like the outlet play covers. But like I could put my wife. My wife and I would just sit there and just put outlet play covers on all day. Like some of the things that are like real. Like I don't want to pay $100 an hour to screw and plastic cover onto a light switch. And so that's one way that we saved a lot of money. We would like we would do all that that work at the end. Right? Because like an hour. Our electrical inspection agency, they want to come through at the end and make sure all those plates are there. And if they aren't, you get a deficiency. Well, now the electricians actually got a reason to come back and make sure. So, you know, our electricians wouldn't do that. But you had a relationship, maybe they'd let you do that as long as you had a little, you could show them a picture or something. Mine would always let me do it. They always like, yeah, great.

They hated doing that part. They were like, they'd rather go on to do something. Nobody wants to come back. Well, what they would do is they would come in and put the plates on and then they'd call for the final, whether you're done painting or not. And then you've got to take them off and then put them back on again. That's a zero tape, right? It doesn't make any sense.

Yeah, they'd rather just be done with it. So what else can you? Anything else you can think of? I know, for example, like, I don't know if you agree. You probably don't agree, maybe, because you were a tile guy. I actually enjoyed doing tile. I enjoyed learning to do tile because tile guys were so rare and expensive, like, you know, 10 years ago especially, that like, I learned to just do tile.

And I wasn't amazing at it. But for, like, I could. could I could tell a shower in an afternoon or, you know, in a day. And I would save myself $800. And it was like, that was a good thing for me to learn. I don't know what your thoughts on on that, but I like that one. Well, you know what? If you learn how to cut the tile, then you're fine.

Right. If you don't know how to cut tile, then you shouldn't be installing it. Agreed. Like lots of people just don't take the time to invest and learn how to do it properly. And so they end up making a huge mess. But yeah, tile is something, if you're proficient at installing tile, not only you're saving time, but you can get creative, you can make a space to look absolutely brilliant,

but it's your own time that you're investing, then you can go into your material price point, right? And start having a little bit of fun. Yeah. But yeah, tile is one of those things that even if you do poorly, it can still perform well, right? It's the assembly that's the trick. As long as it's clean and dry, you're in good shape.

It doesn't, you don't have to have a whole lot of skill. If you're not sure or you're unskilled, buy a better quality stone so it doesn't break so easy and you're good to go. Yeah. That's awesome. There's a high margin of air when it comes to tile. That's why it's a good place for people are you started. Yeah.

If that's it, if you're good at tile, you can put in ceramic and it'll never crack. If you're not good at tile, you better put in something like a really good rectified porcelain or you're going to run into trouble. Yeah. Yeah, plus tile, I always like tile, probably the reason I like the most because it was

very, it was creative. You could actually have fun with it. It felt like an art project. Like I almost like forgot. I was working and I was just working on a cool art project in my house or some rental. And I'm like, oh, yeah, that's right. This actually work. And it was, you know, it's hard work.

I get all crusty full of like cement and there you mortar all over my hands. But it's, it was enjoyable. Well, I'll tell you, the tile industry, just so you get an idea. When we were doing new house tile job, we'd get our paperwork Tuesday at noon, drive across town to where the suppliers were load up from two different suppliers for a new house, drive across the other side of town again back where the development was, usually about three or four o'clock by the time we get there. We're only allowed to work till seven o'clock at night.

And on Thursday at seven o'clock at night, we needed to have three bathrooms, two front halls, plus the kitchen, the kitchen back splash. And it all had to be done. It was seven different tile, three different accents. It all had to be installed, finished, grouted, cleaned up and out of there because on Friday, the hardwood refinishing guys are coming in to stay on the floor.

So I had a two-day work week. Awesome. And we installed that. stuff so fast. If anybody wants to know why new home construction is a little sketchy with the tile, it's because, well, that's the parameters they give the tile guy. Yeah. Yeah. Yeah. Not saying. All right, man, last question from me for the day. How do you find a good contractor? It's probably the number one question I get from new investors, at least out there with like, how do you invest with no money and how do you find a good deal? It's like, how do you find a good contractor that's not

going to rip you off that does good work that isn't going to, you know, disappear up because the surf is so good and they run away to go surf. How do you find the good contractors? I mean, it's easy to find a contract. A good one is the question. So it's one that is different for everybody. Like, are you looking for someone who's fast or cheap or amazing as talented at this project? And so you got to discern that for yourself because you can't get highest quality for the lowest price as super fast. You can't get that mix. And I think, unfortunately, a lot of people are disillusioned. Their expectation is, I'm going to find a guy who's so happy to have work. He's going to almost do it for free. He's going to be a great grandson of Picasso, right? And on top of that, he's going to do it so fast.

He's going to be like HGTV. I'm going to drop them off, coming back after getting coffee, and the job's going to be done. And if that's your mentality, then the answer is you'll never find one. Your expectations are out of whack. It's so funny. You see. say that. So you got to decide, do you want somebody who's fast, somebody who's good, or somebody who's cheap? I tell people, those are the three things you're looking for. Pick two. Because the minute that they get the third one, they're now too expensive for you to be able to say or cheap. If they're fast, then they're good, right? If they're cheap and they're fast, they're going to get good because they're all doing all this work. Well, if they're cheap and

they're fast, their quality is probably down the toilet, right? Yeah, until they've done it enough times that their quality gets good. In which case, they would then be more expensive because they have good quality. And this is where referrals. come in because you can be cheap and fast and have, you know, average mediocre quality and have great referrals because you've lined up with people looking for them. But now if you say to your friend, hey, you got a referral, check to see if your friend has the same expectations as you on the job. That's a good point. Because if you don't want cheap and fast and your friend was happy with cheap and fast, you could be really disappointing. So ask the question, why were they a good contractor?

And they would be like, oh, they were amazing because they were so fast. I mean, the quality was pretty rough. But we needed that job done on a Thursday. It was done on a Wednesday. I mean, it got done a day early. He was awesome. I just my tile cracked next week. Listen, I did a, I did a job at a retirement home. They had a fire. One of the members that was living there had serious issue with being displaced from her unit. Okay. They took her out of the unit. They came to me and they said, we need to move her back in tomorrow. They asked me to have it done in 12 hours. So by tomorrow at noon, basically. And I said, sure, I'll have it done. And I worked all night. and I had the unit put back together and she moved back in.

Now, I told them, I said, after this person is using that unit, when you're finished and you're ready for a new occupant, tear everything I did apart and fix them. Right? Because I put lipstick on that pick. It wasn't a good quality build, but it got her back on the unit, which was the goal. So that's just an example of how meeting a different expectation can be done. So that's really the key.

Now, I tell my people, if you're looking for a, contractor, manage that expectation first, and then go visit them on site. Talk to the current client. And then just before they start your job, they should be done that other job. Yeah. Go talk to that client again. Make sure it finished just as good as it was going when you visited the first time. Because you'd rather find out you got a dud the day before they start than after a week or two. Great point. Right. That's really all there is to it. And, you know, There's a couple of simple rules. If a guy's available tomorrow, there's a reason for that.

Yep. So if you're running your life at max speed and you just got this unit, you're going to flip it around and you want to get a contractor in there next week, be careful for the guys who are available for next week, especially in today's economy. Oh, you don't want to be that guy. I wish I would have heard you say that 15 years ago. You really want to start lining this stuff in a bench.

Yeah, if I would have heard that 15 years ago, my life would be very different today with contractors. You wouldn't have had that first experience. I wouldn't have had a lot of those. Yeah, it's been a interesting. Yeah, but everything's seasonal, right? It's all up and flow. So it's not 2010 anymore.

Now it's 2020. I have no idea what advice I'll be giving in five years. And maybe it'll be different. But for right now, if you want a contractor, manage your own expectations, and then expect them to be wanting to do a good job for you. Don't be looking for a problem. There's enough times that problems will happen in life.

if you manage your own expectation and you're willing to treat them fairly, you're probably going to be just fine. Yeah, good stuff. All right, man. Well, this has been, this has been really, really good. Normally we end our shows with a section we call our famous for.

We're going to do kind of an abbreviated version of it here for Jeff. Since Jeff, you're not necessarily not talking about real estate investing today specifically. So maybe we can skip the first question and just jump in the second. Like, is there a business book, whatever. But before I ask you that question,

I will ask in a second. Let's hear what's going on this week around the Bigger Pockets podcast network. Hey, it's Ashley from the real estate rookie. And last week we had Marseille on the show. He is an engineer and pastor. And he has made time to build a rental portfolio of 24 units. He's put systems in place and talks about working on his business and not in his business. So make sure you go back and listen to last week's episode.

All right. And with that, any business book or entrepreneurship book or, you know, even a construction book that you recommend people get? Just any book recommendations on your shelf? You know, I don't even read books. All right. How about this? Any YouTube channels you recommend other than your own? Yeah, you know what? I do actually have a YouTube channel to recommend. I'm going to shout it out to Matt Rizzinger. I don't know if you guys have ever seen him before. He's a contractor out of Texas. And he does everything best practice. So he's kind of at the other end of the spectrum from what I do, right? I'm a very practical how to get it done without spending a fortune. And he's on the other side of the spectrum. So having both of those experiences in your arsenal is a great way to learn, right? because then you'll know exactly how much money you could have spent

and what a different marketplace is expecting from your performance. It's just a really good both ends of the scale kind of education. All right. David, do you want to get any final questions on the famous four? Maybe the last two? Yeah. What are some of your hobbies when you're not fixing up houses and making videos? right now I have nothing.

I like to eat. Okay. Yeah. I love the travel. So right now I have nothing. Yeah. Now you can't do it. Yeah.

I mean, I used to come home from contracting and then work on my own house. I'm an exciting guy. Yeah. But yeah, I love to travel. My wife and I have married 31 years now and we just, we're like getting out and about.

But. Very cool. Yeah. So it's been a little bit crazy lately. I hear you. All right. Last question of the day. Last very last question of the day, and I think I said that earlier, but last question from me anyway.

What do you think separates all those people out there who are trying to do a rehab who succeed, get it on time on budget from those who fail, give up, they never get started. They don't even do a rehab because they're so afraid of it. What separates people who are successful when it comes to rehabs? Okay. I think I know. Yeah. Common sense in our business is knowledge mixed with experience.

right that's good and if you don't have the right information and the right experience you're not going to have good common sense and you'll fail because the most obvious mistake that you're going to make isn't going to be obvious to you know i always tell people they ask me all the time you know i want to get into business how do i do that i said well go work for somebody and until you're a lead hand for a couple of years don't even think about running your own show yeah right you want to get into real estate investment maybe go work with somebody and learn the business first yeah that's really good advice for So many different trades. So many things.

Right? Like real estate agents, I get everyone that says, Hey, David, how do I learn how to be an agent? And I just think that the amount of time it would take you to try to teach you that. You just need to go work for somebody for free who knows how to do it, right? Or learn a trade or learn the business. Anybody who's ever been successful in life had a mentor.

Yeah. Right? End of discussion. I mean, for me, my, my, the greatest teacher I ever had was also the biggest jerk I ever worked for. But man, he knew his business. And you learned. Right? But if you don't have that experience of someone that you can kind of glean from, then you're going to have to learn everything the hard way. I mean, I tell people,

our YouTube channel, we make videos shown DIY, right? I tell everybody on our YouTube channel that every time they watch a video, it's like watching a few minute lecture of a topic, of a course of a degree in your educational life. And you can't just say, ooh, I learned something and go out and be a professional. It's just too much to learn. So it's best to glean, best to watch somebody who does it right before you try to learn how to make all your mistakes first. That's great. And don't just say, can you be my mentor? Teach me everything that you know, right?

Like the people that I've noticed that got into Brandon's world, the Ryan Murdoch. Yeah. Yes. Like Ryan flew to Hawaii and said, Brandon, I will take over running the stuff that you're doing that you don't like doing. Micah showed up and said, hey, I'm going to run your books for you and I'm going to handle all the detail stuff that you don't like. those people work their way into a mentorship with Brandon and they're going to be making a lot of money in the future because they get to be around them all the time. That's a much better method than just say, hey, can you be my mentor as like kind of saying, can you coach me without me paying you?

That's what that turns into. Figure out a way to work with them. Mentorship should be you bring something to the table and you improve somebody's life and then they'll in turn pour into you. That's exactly right. Don't just show up and be a leech. Like, Yeah. Great way to put it. In our business, we're always training guys to be our competition. But that's a good thing because the more guys that are out there and know how to do it right, the more value we have. Yeah.

Well, this has been an awesome discussion. And I think that a lot of us learned a lot about the whole world of rehab and contracting. For people that want to learn more or find out more about you, where can they find you? We're on YouTube. It's pretty simple. You know, you go home renovation, DIY. We got a lot of videos out there. project videos, specific skilled trades, experience. I try to pour in as much as I can. And

we're happy to help. That's what we're doing. We're acting like a consumer advocate. So we're not in the business of taking money from people to make videos for them. So it's a lot more fun. And if you need help with your own individual project, we have a membership program as well. And you can jump into that. And we'll give you an email and you can correspond. And we'll hopefully help you with some of that learning curve specific to your project. Awesome. Well, thank you so much, Jeff. This has been fantastic. I really, really enjoyed learning from you today.

And, of course, everyone, go check out his YouTube channel again. That's Renovision, DIY. We'll put that in the show notes at biggerpockets.com. So show 399. So you can check it out. Jeff, have a fantastic day. Hey, thanks for having me, guys. It's been a blast.

Hopefully we'll get a chance to do this again sometime. Yeah, look forward to it. Thank you very much. This is David Green for Brandon. Drop it like a ceiling Turner. Signing off. You're listening to Bigger Podcast. Rockets Radio, simplifying real estate for investors large and small. If you're here looking to learn about

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