The Science of Flipping - How To Find Inspectors and Contractors For Flips

Starting point is 00:00:00 Again, the difference would be is are you doing it with a homeowner, meaning are you contracted directly with a homeowner or are you actually buying it from a wholesaler? So those are the decisions of Flipping. I am your host, Justin Colby. And on this episode, we're going to be talking about how I find contractors. And when I'm buying a home out of state, out of my own market, do I get an inspector? Why or why not? Now, if this is your first time to this podcast, welcome. I'm excited that you're here. This podcast is all about making you the best well-rounded real estate investor you can possibly be. That means wholesaling, flipping, buying and hold, short-term Airbnb model, creative

Starting point is 00:01:02 financing, all of that you will find right here on this podcast. It is streamed live right there on iTunes. Well, not live, but it is on iTunes and it is also on YouTube. So if you're more of a visual learner and actually like to see some edits and things of that nature, make sure you are subscribed to my YouTube channel, youtube.com forward slash Justin Colby. Now let's jump in to this topic that quite honestly, I get a lot from my students. My students know and so should use that I'm buying virtually, meaning I'm buying rentals and flips and wholesaling in a lot of different states. I'm not necessarily just doing it in the state I'm living in. Now, while I do buy and flip and do wholesale and buy rentals in the states I live in, the vast majority of my business now is built on the virtual model. We're doing

Starting point is 00:01:53 anywhere from 10 to 20 deals a month every month across the nation, not just in our own backyard. So the question is posed, A, how do you find contractors in that scenario? B, when buying a home, do you make sure to get a real inspection each and every time? And then where do you find those inspectors? So let's start with where do I find the contractors and then where do I find the inspectors? Well, if I'm buying a home, truly buying a home for my own rehab or rental purposes I will do an inspection now if I'm buying it directly from a wholesaler because it's a good deal likely I'm gonna have to skip this okay so if I'm buying it directly from the homeowner I will hire an inspector and I find good inspectors a large part

Starting point is 00:02:43 on the Facebook groups. So groups that you're likely a part of, I will actually ask, hey, does anyone have a good referral for an inspector in so-and-so town, right? A lot of times I will come up with a name or two. Now, if I don't find them there, then a lot of times I'll actually call realtors, right? Realtors usually will have a good home inspector, or I will actually go call or not call, but I will reach out to home flippers in that area. Again, usually through the Facebook groups. And I'll just ask, Hey, when you do a home inspection, do you have any good inspectors

Starting point is 00:03:17 you can call? And again, I'll usually get a decent response for those people right there in the Facebook group. And then realtors also help a lot as well. So if I am buying it, not wholesaling it, then yes, I do a full-blown actual paid inspection, usually anywhere from $350 to 650 tops. Now, if I'm wholesaling it, I don't do an inspection. And then furthermore, if I'm buying it from a wholesaler, because every so often wholesalers have pretty darn good deals, I do not do a full-blown inspection. I'm taking the risk myself, right? If I'm very questionable about whether something like a foundation or electrical or roof or something really high price point, then I might risk my

Starting point is 00:04:02 earnest money, right? I might risk it and say, well, I'm going to give you the $5,000 earnest money that you want. I know it's non-refundable. I'm still going to get an inspection because if I am off when dealing with a wholesaler, I lose my earnest money and it could be a bigger mistake than $5,000, right? It could be a $20,000, $30,000 mistake because I didn't get the inspection. So my rule of thumb is when buying a home for a flip or for a rental, always pay for an inspection. Again, the difference would be is, are you doing it with a homeowner? Meaning are you contracted directly with a homeowner or are you actually buying it from a wholesaler? So those are the decisions you have to make. Now let's talk about the

Starting point is 00:04:45 contractors. Contractors are the bane of my existence. You guys hear me this over and over and over again. And in large part is because they want the job so bad that they're going to give you a good price that you want, but then they either can't perform at that price. It actually won't cover the actual costs. They say that they can get something done in 45 days and it's going to actually take 60 or more. And so what I will do is I will try to find a referred contractor, very similar to what I do with the inspectors. Now, here's why I do this. Usually, if someone's willing to refer a good contractor, that means the people or the person is good. They've used them before. They're willing to put their good contractor, that means the people or the person is good.

Starting point is 00:05:25 They've used them before. They're willing to put their name behind that contractor saying, hey, here is a good referral for your business. Now, again, I utilize these Facebook groups. I'm part of probably anywhere from 50 to 100 real estate investor Facebook groups across the nation. Some are national, some are localized, depending upon the location. And so I will go in there and I will simply ask. Another thing I do is ask the people that are flipping homes, right? I engage with the agents, I engage with the investors in the area, and I'll ask for some good referrals. Now, here's the key to the actual contractor. It's not quite the same with the inspectors. I actually want to get three to five contractors to walk actual contractor. It's not quite the same with the inspectors. I actually want to get

Starting point is 00:06:06 three to five contractors to walk the property. I then ask them to give me an itemized bid. I tell them, hey, on this property, we're looking to do a full-blown rehab, or maybe it's a rental, right? So, hey, on this property, we're not going to take down walls. We're not going to totally blow out the house. We're just going to do a rent ready type of rehab. You know, depending upon the pictures, I'll give them some advisement like, hey, you know, those cabinets are 40 years old. We're going to replace those cabinets, et cetera. But I'll let them know the size and scope of that rehab before I get the bid. That way they're going apples to apples, right? Everyone's going to give me a very similar type bid, hopefully. So now I'm pretty specific. I say, hey, listen, I want to know

Starting point is 00:06:51 exactly what the bid is. I don't want two numbers on there, the external number and then the internal number, meaning how much you think it's going to cost to redo the front and then how much in inside. I want quite literally every single item that we are going to be going through from cabinets to counters to paint to flooring to piping, you name it, right? Door handles. I want that itemized bid. If they can't follow the instructions, they are out. It's as simple as that. If you can't do that part, then I don't believe you pay attention to detail. And at that point, I don't want to be working with you, right? That's my own frustration with contractors. They usually are really good at what they're doing, but the business side,

Starting point is 00:07:38 the operational side, the budgeting side, the attention to detail in terms of an itemized bid, more often than not, isn't their strong suit. I can't blame them, right? I'm not a big spreadsheet guy, right? I get it. But they should have someone on their team, someone that can fulfill that. Now, I have three to five because a lot of times you either have one person that is obscenely expensive, right? You have one person that underballed everyone, lowballed everyone, and really just is trying to get the job. And then you probably have two or three people who are all in the same ballpark, right? That's why I really want three to five more than just two. Now, once I have those individuals, I usually try to have a conversation with them, see

Starting point is 00:08:22 if they've done something relatively nearby. And then I want to make sure I know the type of work they're dealing with. So I ask them to send me the most recent couple of rehabs that they've done. Now, most good construction crews, they can literally say, oh yeah, 123 Main Street over here, investor Johnny just flipped, we did his work, go check that out. It's active on the MLS or just sold on the MLS, right? The good contractors will be able to very quickly point you in that right direction, okay? So again, I like to do that on homes that I am buying, that I am flipping and buying and holding for my own purposes. If I'm just going to wholesale it, I don't do that. Now I have 15 years experience. I know how to estimate a remodel bid pretty darn closely within five to 10% max,

Starting point is 00:09:13 meaning I can look at the age of the home, the size of the home, the city that it's in, the price point that it's in, basically be within 10% one way or another just by kind of what I call bubble math, right? And that's just because I've done roughly 600 rehab homes and I know construction pretty, pretty well. Maybe not the best, but enough to be within that 10%. Now, yes, are there some variables that have come up since COVID? Of course, materials are a little bit more expensive. Every contractor in the world is crazy busy. They're not in need of work so they can increase their prices. So yes, something that I used to be able to say was $20 a square foot. Now I'm actually saying is $30 a square foot.

Starting point is 00:09:56 Not because, well, I should say it this way. Just because of the reasons I just said. COVID, materials, supply and demand, everyone is super busy. They can charge what they want. So just be aware, right? Remodeling is more expensive today than it was prior to COVID. But it doesn't mean it's not a good idea. I don't love remodeling because it just has more pain points, right? Whether it's the contractors, whether it's the city, whether it's the budget, whether it's the timing. So unless I'm tripling, tripling my bottom line net number from a wholesale deal, I will usually not decide to rehab flip it.

Starting point is 00:10:43 Meaning if I can make 20 grand as a wholesale in my pocket, I need to put in my pocket 60 grand to make it worth my time to rehab flip. Some of you guys love rehab flipping. You're passionate about it. You're willing to do deals for 20 grand. God bless you. Hopefully you're crushing it. I know so many people murdering it right now, rehab flipping because of the market. And we are starting to see a little cool off period. I don't know if it's really that drastic or important right now, but I would be cautious as I record this video as interest rates are going up. There seems to be more properties on the market. Part of that, I think, are sellers feeling like they missed the opportunity to sell at the peak. So it's a little FOMO, but we'll see. We'll see how this all shakes out. So those are my answers to some pretty important but frequently asked

Starting point is 00:11:25 questions about where am I finding an inspector? When do I hire an inspector? When do I bring in contractors? Those are the answers. Again, subscribe to this channel. Make sure you are liking this video. Very important for the YouTube gods to appreciate my channel. And I keep delivering five videos a week. Make sure you're subscribed. And if you're listening to this on iTunes, drop me a five-star review. I'd appreciate it. Peace.

The Science of Flipping - How To Find Inspectors and Contractors For Flips

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