Negotiating with contractors is an important part of the job for real estate investors, especially rehabbers. Strong negotiation skills help you keep labor and material costs low, which increases the profitability of your real estate investment business.
Here are three insider secrets for negotiating with contractors.
1. Always Shop Around
Shopping around for the best deal might not be a secret, but it is a severely underutilized practice for real estate investors.
We get it; you’re busy. You need the job completed quickly and don’t have hours to invest in researching multiple contractors. And then there’s the waiting period for those contractors to get back to you with quotes.
Here’s the insider secret: use Yelp’s “Request a Quote” feature to save serious time in your search for the best rates on well-reviewed contractors. You’ll see “Request a Quote” under the yelp listings for businesses that offer this service. Once you enter your information for your quote, you’ll have the option to get quotes from multiple other businesses using the information you already entered. And many of the contractors will reply within 10 to 30 minutes, so you get the information you need without spending too much of your valuable time searching for it.
2. Make the Contractor Pitch the Starting Amount
Have you had a contractor ask, “So what’s your budget for this project?” Don’t answer that question! If you give the contractor a figure, they know how much you have to spend. And, more often than not, they’ll find a way to spend your entire budget.
Instead, make the contractor throw out the first number. You can say something like, “I want to spend as little as possible, while still getting the project done right. In your professional option, how much will it reasonably cost to complete the project?”
And remember, everything is negotiable. The number the contractor offers is just the starting point. From there you can indicate that the starting number is more than you intended to spend and ask how (not if) you can get that number lower.
3. Use Data to Negotiate an Even Lower Cost
The best way to negotiate with contractors is to go in with real data.
The fact is, many of us don’t know exactly what’s involved in the project from the contractor’s side or how much it costs. We often simply have to trust that the contractor is knowledgeable and honest. That is, unless you have access to a tool that provides up-to-date cost estimates for local labor and materials. This is why smart real estate investors use PropStream’s Rehab Estimator as their secret weapon in negotiations with contractors.
With PropStream’s Rehab Estimator, you’ll be able to check your contractor’s numbers against local averages to make sure you’re getting a fair deal. And if your contractor is too high, you’ll be able to use real data to support your argument for a lower rate.
Negotiating with contractors might not be easy, but with these insider tips, you’ll save time and money, putting your real estate investment business in the best position for success.