Rehabbing property with payment after property sells. - Posted by Tim Conde

Real Estate Investing
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Posted by JohnG on April 14, 2000 at 17:17:24:

The last line says it all - some of these guys can’t show up to their own job. Thats priceless !!!

I have had a busy week dealing with contractors on a couple of different projects. Its Friday afternoon and I feel like a practising psychiatrist who has just spent the day with 2 or 3 of my most serious patients. Seriously, trying to deal with these people is like doing open heart surgery on yourself. It can take the good out of you real fast.

I used to get mad. I would scream and throw things and just lose it with these people. They would look at me like I was nuts and it got me nowhere - except I ruined a perfectly good Friday afternoon on people who couldn’t see the big picture. So, now I am quiet, polite and I make a note that as soon as this job is finished I will not hire this person again. You know the only problem with that - the devil you know is sometimes better than the devil you don’t. It seems to be an occupational hazard that contractors are a different breed of cat.

Eagles fly and turkeys are for Thanksgiving and Christmas. The minute you try to make a turkey fly like an eagle then you are in big trouble.

So, I agree. Don’t try and partner up with anyone who is not on the same page as you are. Its a lot easier to fire someone from a jobsite than from a partnership position - especially halfway through the job.

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Rehabbing property with payment after property sells. - Posted by Tim Conde

Posted by Tim Conde on April 13, 2000 at 19:37:29:

Does anyone have an opinion regarding a deal where a contractor will rehab a property you own in return for a percentage of the gross profit after it sells??

Is this something that you would like to see? Would you avail yourself of this service even if there were necessary time restrictions, penalties for breach, etc.

Obviously, this would allow people to flip properties much quicker and not have to worry about up-front cash to bankroll the rehab. But do you see a potential downside that would scare you away??

Thanks to all,

Tim

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Re: Rehabbing property with payment after property sells. - Posted by JPiper

Posted by JPiper on April 14, 2000 at 11:46:21:

Tim:

This is an idea that I?ve given some thought to. I decided it was a poor idea. Perhaps it?s just me, but I have consistent and ongoing problems with contractors. It?s not unusual for me to have to fire a contractor, hire another one somewhere during the project. This seems to me to be the nature of the beast so to speak. Making this guy a partner strikes me as leaping from the frying pan into the fire.

Many of the contractors around seem to have one thing in common?.not a great deal of money. This is the guy you?re asking to WAIT to receive his funds until the sale of the project. How does he do this and still eat? He may well want to get involved, but when confronted with the reality of needing money, he now goes out and gets another job (or two), thus putting your job on the backburner. If you?re not satisfied with this ?backburner? status, now you?re involved with terminating a ?partner?.

If the guy is a guy with no money, certainly you?ll still have to pay material costs. And you?ll still have to pay his crew if he has one. In other words, you?re still going to have to front some money with this type of guy, thus partially defeating your objective. If the contractor is better healed, he either doesn?t need you, or becomes quite costly.

Speaking of cost, the contractor that could actually afford to pull this type of arrangement off, is going to expect not only what he would have earned under the usual method, but also expect an additional return for having taken the risk of earning it (that is, unless he?s a complete idiot). So now, the question for you becomes how much additional are you going to pay to engage a contractor who is willing to take the risk with you? Bottomline, if you have a means of financing, it will be cheaper than involving the contractor.

Finally, the well-heeled contractor really doesn?t need you. If the guy is good, making plenty of money, has a competent crew, he?s more than capable of doing these deals on his own without you.

To me, this is one of those ideas that sounds good in theory?.but putting it into practice looks problematical. The contractor most interested in this proposal is the guy you?re most apt to have problems with, both financial and other if the deal unravels.

Personally, I?d rather sell this guy the project, allow him to rehab it on his own. This is a strategy I?ve used several times, ALWAYS to my amusement. It seems that some of these guys can?t even show up to their own job.

JPiper

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Re: Rehabbing property with payment after property sells. - Posted by Wilton

Posted by Wilton on April 14, 2000 at 09:36:02:

Tim, I have been searching for some method of buying sfh needing repair, finding someone to make repairs and split the profits after the sale. I find that is that if it is a responsible contractor , he is making his own buys and repairing. Other possibilities are finding a lesser qualified person and doing the split thing, but the ones I find in this catagory are broke and often short on ability. This would be a winning method for both parties, if a system could be developed. Maybe establish a “going in” price and give him an option. Problem is he might SIT on the property, tying u up for extended time. Im sorry not to reply to you question with more positive input, instead of finding more negative, but i too am interested in solving this problem… Anyone else have suggestions on this.??

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I doubt you will find a contractor to do this. - Posted by Bill K. - FL

Posted by Bill K. - FL on April 14, 2000 at 07:59:32:

Unless they are starving for work.