Negotiating With Your Contractor | Success Path Education

By Tarek El Moussa

If you keep up with our show, you know that the labor and material prices on fix and flip projects can get pretty crazy. Without our contractors, though, we’d be in real trouble. They have the experience, expertise, tools, and manpower to do all of the big rehab jobs on our flip houses that Christina and I wouldn’t dream of doing ourselves.

That said, we don’t always accept our contractors’ estimates and bids without asking a few questions. Some jobs really have no room for negotiation, but on others there’s definitely some wiggle room where you can save on your rehab budget. Of course, you really need to know where and when to negotiate so that you don’t offend your contractor and lose them on a job when you really need them. So, whether this is your first flip or your hundredth, you can benefit from a few tips I’ve learned along the way for negotiating with contractors on big jobs.

Don’t Ever Be Rude

First of all, remember that your contractor is an expert at renovating houses. They know what’s going to go into this job, and they know what it’s going to cost. Being rude and/or treating your contractor like their labor isn’t worth it won’t get you anywhere. So, even if you think that they’re quoting you something completely astronomical, don’t lose your cool. And do be polite, no matter what.

Ask Them to Break It Down for You

Next, big fix and flip projects involve a lot of smaller rehab details. When your contractor says a job is going to cost you $50,000 from start to finish, that might sound pretty crazy. However, when you get them to break that estimate down into individual projects that make up the whole, you’ll understand the price a lot better.

Not only that, but you’ll also see where you can afford to negotiate. Say, for example, that your contractor’s estimate includes sourcing and acquiring all of the materials needed to upgrade the house. You could save some labor costs by sourcing your materials and getting them to the property yourself (or through the outlet or home improvement store’s delivery service). Doing the legwork on this part of the project could save you a significant amount of money, and it won’t offend your contractor by trying to undercut their labor prices.

Make Them a Part of Your Team

Do you have more promising leads on flip houses coming your way? Are you going to have another project for your contractor after they finish this one? Let them know that you value their work and that you want to keep working with them. Give them first priority and right of refusal on your next project. The more your contractor sees that you’re going to have a steady source of work and income for them, the more likely they’ll be to work with you on pricing and give you a break on labor or materials whenever they can.

Let Them See the Big Picture

And don’t be afraid to share your budget with your contractor. Let them know that staying in this budget will help you net enough money to continue buying and flipping more properties to keep them and their workers on jobs as much as possible.

When you’re open and honest with your contractor, show respect for them and their work, and show them that they’re going to have a lot more work from you in the future, you’ll build a solid relationship with them. That relationship will help keep you on time and on budget on all of your flip houses. Don’t be afraid to negotiate, but remember that your contractor is your best friend on fix and flip properties.

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Tarek El Moussa

Tarek and Christina El Moussa have over a decade of professional real estate experience and have been featured in national print publications, online media outlets, and a popular real estate TV show. Tarek is known for his determination to get the job done and doing it right.