Today’s REI Classroom Lesson

Ron Carlson discusses how difficult it can be to compare bid to bid because there are so many variables that could be different.

REI Classroom Summary

One bid might be a few thousand cheaper but until you know exactly what is covered for each bid, you have no way to know which is the better option. They might both account for flooring in the bathroom but the quality of the materials might be completely different, for example. In addition, bids for a room without broken down details of what’s covered can be very misleading.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Mike: Welcome back to the REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Ron: Hey, my name’s Ron Carlson. I am with Renovation Gurus. Today I will be your host of the REI Classroom and I’m going to talk to you about bid versus bid or comparing contractor bids.
Mike: This REI Classroom real estate lesson is sponsored by, FlipNerd’s private investor coaching program and your blueprint to investing success.
Ron: As a general contractor, I see a lot of competitors’ bids and I want to talk you about how to look at one bid and compare it to another bid. The truth is, it’s impossible, you can’t do it. I know that’s not what you want to hear, but what I want to talk to you about is when you are looking at a bid and you’re trying to see what the other bid is, kind of how it works out in the contracting world. The reason why it’s so hard is because a lot of bids have different ways to write them. For example, I always break down a kitchen when I teach, I always talk to people about the kitchen, okay?
Some people, some contractors will bid out a kitchen. For example, they’ll say we’re going to put all of the cabinets in the kitchen, we’re going to do granite countertops, we’re going to do a backsplash, we’re going to do uppers, we’re going to lowers, we’re going to do hardware. And another contractor might have a kitchen for $5,000, but you don’t actually get to see what’s in the kitchen. Some contractors have say, a flooring budget where they do all the flooring throughout the whole house on one side of the bid, and another contractor might add flooring into just the kitchen area.
So when you’re looking at a bid, one contractor might say okay, this kitchen is $5,000, another contractor might say this is $7,000, but that’s because they’re moving material around. One might have material in the kitchen budget, and one might have material on the flooring budget and it’s really hard to see where that money is.
Another reason there is a very hard to compare is because they have different material on them. For example, let’s use a high-end bathroom, or a normal bathroom for that matter. Some bathrooms you could use travertine in and some you could use a 59 cent tile from your Home Depot or your Lowe’s or something like that. So it’s very hard to say, “Okay, I got tile, but did you get these exact same tile I got? Vinyl plank, but did you have padding underneath it? Is it a glue down? Is it snap together?”
The quality of the material sometimes differs on the labor of the material. For example, I have a client right now, he is wanting to paint the exterior of a house, he wants to caulk the exterior and all the trim, do a little bit of fascia repair. And he said, “Okay, here’s my budget, here’s what the handyman gave me.” And it’s really hard to, one, compare a bid because I don’t really know what’s included in that. To do this particular job right, he needs a lot of siding repaired, but he just wants to paint it over. Is that right? Is that wrong? Because one contractor is going to paint it, the other contractor is not going to paint, it’s hard to say.
And then, items [Inaudible 00:03:20], what’s a good example of this. Sometimes you do, say, lights and hardware, and on one bid you might have a switch for that light to turn on already included into, say, add a light in the living room. On another bid, it might say something along the lines of light in the bedroom, but it doesn’t include switch and the switches and the electrical area.
And then, you have the last thing is items that are just flat out missed. A lot of times we see say transition strips, one contractor will have a transition strip between the carpet and the vinyl plank, the carpet and the tile, or on a stairway or something like that, and another contractor may not have it.
So most people what they do is, they grab one bid, they grab the other bid, they go all the way to the end, they don’t look at all the stuff in the middle and they say, “Oh, this one’s $5,000 cheaper or $3,000 cheaper. I’m going to go with the cheaper contractor.” I just talked to somebody just recently and he said, “Okay, you guys give me a bid of this, I decided to GC it myself, but when it was all said and done, I paid exactly what you told me the original bid was going to be at,” because his bid didn’t cover everything that are bid covered.
So when you are comparing bids, I’m just letting you know it’s really, really hard because people disguise stuff, they’re using different labor, they’re using different material, they’re using different timelines, they’re using different qualities and you have to almost be smarter than your contractor and say, “Okay, this is on one bid, does your bid include nails? Does your bid include glue? Does your bid include trash? Do you have appliances? What kind of appliances do you have?” There are so many variables on a bid, it’s very tough.
I recommend that if you’re going to do a bid versus a bid and you want to have a better understanding of what’s going on, you walk the house yourself first and you take very, very good notes personally, you have your own little notepad, you say, okay I want granite, I want a back splash, I want this, this and this.
And then, whenever you’re walking it with a contractor, let’s say you’ve got three contractors out there, anything that they recommend make sure you add that to your list. This way you can go back and you compare each bid and you can say, “Okay, do you have the granite on here? Do you have the appliances on here? Are you getting the appliances that I talked about or are you getting your own appliances?” And you can go through your checklist and compare all three bids and as long as the bid that you go with has everything on your checklist, you’re probably going to be okay.
However, it’s very easy to miss stuff because people are moving stuff from room to room, from line item to line item and it gets confusing. And it gets confusing for a contractor, it gets confusing for clients, and really all I can say is best of luck to you. But take your own personal notes and you’ll be better off for it trying to help yourself stay on budget, stay on track, stay on time.
My name is Ron Carlson, you can reach me on my cell phone 817-566-4346. I am with Renovation Gurus and I hope that this tip has helped you today.
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