It’s often a tricky thing when you’re trying to make a purchase for the first time. My wife and I have decided that 17 windows in the duplex that we’re living in need to be updated. It’s a 90-year-old house and we think the windows are original. Every time I look into windows they always seem quite expensive and it’s hard to know what type to buy and what to pay for them.
As a landlord, this comes up pretty often. In the last year, I’ve had to replace a water heater, get vinyl siding installed, get commercial insurance, and have tuckpointing done (it’s when a mason fixes up the concrete between bricks). All for the first time. In each case, I had no idea what would be a reasonable price or what the criteria of a good purchase would look like.
As the title suggests, the solution to this that I’ve found works best for me is to get multiple bids. I find 3 is usually enough and it’s important to let each person know that you’re talking to other people. I find saying something like “I was hoping to get a bid from you on insurance for a commercial building that I’m buying” is enough to clue people in that they’re not the only person you’re talking to. Sometimes I’ll refer to it as a quote instead.
Having the person realize other people want the job is key to getting them to give you a good price. If they think you’re just going to say yes or no to them, they’ll be motivated to try to get as much from the transaction as possible. If they realize other people might undercut them, they’ll try to give you a good price.
Ask Tough Questions
It’s fair during the bidding process to ask questions, which you’ll sometimes get from the other people bidding. I had an insurance agent suggest that I form an LLC to buy real estate – he admitted as he made the recommendation that he’s not a lawyer. I’d read the pros and cons of this and wasn’t sure it was a good idea. If I was just dealing with 1 person, I might be more motivated to stay polite and just accept his advice at face value. I asked him about his clients’ experiences where an LLC had protected them or failed to protect them when they had problems in the past. He quickly changed the subject.
A window installer pointed out that given the age of our building there was definitely lead paint. He made clear that his bid included taking precautions to not put lead paint dust into the air inside. This seemed like a good thing, so we asked everyone else about this – presenting ourselves as more knowledgeable consumers.
I was debating getting a cast iron tub either replaced or refinished. I had a plumber I was getting a quote from and asked him about refinishing it. He said he wouldn’t recommend that, but when I asked follow-up questions there didn’t seem to be any reason WHY he didn’t recommend it. In the end, I figured that was as good as an endorsement for refinishing – he just wanted a bigger job taking out and replacing an old tub.
Big Differences In Price
With the cast iron tub, we had a first plumber bid the job at $7,000, to cut up and remove the cast iron tub. He stressed what a tough job it would be getting it out of the 2nd story bathroom. A second plumber bid the job at $20,000, claiming he’d need to pull out the floor and sink from the bathroom to replace the tub. In the end, we got it refinished for $790, it’s held up through 2 tenants and still looks great.
With commercial insurance we were recently shopping for we got bids of $3,100, $1,600, and $1,025. Brokers often sell themselves by saying they’ll shop around to find the best deal for you. I was amazed that one bid would be 3 times as much as another.
Nothing But A Bit Of Time
At the end of the day, all it costs is an hour or two to get multiple bids. Even when you’ve settled on someone you use regularly, it’s probably good to occasionally bid out a job to keep them honest. Obviously, any provider won’t like this, they want you to use them exclusively. If they aren’t giving you a competitive price it seems to me like a mistake to use them exclusively.
I released a book on Amazon about “Getting Started As A Small Scale Landlord”. It treats this as a part-time job you can give yourself, rather than a get-rich-quick scheme. If you enjoyed this post, I think you’d dig it.