Flippin’ Pronstar

[popsgarland]

What company is gonna show a customer, or make public, their overhead and profit numbers?


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Agreed Pronstar.

When I was contracting, I very seldom got what I had for P and O. There is always something on my contracts that I missed in my bid cost on the materials and/or products I had to buy went up in price. I took this extra cost out of my P and O.

 

[Darkpriest667]

What company is gonna show a customer, or make public, their overhead and profit numbers?


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Pretty much all of the publicly traded ones do.

DELL | Dell Technologies Inc. Cl C Annual Balance Sheet - WSJ

Dell Technologies Inc. Cl C annual balance sheet for DELL company financials.

www.wsj.com

 

[F350-6]

What company is gonna show a customer, or make public, their overhead and profit numbers?


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It's called cost plus or construction management. It comes in handy when the scope is unknown and is likely to change. The contractor doesn't risk losing money on a firm bid, and the owner knows the mark up going in, especially when subcontractors are going to be involved.

Without fixed price, cost plus or NTE (Not to Exceed) the purchaser takes all the risk. Of course moving walls, etc. would be excluded in a typical contract and would come with additional charges, but for a straight forward rehab, I'd pass on this deal if it didn't have a NTE, and I'm in the market for a rent house currently.

 

[pronstar]

It's called cost plus or construction management. It comes in handy when the scope is unknown and is likely to change. The contractor doesn't risk losing money on a firm bid, and the owner knows the mark up going in, especially when subcontractors are going to be involved.

Without fixed price, cost plus or NTE (Not to Exceed) the purchaser takes all the risk. Of course moving walls, etc. would be excluded in a typical contract and would come with additional charges, but for a straight forward rehab, I'd pass on this deal if it didn't have a NTE, and I'm in the market for a rent house currently.

I’m not sure I follow.

The NTE is your budget amount. You can remain under budget if you don’t get extravagant with your rehab choices.

The buyer sets the scope of work.
And the house has to appraise to receive funding.

Distressed homes we deal with typically don’t qualify for traditional mortgages. They’re trashed and don’t even make it to the MLS...these are bought wholesale.

Edit:
First sentence, I corrected it by deleting “gonna”

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[mongoose]

Pretty much all of the publicly traded ones do.

DELL | Dell Technologies Inc. Cl C Annual Balance Sheet - WSJ

Dell Technologies Inc. Cl C annual balance sheet for DELL company financials.

www.wsj.com

I agree. You provide the client with a schedule of values that breaks down every division of work including O & P. This is what you get paid from as you provide a % of completed work and stored materials to be paid. Contractors have often been known to front load the SOV in order to bill for more money than they actually have earned. Additionally the client does not need to be paying $20,000.00 for earthwork when there is no earthwork on the project. You can a cost plus contract as noted which provides an an agreed upon % for O & P on the project and any change orders.

 

[Brains]

Different situations call for different schemes. Some want the all-inclusive packaged product. Check these boxes, pay $xxxx dollars and get yyyy all wrapped up in a bow. Don't bother me with how you did it or what it actually cost, I just want to know that everything is taken care of for what I'm willing to pay. Typically less stress, less time, but more money.

Some people want more detail, involvement, and control.

I personally like cost plus, because it puts the customer in the driver's seat. If I'm sourcing materials or labor, it's cost and I'm responsible for resolving any issues. If I'm asking them to provide, it's cost plus and they assume the liability. If I introduce a change order, I'm made aware of the cost and I can decide if it's worth moving forward. If I don't like the markup, I can choose to go forward on my own. There's money in the game up front to cover costs, and then the remainder on completion to square up. More of a partnership, I like to think.

There's nothing wrong with either model, they both work. For what Pronstar is doing, I think cost plus would kill their timelines though, it's a totally different animal.

 

[mongoose]

Every publicly traded company does
That’s the fiduciary responsibility to shareholders. And it’s done on a macro level.

Pick any private business and ask them to see their overhead costs, and profitability.

Not just contractors.
The local grocer.
Your car mechanic.
Any gun store like Primary Arms.
Local car dealership.
Your favorite locally owned restaurant.
A plumber who snakes your drain.

Ask any business owner on this site if they’re gonna open their books for you.

It’s just not gonna happen.


Maybe this will help explain:
Buyer tells us budget, and what areas they’re interested in.

We present various distressed homes that check the boxes, along with a condition report, house details and distressed price.

We provide an approximate, general renovation cost. This would include things like: does it need a new electrical panel, foundation repairs, a roof, HVAC, known issues to make the home habitable.

If this hit their max budget, it probably won’t work for the buyer because we don’t know the level of finishes, or the scope of work the buyer would want for the house.

If buyer like a house, we work with them to see what they’d like to do to it.
Maybe they want some walls moved.
Open floor plan.
Giant kitchen.
Customize the master bath.
...all of this will vary depending on the house.
This becomes the scope of work.

Then we provide a standard estimate.
If it can be done within budget, great.
If it can’t, then we keep looking.


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This is BS. Any contractor that wins a bid ( especially public monies but generally private also)will have to show costs including O & P in order to bill and get paid.

 

[pronstar]

Here’s the gist of it:
There’s very little inventory.

Year over year, there are 50% more buyers competing for 50% fewer homes.
Those that do sell, go for above asking price.

New homes are being built and are sold almost immediately when offered, with build dates months out or more. The builder isn’t going to tell you what he paid for labor costs or lumber. It’s not really relevant.

My parents paid $34k their house. They’re probably going to sell it soon, for upwards of $700k. A buyer may think my parents shouldn’t makes that much profit on the home, but that’s not really relevant.


We can put a buyer into a semi-custom home priced in-line with comps. This may appeal to some, perhaps not others. I’m ok with that. I’m not saying we’re the only game in town. We fill a niche, that’s all



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[Axxe55]

An item is worth exactly what someone is willing to pay for it.

What I paid for something, and what I'm selling it for is my business.

If I were in the market to buy a house, my concern is the final cost of the house, and that it meets my expectations of quality work was done and the work done, was done correctly. How much the contractor, or the sub-contractors paid for material, or their labor costs are of no concern to me.

If I were paying a contractor for a re-model, how much they paid for the materials isn't my concern. We have already reached an agreement of the total cost of the job when completed. How much he paid his workers to do the work we agreed upon, isn't my concern or business either.

 

[WT_Foxtrot]

An item is worth exactly what someone is willing to pay for it.

I agree and say that all the time. And isn't just germane to real estate. Unfortunately many of the "appraisers" of properties I've bought, fixed up, and sold don't agree and has cost me a ton. Pisses me off to no end.

 

[pronstar]

Welp...no more flipping for me.

Corporate America called, made me an offer I couldn’t refuse. I wasn’t even looking for a job...it found me.

So I’ll be rehabbing and retaining rentals.
If any of y’all are interested in the program I mentioned above, I can put you in touch with some folks in the brokerage.

Having a kid and the desire to build a legacy for him has really changed my outlook.

A steady paychecks every 2 weeks, versus getting paid when a flip sells, has a lot of appeal from a stability POV...plus I get an amazing healthcare plan thats better than the one we currently have.

Sometimes the Good Lord puts amazing opportunities in our path, and we feel very blessed right now.


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[ZX9RCAM]

Congrats!

 

[pronstar]

Congrats!

Thanks brother!


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[Charlie]

Double congrats!

 

[Vaquero]

That sounds pretty good .
Congratulations

 

[toddnjoyce]

 

[lonestardiver]

Good deal !!

 

[pronstar]

Must...resist...the “good gun deals” thread


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[toddnjoyce]

Must...resist...the “good gun deals” thread


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Pretty easy right now. That thing’s on life support.

 

[Axxe55]

Huge congrats to you @pronstar !