ForeclosuresMass - ForeclosuresMass Monthly - Negotiation Skills - Developing Strong Relationships... A Key to Success with your Contractors (October 2006)

Developing Strong Relationships... A Key to Success with your Contractors

By Richard Cohen

Richard Cohen

One of the amazing things about owning investment property is the extraordinary number of contractors you need to deal with. Plumbers, electricians, and painters, of course, but you've also got pest control contractors, roofers, house cleaners, sewer experts (not the same as plumbers), carpenters, handymen and others.

Hiring each of these people involves negotiation, however it was only after I had owned investment property that I realized just how valuable my relationship with each of these specialists would be.

A Different Type of Negotiation

In negotiations, there are many sources of power. The two most commonly recognized are the strength of your alternatives and the legitimacy of your argument.

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The first has to do with the quality of your options. If you can easily walk away from a negotiation with an electrician, for example (because you are not in a hurry, or because you've got a list of other qualified electricians who could do the job just as well), you've got alternative power.

The second relates to fairness and logic. For example, if your property needs a new roof, and based on your comparative research, you know that it should run about $15,000, that knowledge is power. You can sit down with a roofer who is asking $20,000 for the job and ask him to help you understand why his quote is fair. That too, is a form of negotiating power.

A third area of power, however - and one that costs little and is frequently overlooked - is the power of relationship. If you can learn how to grow and cultivate trusting relationships, you'll find that your dealings with contractors are not only more profitable, but easier and much more pleasant.

Why Relationships Matter

You've probably heard it said that successful real estate investing requires building a rolodex... a team. Here too, I didn't appreciate the value of this advice and the efficiency inherent in creating honest, supportive relationships until I owned investment property myself.

As a property owner - whether you intend to act as landlord or just renovate and flip - you'll likely be challenged by the sheer number of projects to be done. It would be nice to get three competing bids on each project, but even if you had the mental energy to go through all that, it just takes too much time.

Instead, you want to get to the point where you can save time and energy by developing a "go to guy/gal" for each area of expertise you're likely to need (e.g. painter, pest control, electrician). What a time saver and stress reducer it is to know that if you need a room painted quickly or a leak fixed in the middle of the night that you've got someone you can trust.

The End Game: Getting to a Place Where Negotiation is Easy

Here are three suggestions for developing strong, lasting relationships with contractors:

Pay quickly. As soon as I get a bill for work that's been done, I send the check. Sure, I could sit on it for a few weeks, but the fact is, most of these guys are not living large, and when a contractor realizes that I pay quickly, he tends to move me to the front of the line. This in turn is very valuable to me; much more so than whatever pennies of interest I'd earn by leaving the money in my checking account for a few more weeks.
Let them know that you own, or plan to own, other buildings. Most contractors are looking for steady, predictable work, and when they hear that I'm in it for the long haul - and have more needs than the average home owner - they (again) give my jobs higher priority. Also, knowing I'll be back with more work removes any temptation to charge more than a job is really worth, since that would risk my extensive, long term business.
Treat them with respect. I know, it sounds trite, but many people think that being a successful investor requires a hard nosed, "take-no-prisoners" approach. I take a different tact. I do my best to show interest in them as people by sending a gift when the new baby is born, inquiring about their work, or just taking time to ask how it's going.
Even if we have a disagreement about work done, I don't question their integrity in the process of getting clarification. Does it help? Well, last month, and for no good reason, my electrician informed me that he was lowering the hourly rate he would be charging me.

One last point. There is such a thing as too much dependency on a single individual, and the tradeoff for the efficiency that comes with familiarity is that you can be taken advantage of. That said, and in my experience, most people are exceedingly honest and hard working, and want nothing more than to do a good job for you. If you come across someone who's not, you just move on.

In summary, building relationships with your contractor team is one of the lowest cost, highest value activities you can engage in. Commit from the beginning to invest in these relationships and everything about your real estate career will go more smoothly.

Richard Cohen is a negotiation coach and consultant with over 25 years of experience, as well as the owner of investment properties. He is the author of two books on conflict and negotiation, and the founder of School Mediation Associates. Contact Richard at sma@schoolmediation.com.

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