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How to Negotiate with your Contractors & Subcontractors

Updated: Sep 15, 2021

Negotiation is one of the most significant factors in establishing a business' growth. The reality of it is, good negotiation skills equate to a realistic and attainable business plan. Thus, having such skill, particularly in real estate, will get you a better deal. For instance, as an investor, you will have to work with contractors, subcontractors, suppliers, etc. working with them will require an agreement, and not all terms and prices meet your budget and standard, therefore, an arrangement could make your partnership work. With that being said, having a clear overview of what you would want for your business could mean fair and practical planning and execution.


Although there are several contractors you can negotiate with, there will always be some who won't budge. Therefore, to help you do business with them in the most cost-effective way without compromising quality, here are a few negotiation tips you would wish you know before closing the deal.

1, Prepare your detailed plan and scope of work

The first step in getting your business in shape is keeping a measurable, attainable, and realistic plan. Thus, your budget must justify your projection and, it shouldn't compromise the quality. All of your project details and expectations with specified terms must be ready before meeting with your prospective contractor to avoid confusion and misunderstandings. Additionally, this will get you more strategic and accurate bids.

Moreover, if you are an investor who flips houses or invests in rental properties, your scope of work must manifest concrete objectives. To ensure that you and your contractors, and subcontractors are on the same page, have a clearly defined plan from a general standpoint to the specifics. This way, you are very much secure that they understand your plans for the project, to which you both agreed.

2, Get estimates from a couple of contractors

Part of the decision process, project planning, and assessment is to gather more data prior to execution. You got a lot of options to choose from, you shouldn't deprive yourself of the best deals the market could offer. Maximize your resources by doing your market research for a couple of contractors, get more quotes if you can so you'll have your basis on which one best works for your budget.

Sometimes, getting an estimate from various contractors will help you come up with a well-thought-out plan. And letting them know that you work with a few contractors or you are looking to get a quote for your project will somehow help you economically get the best deal. Getting estimates from 2-3 contractors will give you a justifiable comparison and more importantly, will help you save bucks.

3, Perform a background check

Before hiring one, you must ensure that they meet the qualifications you set, they have credible experiences attested by their previous clients, and; they are legally licensed with no records of fraud and the like. Go for a contractor with a proven history of quality work and timely delivery, and not just rely on the low-cost estimates.

4, Get cost-effective materials and supplies

Apart from knowing who your contractor is, you must keep an eye on the prices and the quality of the materials presented on the proposal; some contractors prefer costly materials over cheaper ones. If you know that the materials are out of your budget, let the contractor know. You may ask or present alternatives yourself with the same quality for a reasonable price. You can also list the materials per estimate and use them as your reference; decide which one is more realistic and strategic.

5, Set payment timeline

Once you have finalized which contractor you'll do business with, have a payment timeline set. It doesn't necessarily mean that once you agree and sign the contract, you have to pay them in full. For security purposes and to have a more transparent execution of plans have a clear and fair agreement on the payment process. Some contractors will require you 20-30% down payment; others will split up the total contract amount into three. The payment process varies so does the payment method. However, regardless of the variations, having an equitable payment schedule will keep the ground running.

6, Communicate and be transparent

Above the all-mentioned negotiation tips, communication will always be the key factor that will keep your business and your relationship smooth sailing. There are instances that both of you won't agree on particular terms and conditions; it can be on the materials, prices, timeline, payment, etc. Therefore, communication is the only way to make things work. You don't just negotiate; you communicate.

In conclusion, doing business is not just about complying with the standards. It's about building a strong foundation between your business partners from start to finish. You don't just sign the contract; you sign your business away. And you wouldn't want to risk the possibility of losing your business, your investment, just because of a fail plan and agreement. Therefore, being transparent and straightforward will get you on the road to success.


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