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The Real Estate Addicts (REA) podcast is a must-listen for anyone interested in real estate development, investment, construction and entrepreneurship. Each episode dives into a wide range of industry topics and features conversations with savvy, successful entrepreneurs who candidly share their career paths, challenges, breakthroughs, and the stories behind the remarkable companies they’ve built. Expect big personalities, thoughtful insights, and conversations that both educate and inspire.
Co-hosted by Ray Hurteau, Dan Rubin (Instagram: @rhinvestgroup), and Marc Savatsky (Instagram: @choose_boston)
Follow the Real Estate Addicts Podcast on YouTube: @RealEstateAddicts
00:10
All right, guys, we're back. We're live. We're live. We're live. right. Hey, before we get going, just one thing. We put a ton of time and effort into putting this podcast on. hope that you guys are getting a lot out of it. And if you could subscribe, if you could share this with a friend, it would mean the world to us. So if you don't already, which we know you do, but.
00:33
So thank you. We're trying to get to 100 subscribers on our YouTube. On YouTube. it was 100,000. We do really well on Apple podcasts, Spotify, a ton of listens. It's the YouTube channel that's new. Well, just started it up and It really wants to be a YouTube influencer, so thanks. And you had a fellow listener give you kind of a cool shout out about, what is it, Manus? Yeah, I met Oliver the other day for listening, a commercial broker from the South Shore.
01:01
And he pulled out a phone show me the website he built for his company one, Manus. And he said it was inspired by our conversation on AI and Manus. I was plugging is, you know, a really good app for doing for admin. And we get no financial consideration from them. just know you've obviously had a good experience and now Oliver has too. So thank you for listening. I guess forget just as far as like, um, Harvard floors go. I'm, I'm very loyal to Bajal and B J E L I N.
01:31
That team's been ah nothing but good to us. um And I mentioned when I was talking them that we'd bring them on the pod. So maybe in a future episode, we can think about... Yeah, shout out to Ken Sheldon, right? One of those guys, yeah. He helped me out with my house too. And they're not a sponsor, so just an effort, know. But we are looking if you'd want. All right, well, onwards with the show. um You know, I think a topic that comes up a lot in our world is negotiation. Whether that's...
02:00
a property or bringing on a subcontractor or a GC. So we're gonna talk through some of like strategies and things to think about. I think one could say that you're negotiating so much throughout your day to day life, regardless of whether you're with your job or not, right? You're negotiating with your spouse, you're negotiating with your kids, you're negotiating, know, so I think every day is one big negotiation. Oh yeah. But with...
02:29
regards to work and negotiating, I think that there are definitely strategies, you know, you can use whether you're negotiating with subcontractors, whether you're negotiating with tenants, whether you're negotiating with vendors. You've read a book called Never Split the Difference, right? Yeah, yeah, I it. What were your It is good. mean, So the premise FBI negotiator- Correct. He writes- Did you read it? He's got a super hot girlfriend too.
02:58
That guy's gotta be pushing 70. God bless him. Good book though. mean, there's a lot of good tidbits in there. I would definitely recommend it. I think the premise is basically you always want to be in control of any type of negotiation. if you are making it seem like the person you're negotiating against is in control, you always have the upper hand.
03:25
So how do you do something like that? Let's say you're negotiating a contract with a vendor, right? I think you always want to make sure that both sides are winning and it makes it look like you're giving something up in the negotiation, whether it's you're starting at a certain point that is always
03:55
Exceeding what you ultimately want which I think a lot of People do already whether you see that all the time when a developer is proposing a new project Right. They're like, okay, I'm going to I Realistically, I think six units could fit on the slot, but I'm gonna propose 12 and Work my way down because I know I'm gonna get beaten down anyway
04:25
Yeah. Shoot higher, shoot further or, that's a very specialized form of negotiation, which is the entitlement process, the community process. Yes. How you go to the grocery store and you'll find that can of dented beans and you go, you know what? This can's dented. know nothing's wrong on the inside. Give me 50 cents off. Let's do that. For one thing is if you don't ask, you don't get. Yes. The second thing is I will harken back to Tim White's episode where he said, you know,
04:55
I said, you can squeeze someone, but you can't squeeze through them. And he said, why do you squeeze anyone? You don't squeeze your dentist. You don't squeeze your CPA. Why are you going to go and squeeze your GC? And look, I'm not a Pollyanna. Like I know that there is a certain amount of buy. That's what we call it in construction. Like you get to the end and then you go to your subs and you're going to extract a buy typically on big contracts. You can expect somewhere like two to 3%. Five is a lot, but the
05:22
Also, the problem becomes that you've conditioned this group of subcontractors, trade partners, or whoever to expect that. And thus they build two to 3 % of fat into their price only to give it back to you. So, um there's something to be said for reputation. That's a very good point because, you know, and I've said this to Dan, let's say that, you you do have that initial round of back and forth with a sub and then...
05:48
you know, now you get them down, you know, a couple grand and you feel like you're winning some and they're getting the jobs, they're happy. Next time you go to ask for their services, are they just going to bump it up that extra couple grand knowing that you're going to come after them, not after them, but you're going to ask for, you know, hey, give me your best and final. So I actually value the relationship a lot more necessarily than the negotiation. We typically don't negotiate a lot in terms of price at the beginning. rather not at the beginning, but we have been lately.
06:16
Well, we've been holding people accountable and honest lately, right? So I think there's a difference between negotiating pricing down versus using someone that you've been using for the last five years and just going with their number regardless. I think we've gotten a number from someone, a subcontractor recently, and it seemed high. And we went out and got one or two other bids to...
06:44
to keep them honest, but we didn't really beat them down in price. No, no, didn't. We didn't turn it into a race to the bottom. That's not fair. To your point, Mark, I rather not negotiate on the initial contract because then you know something's gonna come up throughout the project where you're gonna need them to do something for you or there's gonna be a favor that you're gonna need and you don't wanna have to deal with a change order. And a lot of times, because of that relationship,
07:14
and the sincerity that you had with them at the beginning of the project and bidding the project, I think that goes a long way. I do too, but like I think that you and I think often in terms of construction subcontracts and trade partners, and that is a certain form of relationship and negotiating because it's an ongoing relationship. If you're negotiating with a seller of a house, know, it's sort of a transactional thing. Yeah.
07:40
Yeah, you only have one time to do it. That being said, like, I will say, like, you always need a cup of flour at the end of a closing period or like, you never know when you're going to move in and the HVAC kicks off and you need to call them back and say, hey, who did the installation? Or like, did you ever notice this over here? Like if, if you want to, you know, really put the screws in them during the negotiation, renegotiate, act in bad faith, and some might say, you got to be careful. Yeah.
08:09
No, agree. Um, but I guess back to subs and contractors, you know, another world is, uh, general contractors who buy out the subs who worked for a third party owner. So they often have what's called a shared savings clause in their contract. So they establish a price for the job and every dollar that they bring it in under that price gets split sometimes 70, 30, sometimes 80, 20, uh, uh typically in the owner's favor.
08:39
But still they're making money on that. So what they're inclined to do as well is, to push some numbers up and then come in on the buy. And you might have a central purchasing agent whose job it is, you know, it used to work at a big firm and there was a gentleman there, Peter Washenko and it was internally known as the Washenko Chop. So you'd send your scope sheets out to central purchasing and then come back with the new number. are big shops. These are big shops. Yeah.
09:09
Yeah. You know, so we're, I guess more on like strategies and like ways to approach negotiation. um Well, what about negotiating with a buyer? Yeah. Or a seller? That's very different than negotiating with a potential contractor. Yeah, it all depends. The most important thing to me is to know what the value of what you're buying. And that sounds simplistic, but like I've bought scopes where I've priced it one way and I've never bought that scope before.
09:37
And like, that's actually where I do find myself like going, Hey, do you think you can find 10 % in that number? And it's basically because I'm insecure and vulnerable and I'm not sure if I'm buying it well. And I've never bought it before, but when I buy drywall, I have a rough sheet counts in my head and I know what blueboard plaster should cost. And when I see that number come through, if it's in the realm of reason, it's where I expected it. I'm not going to take a chop. Yeah, no, I, I agree with you there. But so, so guess the point there is.
10:06
to educate yourself before you go into any negotiation, you know? And sometimes that does mean get a couple numbers. I mean, I think you should always get some numbers. And it also depends on if you're working off a good budget. I mean, everyone wants it to be as lean as they can right from the get-go. But if you're running into unexpected things or the budget's really, really tight and you really do have to squeeze, you got to consider, you know, what are you going to get for squeezing a little bit more on those guys? I think it also,
10:37
to your point, like the perception of what you're negotiating, right? Like someone can go and try to ask for a free coffee one day because they missed a coupon expired or something. That's very different than negotiating with a sub or, or negotiating with a buyer or seller. But then there's also this value of like, well, I saw you do it in, you know, an hour and you gave me a flat price of this amount. And, you know, I think like, why is your hourly so high? You don't go in to your point, you don't go and like argue with the masseuse over there hourly because a masseuse is
11:06
literally going have hands on you for like 90 minutes, right? But if your plumber is at your house for an hour and you expect it in your head, like four hours trying to work some hourly number in your back out of their quote, you know, you kind of feel like it's not fair. So it's that feeling of fair versus their knowledge of what they're doing and the efficiency that they can do it in. Well, that's bad faith. I have had the urge to do that. And I've always held back where if I've agreed to a price and then, you know,
11:35
I've seen, have somebody that I know indirectly, they get quotes all the time for like random services and they just don't know what they're doing, right? So they'll just have somebody come over and those slimy folks that, I don't know if it's Pete, the result of private equity buying them out and then this is how they're trying to sell their services, but you'll see somebody come in and like, oh, you're dripping faucet. You know what? While I'm here, why don't I do this? And why don't I do that?
12:00
this price is including in case I need to replace any of these other things. Like, what do you this in case stuff? Like just give me the price of the time and materials for what I need you to do. So I think that's really bad faith. And that has become more invasive in certain trades, especially for homeowners. long as it's set up upfront. We're knowledgeable enough to call bullshit, but I think homeowners are getting ripped off left and right all the time. I would say no, I just don't think that those guys are running around, you know, putting their
12:30
Econo vans away and I'm taking out their Rolls Royce on Saturdays. No one's getting rich. like $1,200 to swap a faucet seems reasonable. I think you'd be shocked at the cost to run a business. Maybe you wouldn't be, but. If I can do four faucets a day. Yeah. You know, $4,800. That's what I'm saying. Even if you're a drain cleaner, like your insurance, your gas, your easy pass, all these things are real. Not to get so in the weeds on it, but that's an example of.
12:58
what I think where our industry is dirty. I think people don't understand just the time it takes to get out of bed. Like you want me to come to your house, price something, come back, um then bill you for it. It's like small jobs don't pay. Yeah. Well, that's why you see a lot of guys not wanting to do the small stuff. A lot of guys won't even price to swap a faucet. Some subs will just say, I want to just do the big jobs. Or they'll only want to do new construction. They won't even want to do renovations.
13:27
They don't want to open up that can of worms. But I'll talk out of both sides of my mouth now. I'm close with a guy who has a very established and reputable HVAC company and he no longer will do new construction. He only will take service calls because that's where the big money is. mean, and you can imagine, homeowner calls you, it's urgent, know, it's January, it's freezing. It's so, yeah. You know, it's funny, Dan and I had an experience with that. We had a, like a pipe.
13:56
situation that burst and no heat. All these companies that are like 24 seven available, not one of them picked up and responded. Yeah, they just like plaster it on there. No, it's also a lot of the consumer facing subs to and I know we're getting off topic. They'll when you call to do anything, they will say, Oh, it's $150.
14:21
you know, fee, a trip fee just to come out. And if we end up fixing it or, you know, suggesting a specific service or solution, that will get credited towards that. But if not, then it's 150 bucks, you're out 150 bucks. That I can appreciate, yeah. You know, like to come out, like you said, to come out of bed to drive to them. It's almost like paying for an estimate. Yeah. And making sure that you're not just getting bullshit calls. So anyway. It weeds people out.
14:49
So I guess my point is like, you know, think negotiating applies not just to us as developers and managers and you know, that sort of thing, but also for folks that own a house and may need work done too, you know? You know, I think to negotiate properly, you need to have a solid understanding of what you're buying. And often that does, or selling, or selling, come from having a couple numbers and having experience in that market.
15:20
But you know, last thing, don't get more than, I think three numbers is plenty. I think that these guys don't do this for exercise. Nobody's coming out and pricing work for fun or for practice. unless maybe it's a real big job, right? Then you may be required to get like five or kind of beat the bushes until you get closer to a number that may make sense. And sometimes you've got a problem in your budget and that.
15:49
plumbing number, whatever it wants to be is just, you carry too low. It's not realistic. And in those cases, sometimes you do have to dig around and then do a gut check on like, Hey, this is a low number. What's going to happen if I take it? How much headache is this going to cause? At some point it's your fault. Not everyone else's fault. Right? You're the only one to blame at that point. Yeah. But again, that's just negotiating with,
16:16
subs, right? What if you're, you know, we've done a lot of negotiation on the tenant side where we buy a building that's completely occupied and we need the building vacated so we can start the work. So that's another whole negotiation step or tactic that you need to work on. I'm not sure this is a tactic, but always listen, right? Like, if you just try to shut somebody down, you're never going to get anywhere. Like as crazy as that tenant is, or the person you're dealing with,
16:45
You know, I like to just like try to really lean in, hear what they're saying, maybe spit it back and then explain where I'm coming from next. always tell people when I'm talking with tenants and it's an uncomfortable situation, just treat someone like a human. think that's the biggest, I think that's the biggest comforting tactic that you can provide, right? Cause a lot of people, if
17:14
If they'll buy a building and the first interaction with the tenant is their attorney sending them a 30 day class acquit. Cleaning house. There's no initial introduction. There's no, I'm Dan, I just bought the building, know, nice to meet you, blah, blah, blah. There's none of that. It's just, immediately put a sour taste in their mouth. You immediately put them on the defensive.
17:41
and just ruins the relationship from the beginning. I think that's the worst thing that you could possibly do and it will end up hurting you in the long run and costing you more money and taking forever to get anyone out. just treating people like a human and talking to them like a normal person, I think goes a significantly long way when it comes to talking to a tenant. Yeah, and I would add to that. It's really hard to recover once you get a no.
18:10
If you're going to go over somebody's head or you're going to send the lawyer letter, like it's tough to then backtrack to the earlier steps. Correct. You know, you can always go there. That's, that's your last. Yeah. It's exactly. Yeah. Last option. Correct. All right. Same thing with like, talked about this on another episode contracts, right? You don't ever want to reference the contract or bring it up. So you want to at least, at that point you're is just the second you're pointing out sections in a contract. The point of this contract, my hope is that.
18:40
we reach an understanding, it goes in a drawer and it stays there. Right, I want it to get paid in full, everybody's happy and we do another one. Yeah, all right, well, this has been awesome. This is great, yeah. Thank you guys again for subscribing and for helping us share the podcast. Any topic recommendations, definitely hit us up in the comments or send one of us a DM and we'd love to talk about anything that comes to your mind as well. See you guys in the next one. See later. Cheers.