Triple Squeeze

I started hiring subs directly again last month.

Hadn’t done that in a while. I’d gotten to a place where I was handing full scopes to GCs and letting them manage the trades. It’s cleaner. It’s simpler. And when it works, it’s the right move for scaling.

But the bids I started getting back made that impossible.

I have a project right now. Budgeted $100K for the rehab. Reasonable scope. Nothing exotic. Got bids from GCs ranging from $160K to $260K. WTF...

That’s not a spread. That’s a different world! It’s like the contractors are either guessing on what the job will cost, or they don’t want the job...at least it seems that way.

The $260K bid... I genuinely thought it was a mistake. It wasn’t. The $160K bid was more reasonable but still crazy. And the ones in between? All over the place. No consistency. No logic I could reverse-engineer on their pricing.

So I went back to hiring subs directly. Not because I wanted to. Because the math forced my hand.

And here’s the thing. The sub numbers are all over the place too. Better than the GC bids, but the days of getting three comparable bids and picking the middle one? That’s not the market right now.

Something shifted. And I don’t think everyone is paying attention to it.

Three Things Moving at the Same Time

Everyone’s watching mortgage rates. I get it. Rates are the headline. They’re the thing that shows up in every article and every podcast and every “is now a good time to buy?” conversation.

But rates aren’t squeezing my deals right now.

My rehab budgets are. My project timelines are. And my insurance costs are.

All three. At the same time.

1. Materials and tariffs.

If you haven’t priced a rehab lately, you might be in for a surprise. Building materials are up about 40% from where they were in December 2020 (NAHB). That’s before the latest round of tariffs. Steel, aluminum, and copper are now sitting at a 50% tariff. Cabinets and vanities up to 25%.

Some of that you feel directly. Some of it shows up two layers deep in a GC bid and you can’t even trace it. But it’s there. And it’s real.

2. Labor.

This one is quieter but it might be the biggest of the three.

The construction industry needs roughly 349,000 new workers this year just to keep up, according to Associated Builders and Contractors (ABC Report). About a third of construction workers nationally are immigrants. In trades like drywall and roofing, it’s over half. Immigration enforcement has ramped up significantly, and nearly 30% of construction firms are reporting workforce disruptions. Crews are thinning out. Timelines are stretching.

Residential projects that used to run six to eight months are now pushing nine to twelve in a lot of markets. That’s not a minor inconvenience. That’s extra months of carry costs, extra months of interest, extra months of exposure to a market that might move on you.

If you’re flipping, longer timelines kill your margins. If you’re doing a BRRRR, longer timelines delay your refinance and tie up capital. Either way, it costs you. And that sucks.

And here’s the part that connects to the GC bids. When labor gets scarce, the contractors who are still standing can charge whatever they want. That’s part of why the bids I’m seeing have no consistency. There’s no baseline anymore. Everybody’s pricing based on how busy they are, not on what the job actually costs.

3. Insurance.

This one snuck up on me. And I think it’s sneaking up on a lot of investors.

Homeowner insurance premiums have climbed about 24% nationally since 2021. In Texas, we’ve seen some of the steepest increases in the country. Insurance now represents about 9% of the typical homeowner’s monthly payment. That’s the highest share on record. And it’s projected to go up another 8% this year and another 8% next year.

If you’re underwriting a rental, that insurance number matters. It hits your cash flow directly. If you’re flipping, it matters less to you personally, but it matters to your buyer. Higher insurance costs mean higher total monthly payments, which means your buyer pool shrinks, which means your ARV projections might need adjusting.

I wasn’t modeling insurance increases into my underwriting 18 months ago. But now I have to.

Why This Matters If You’re Operating Right Now

Any one of these alone is manageable. You adjust your budget. You pad your timeline. You update your insurance line item.

But all three hitting at the same time is a different situation. The margin of error just got thinner. And the cost of being sloppy just went up.

This is the part that connects to something I talk about a lot. Systems.

If you don’t have a system for getting multiple bids, tracking material costs, managing your own subs when GC pricing doesn’t make sense, building realistic timelines with actual buffer built in, and underwriting insurance as a moving number instead of a static line item...

You’re going to get squeezed. Maybe not on this deal. But eventually.

The market didn’t get harder. The cost of being undisciplined just got more expensive.

What I’m Doing About It

I’m not going to pretend I have all of this figured out. But here’s where I’ve landed.

None of this is complicated. It’s just discipline. It’s just systems.

And in a market where the inputs are moving underneath you while you’re running the numbers, that discipline is the difference between making money and wondering where it went.

Good luck, it’s that sort of market right now.

Tarl Yarber

(Yes, I write these)

ONE MORE THING

If you’ve been thinking about how to become a private money lender and figure out how it works, I’m doing a free live webinar on it. I’ve sat on all sides of the table: Borrower/operator, Private Lender, Hard Money Lender.

Private Money Lending 101. May 6th, 7pm Eastern. I’ll walk through how the structure works, how to structure it, vet operators, and set up your team and more.

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Replay included if you can’t make it live.