With shows like Flipping San Diego and Flip This House, turning real estate “fixer-uppers” into a lucrative profit can seem easy. The plan looks simple: buy a nice home in a nice neighborhood, renovate it, and sell it to the highest bidder.

But for most first time real estate investors, simple is deceptive.

“Flipping” a house is a losing strategy for people who don’t understand that turning distressed properties into profitable investment opportunities is as much about “facts” as it is about relationships.

Specifically, relationships with construction contractors.

In the wake of the 2008 housing crisis, nearly 1.4 million construction contractors found themselves out of work across the United States. Foreclosures skyrocketed and construction stalled as the housing market spiraled downwards. Homes listed and decayed as millions of Americans struggled to deal with underwater mortgages and company layoffs.

For contractors like Alan Schaffer, the toll was enough to permanently put him off the business for good. “I love construction, I love building,” said Schaffer in an interview with the Los Angeles Times, “but I can’t have a job that pays me $50,000 one year and zip the next. I need to be more financially secure.”

Many construction workers echoed similar sentiments.

Now, as the housing market slowly recovers, remaining construction contractors are approaching the business cautiously. The demand for construction work is up, but many workers are interested in only one kind of offer: steady work. And in light of the high demand, low supply situation, they can afford to be choosey.

Herein lays the dilemma for a small scale/first time real estate investor: they can’t offer a construction worker what he or she is looking for.

Construction Contractors At Work

A first time real estate investor will purchase one, maybe two homes, for their investment experiment. That’s a huge step for the investor, but a very small payoff for a construction contractor. There’s no guarantee that even if the investment goes well, the investor will be back to purchase another one or two more homes in the area.

Ultimately, contractors gain little to no long term benefits from working with a first-time investor.

As a consequence, many do not feel the need to go out of their way for the investor. They will charge full price for their work and time, and in some instances, produce mediocre work as a result.  There is no consequence for doing mediocre work because the project is a one-time event.

This is where relationships come into play. A good business relationship hinges on what each party has to offer the other. A first time real estate investor might not have much to offer a contractor, but a locally established real estate investment company does.

Established real estate investment companies regularly buy and renovate properties in the market. They’re in the business to last. As a result, they often need a steady stream of construction contractors able to attend the many properties they purchase. This can mean regular work for the construction worker that does high quality work.

This gives real estate investment companies leverage a first time investor does not have.

To secure a position as a regular contractor with a real estate investment company, construction workers will utilize all their available assets: they’ll charge lower prices, offer discounts or exclusive deals on supplies they use, and provide higher quality results at lower overall cost to the company.

A first-time investor risks spending more and earning less by taking a DIY “shortcut” without realizing the full implications (both good and bad) of their decision. Although a DIY approach can be challenging and satisfying to the investor with time, money, and an invested interest, it is often an extremely inefficient process for individuals looking for maximum returns with minimal personal investment.