Find And Work With The Right Contractor
By JD Esajian on February 26, 2016
Your contractor is one of the most important people on your real estate investing team. If you watch any one of the rehab shows on TV you will see just how important they are. Not only can the right contractor help turn your projects around quickly but they can also save you money. A good relationship with your contractor does not happen overnight. It can take several deals until you both get a feel of how each other works. If you are just starting out the prospect of finding a contractor can be daunting. Even if you have been in the business for some time you both need to be on the same page. Here are some tips to finding and working with the right contractor.
FINDING:
- Resume. Like any other prospective member of your team you need to know who you are working with. Even though a contractor may not have a formal resume you need to do a little investigating. For starters you need to know if they are licensed and insured. These items are non-negotiable and can quickly end a conversation. A non-insured contractor may have a lower bid but if there is ever an issue with the property it will come back to haunt you. You also need to ask about previous or current projects. Most contractors can give quickly give you examples without hesitation. Finally you should get at least a handful of references for you to call. You need to feel comfortable and be able to trust your contractor. All of these items will help you get there.
- 3 Bids Minimum. Never accept a bid from the first contractor you talk to. Even if you are comfortable with them you should always talk to at least three contractor’s total. Not only can this help in choosing the best bid for you but you can get an idea how different contractors operate. Price is always important but not as important as trust and dependability. With each bid you need to compare apples to apples. Ask for a detailed breakdown of all costs, labor and materials. If all other things equal go with the person that you feel the most comfortable with.
- Availability. A contractor can have great references but if they are booked for months it may not do you much good. The final piece of working with a contractor is to find out availability. With all rehabs time is of the essence. As soon as you take ownership of the property you need to hit the ground running. Ask how quickly they can start your project. If there is some delay you may need to pass and keep them in mind for your next one.
WORKING:
- Review Specific Plans. Once you settle on a contractor, or have an existing relationship, you need to keep it going. Working with people in the real estate business can be difficult at times. If you find a contractor that you really like you need to treat them right. In most cases the biggest disagreements you will have are caused by a lack of communication. Prior to starting any new project you need to sit down and go over everything. You should leave no stone unturned. Be specific with what you want, when you want it done and exactly who is doing it. It is always much easier to hash things out before you get started then during the middle.
- Payment Schedule. Everyone works to get paid. Your contractor is no different. In your pre-rehab meeting you need to lay out the terms of payment. In addition to the rate you need to determine how and when you make the payment. One of the worst things you can do is to make your contractor wait to get paid. They did the work and deserver their compensation. Don’t wait until the property sells or until you get a check on another property. You will lose many good contractors by not paying them in a timely fashion.
- Avoid Micromanaging. Yes, you are the owner of the property and ultimately responsible for everything with it. That being said you need to know where to draw the line. Nobody likes to be micromanaged. If you have spent the time vetting your new contractor you should give them some space and let them work. There is nothing wrong with stopping by the property in the morning or on the way home. What you don’t want to do is tell everyone how to do their jobs. If you see something wrong you should speak up but if not let everyone do what they do. Your contractor will greatly appreciate you for this.
If you are not an expert in a particular trade it is important not to act like it. There is nothing wrong with having an vision but sometimes these are just not realistic. There are tons of little things you can do to strengthen the relationship with your contractor. Stopping by the site with coffee or lunch may not seem like much but it is greatly appreciated. This will help get a favor the next time you need it. You also want to avoid nickel and diming your contractor when things come up. It is important to remember that an estimate is just that, an estimate. Your contractor did not cause the increase in your budget.
Your contractor can directly increase your business and your bottom line. Know the right questions to ask to find them and the right things to do once you start working together.