If you catch me banging my head up against the wall it is likely because a contractor failed to show up on time or didn’t perform to our expectations. If you see me popping a bottle of champagne it’s probably because a contractor saved a project by providing a necessary service in the nick of time and for a great price. Fortunately for me I have done a lot more celebrating because we have worked with some great contractors.
In real estate investing there is a direct relationship between the quality of contractors and profit. If nothing else – the connection between your contractor and your bottom line should be enough to make you, the investor, realize the importance of being able to choose and manage your contractors wisely.
If you are a real estate investor you have worked with contractors at some point, whether you are an experienced rehabber, or a second home landlord, good contractors are essential to running a successful business. While there are many great contractors out there, there are many that can only be described with words I shouldn’t use, so knowing how to work with contractors on each end of the spectrum and everywhere in between is an important skill to master.
Here are some tips for finding and managing quality contractors and creating rewarding relationships with them:
Get Multiple Quotes from Different Contractors:
It may seem obvious but so many people don’t do it. The disparities between quotes for the exact same job is sometimes mind numbing. If you are only getting one or two quotes you are potentially wasting money and marring your return on investment. On our very first rehab we had to deal with a fairly major foundation problem. The first quote was almost eight thousand dollars, which we initially thought was reasonable until we received additional quotes. The repairs were completed by a reputable company for half that, saving us money and boosting our returns.
Be Specific when Seeking Bids:
Just like other professions, there are contractors looking to take advantage of vulnerable people; don’t be vulnerable. To provide defense from predatory contractors be as specific as possible and leave no room for interpretation. Specificity will also demonstrate confidence, awareness, and knowledge, compelling shady contractors to look elsewhere.
Ink It – Get a Detailed, Written Scope of Work:
In a perfect world a handshake is all you need to ensure an agreement is upheld, but a handshake is not enough today. Once you have selected a contractor and agreed on a price, use a scope of work agreement to put EVERYTHING in writing. The scope of work should describe in detail the work to be performed and should be signed by both parties. This document will come in handy should any disagreements arise.
Go With Your Gut:
Instincts are very powerful and have saved a lot of people for potentially disastrous situations, so if you are not sure what to do, go with your gut. If you get that feeling that you are about to be ripped off, or that hunch that the person you are about to hire doesn’t know what he is doing, follow your instincts and move on to the next one. I have found that instincts are correct more often than not, so don’t be caught thinking “I knew I shouldn’t have done that” down the road.
Cover Your Butt – Hire a LICENSED Contractor:
While it may be cheaper to hire an unlicensed and uninsured handyman from Craigslist, you should consider the risks involved. There are inherent dangers in construction and rules and regulations vary by market. Make sure that you hire contractors with the proper credentials and understand local rules and regulations before starting a project. Failure to comply could bring your project to a standstill and cost you in fines. While ignorance may be bliss, it can also be expensive.
Try Them Out:
One of the best ways to get contractors to see things your way is to let them know it may not be a one time gig. Talk about your future endeavors as an investor and your need for reliable, trustworthy contractors. Many contractors will treat this as a try-out, trying to earn a spot on your team. Be careful for repeat contractors that creep the costs up on you after the first couple projects…some seem to think they are locked in for life.
Get a Warranty:
One of the best steps you can take to sell a property is to provide warranties to the buyer, especially on certain items like foundation repair. In fact, we try to convince the contractors to provide two-time transferable warranties so the buyer can also transfer it when they are ready to sell. Keep in mind a warranty is worth nothing if the company is not going to be around for long, so make sure you are dealing with reputable contractors.
The Golden Rule Applies:
As a paying customer you probably expect your contractors to show up on-time and follow through with agreements. It is important to practice what you preach. How can you expect a contractor (or anyone for that matter) to take you seriously if you are not conducting yourself in a professional manner? In essence, the golden rule applies.
Learn to Move On if Your Contractor Doesn’t Meet Expectations:
Let’s face it, sometimes things just don’t work out. Breaking up is always hard to do, but it can save you a lot of money and problems in the future. If a contractor is not meeting your expectations it is important that you let them know. Be professional but provide honest feedback. It seems that truthful feedback is becoming rare, but it is important in conducting business.
Ultimately you want to have a network of reliable and well-priced contractors, but getting to that stage is much more difficult than it seems. When you find contractors that exceed your expectations, do your best to keep working with them. If you are continuously getting burned by contractors you may need to look in the mirror and find out what it is you could do to better prepare yourself and manage those you work with…your business ultimately relies on it.