Working With Contractors

If you’re in the process of overseeing your first property renovation you’re in for a real treat as you get a crash course in working with contractors. While most are professionals who are dedicated to doing the best possible job for you, there are some prima donnas out there waiting to take advantage of your naiveté. Here are some steps you can take before you hire a contractor to ensure that your first contractor experience is a positive one.
Have prospective contractors fill out an application – It may seem silly, but by having a prospective contractor take the extra step of getting an application and filling it out, you can assess how serious that contractor is in working for you. If they won’t take the time to fill out an application in order to win a bid, what makes you think they’ll take the time to follow up with more important details – like showing up at the worksite?
Get references and check them – Your contractor will probably offer to provide you with references when they bid on your rehab project. Most will have good references, but you need to know as much as possible about a contractor’s work ethic before you sign on the dotted line and commit to spending several thousand dollars on a project. When you call their references ask specific, pointed questions about the quality of their work. If they have a tendency to not show up for work, or worse – disappear in the afte
oon, it can significantly impact the profitability of your project.
Get all bids in writing – I know you’d like to be able to do business with someone based on a handshake and a smile, but the reality is that memories fade and a good faith agreement can be misinterpreted by you or the contractor. A contractor is only human, and by taking the time to get all agreements in writing, you’ll have clarity in the event that a disagreement crops up later.
Work with licensed and insured contractors – Licenses and insurance are common business expenses, but too many contractors are running around without the necessary licenses and insurance. You may be provided with license numbers and promises that they have insurance, but I highly recommend that you take what you’re told with a grain of salt. As the owner of a property, you are ultimately responsible in the event that there is an accident or a fire. Make sure that their insurance information is accurate – and that their coverage is in force before letting them begin a job.
Visit one of their worksites – Wouldn’t it be nice if you could somehow magically know ahead of time what the quality of your contractor’s work will be? Fortunately, by visiting one of their worksites you can gauge the quality of their work and see how vigilant they are about keeping work areas clean. Before visiting one of their worksites, make sure you have permission to go. Find out if they’re the general contractor on the job or just a sub-contractor.
Don’t pay them until the job is done – One of the biggest perils you can face as a new real estate investor is that your contractor doesn’t cause dramatic delays by failing to show up for work when they say they will. Perhaps as problematic is the contractor that will prematurely suck the funds out of a project and then not want to complete the work. There’s really only one way to prevent this from happening. Don’t release payment until the job is done. You may be hit by pleas to release payment early, but if you do there’s a strong likelihood that your contractor won’t show up to finish your project. Imagine that your contractor has already been paid for finishing your job. Then after giving you a hard-luck story, you can’t depend upon him to return to finish your job. This could put you in the position of having to pay twice for the same job or having to postpone the process of renting the property. Obviously, you’ll need to release some money for materials or your project probably won’t get started. Just be careful that you control the purse strings carefully.
I don’t want to give you the impression that most contractors are lazy or unwilling to live up to their agreements, because that’s simply not true. The vast majority of contractors are as honest as the day is long, but by clearly defining expectations you can stop problems before they come up. By doing this, you can ensure that your interactions with your contractor is a positive one, and that you’re just as happy when you part ways as you were when he first waltzed into your life.