Which is easier to find, a unicorn or a rock star contractor?
If you ask the most bonus The answer for real estate investors is obvious: “Unicorns, of course.”
We all know its intrinsic value contractor Bring any real estate investment. A good contractor can help you reduce decoration costsave holding costs through quick turnaround, and manage projects with limited guidance. this end The result, of course, was a beautifully renovated property that was completed on time and delivered a great return.
Reality often paints a very different picture. Headaches, delays and disappearances are commonplace. Investors are always looking for contractors because they anyone Assume all contractors Create equal to or simply Don’t know what to look for.
In either case, the quality of the contractor can make or break the deal.
No matter you fixed and flipped or buy and hold, properly vetting and hiring reputable contractors is a muscle you want to (pardon the pun) build. Here’s what you need to know about bad contractors and how to find a good one.
How to spot bad contractors
insomnia. Endless delays. Excuse. theft. The list goes on.
this more or less Summing up my experience as the first contractor hired by an out of state investor. Everything that could go wrong did go wrong.
Here’s the point of the story: The contractor promised a one-month turnaround at a cheap price, so I decided to give him a chance.Week after week he would mention all the progress That is in production– yet the photos he sent were just of the frame, plumbing and electrical.
everything is done Due to errors and lack of permits, the town shut down the project. We had to start from scratch and redo everything.
Kicker? He stole $15,000 and stopped returning calls and texts.
After applying for a permit and finding a new contractor, we end Project behind schedule two months later. if I have focus on There were red flags from the beginning. The project could have been completed two months earlier and with less stress.
Pay close attention to these five warning signs.
1. lack of permission
Some contractors subcontract work to unlicensed professionals to save costs or make more money for themselves. although It can be tempting to hire The risk taken by an unlicensed contractor at a lower price is usually not worth the savings.
Depending on the jurisdiction, many parts of the renovation may require permits.you need to have Experts in the field are willing to take risks and support the work that is done.If operation is incorrect or if The license has not been withdrawnthe jurisdiction can tell you to start over – and if you don’t comply, all that time and money will be wasted. correct pace.
make sure Contractors and team members used on the project, such as electricians and plumbers, are licensed.
2. unrealistically low bid
Another red flag to look for in a contractor is unusually low bids. We all want to save money, but that’s how they hook you.
Don’t let the cheap price fool you. They often have hidden costs.Unscrupulous contractors know about owners searching To cut costs, they will provide cheap labor and take shortcuts to get the job.
Please be sure to review bids based on your required scope of work, make sure Who are you He is accused Everything you need is provided.
As mentioned above, A The contractor I worked with had a significantly lower bid than the next one. Of course, I gave him a chance. all The job was not done correctly and I had to hire a more expensive contractor to fix their mess. in the endmy cost to complete the project was much higher because I thought I was saving money.
3. poor communication
No investor wants to deal with contractors Who disappears randomly throughout the renovation process. Contractors who perform MIA put your project at risk and delay return on investment.
you can usually Determine if the contractor is a good communicator during your first interaction.. If they don’t follow up after your initial call, are slow to respond, or lack attention to detail, they will treat your renovation the same way.
It’s also important to pay attention to the contractor’s written communication, or lack thereof. If the contractor is hesitant Set out terms in writing, via contract or emailbe careful. this May mean they don’t want to leave behind A written record, possibly it works in future disputes.
4. High upfront deposit
Contractors usually require a certain amount of cash up front before construction begins Started with furnish. This is normal.
However, you should not More than a week or two of materials and labor must be purchased out of pocket at the same time. this given them Enough to get started but requires the contractor to be responsible for work. In the worst case scenario, if they escape, you don’t lose everything.
When allocating funds, make sure it is consistent with the scope of workand check Contractors can provide receipts for their purchases. You can also try to negotiate a lower price by providing materials and making it easier for the contractor to get started.This way you won’t get up There’s a charge for materials, and you’re guaranteed the correct materials for your project.
5. Lack of comments and references
Contractors with one or two star ratings or no ratings not at all– Hard to trust.Sometimes, a license is revoked or be accused Former clients will dissolve their former companies and re-establish them under new names. It’s okay without reviews simply Shows they are inexperienced in their field and have trouble getting clients in the past.
Does the contractor have online reviews? or not, they should really At least there are some references. if they can’t Even if one is offered, they may not be the person you want to work with.contractor Who is Confident in their service and more than happy to share references who can attest to the quality of their work.
What to do if you’ve already gotten into trouble with a bad contractor?
if you meet These strategies once you already When you start working with a bad contractor, you may ask yourself, “What now?”
possible hard Once you are done have the contractor leave already Sign a labor contract and pay wages. You’re not trapped, though. Here are some options to explore.
Be consistent with expectations
You can try chat Adjust expectations and watch their reactions.
The first thing you want to do is eliminate or at least minimize the chance of tension. if You can’t help it Release the work contract and let them do the work. However, Keep Observe and verify their workflow.
You can do this by creating project checkpoints, where you can manually verify that the work was completed correctly before proceeding further. If they fail to complete the work on time or comply with local regulations, you may be able to terminate the contract early.
In some cases, having a contractor complete the work will put your property and investments There is a certain risk. If you find yourself in this situation, contact your state’s licensing board and file a formal complaint. The mere mention of a complaint is enough for the contractor to take action.
Go ahead and start fresh
The alternative is to try to get out of the situation as quickly as possible rather than hoping that things will get better – they probably won’t.
Start exploring other contractor options. Get bids with a timeline to see how early they can start.After vetting and validating your new contractor, it’s time to hard Talk to the contractor you plan to switch to.
No matter how difficult it is to stay calm, you want to appear professional. Tell them the reason for the changeand ensure Agree to payment terms as needed.you will also want put Review via email after the conversation to create a written record.
How to find a trustworthy contractor
Every real estate investor should know how to recognize a contractor’s red flags. However, even the most experienced investors may miss a few.Here are five strategies you can use it To prevent the contractor’s danger signals from slipping through the cracks.
only Hire a licensed contractor
Working with unlicensed contractors is always risky.Even if an unlicensed contractor can do a good job, they may not have the right insurance in place Protect you or your property if something goes wrong. Minimize the potential for project delays and noncompliance fees by prioritizing permits.
Ask previous customers
While this is an extra step in the recruiting process, reaching out to previous clients is necessary when bringing in new contractors. Follow up on references and check online resourcesFor example BBB and Angie’s List, Will help you measure customer satisfaction. You should also call or email references directly to get a more personal sense of the contractor’s work ethic and expertise.
Get recommendations
this Similar to the previous point, the only difference is that you are going to someone you already know. Ask friends, family, your real estate agentWorking with others you trust is the best way to find a contractor.
Real estate investing is highly dependent on relationships. The people around you want to maintain a positive relationship so that you can continue to work together in the future. In this way, these people most likely Giving you an honest review.
View litigation history
Knowing if a contractor has been taken to court by a client can save you money main There will be a lot of headaches ahead. Many cities have formulated easy to search Learn about a company’s court history by posting court documents online. When searching for lawsuits, check the full name of the contractor, the name of their companyand any DBAs associated with their business.
Thoroughly review and take your time
Outsourcing is a main part of your real estate investing journey.When you start scaling, you need to hire professionals for tasks You may not have the time or expertise to do it. It’s better to hire people slowly than to recruit people slowly. Wrong choice from the start.
final thoughts
As soon as you see one of these red flags in a contractor, run in the opposite direction as quickly as possible.
Hiring the wrong person can easily double your renovation costs and delay your renovation by weeks or even months. They say other people’s mistakes are the best teachers. Don’t make the same mistake I made.
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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
