Anyone with experience in the real estate industry is aware of the fact that not all contractors are created equal. Anyone that has had a negative experience with their contractor can attest to how complicated a bad contractor can make even the simplest project. Not only can a bad contractor cost you time and patience, but they may also cost you money. Fortunately, there is a rather elegant solution: avoid bad contractors. Of course, avoiding working with a bad contractor is easier said than done. However, in vetting your contractors appropriately you mitigate the risk of working with one that can hurt your business.
Spend a little time researching your next contractor, and make sure you are comfortable with your decision. There are great contractors out there that can really give your business the edge it needs to succeed. The problem, however, is finding them. If you have a project lined up and are looking for a contractor to work with, there are several things you want to keep in mind.
1. References: You need to treat hiring a contractor in much the same way that you would treat hiring anyone else for your team. If you are working on a rehab, it is not a stretch to say that your contractor holds the key to your bottom line. How quickly, efficiently and cost effectively they get things done goes a long way in the success or failure of your transaction. You can’t just hire the first person that comes your way. Even if they were referred to you by someone you trust, you still need to make sure they are a good fit for your goals. There is no reason to feel awkward asking a contractor for a list of references or past jobs they have worked on. If they get angry or embarrassed, it may be time to look elsewhere. Most good contractors are proud of their work and will readily show you everything they have done. Put the time in to call all of the references listed, and follow up until you are comfortable. Without a list of references, you should think twice about moving forward.
2. Project Management: You may have found the perfect contractor, but you need to make sure they are available when you need them. If they are booked for the next two months, you may have to look in another direction. Most good contractors usually have something going on. These projects often range in size and commitment, but many are open to taking on new jobs. Before you commit, you need to know that they are going to be able to work when you need them. They may tell you what you want to hear, but you need to hold them to the dates you require their assistance. You don’t necessarily need a complete list of everything they are working on, but you do need a commitment that they will be available when you need them.
3. Licensed & Insured: Price is always important when running a business. However, there are times when you need to look past the bottom line. Working with the most inexpensive contractor may end up costing you much more if they are not licensed and insured. A contractor without a license can come back to bite you in the event of an unforeseen accident at the property. To avoid such a scenario, simply ask to see a copy of their current license. A contractor with nothing to hide usually has a copy in their truck. Outside of their license, you need to verify their insurance. You need your contractor to have liability insurance in the event there is an injury on your site. As much as you may never think anything is going to happen, odds are, something will go wrong when you least expect it. If, and when, it does, the last thing you want it so deal with litigation. If your contractor isn’t licensed or insured, you need to move on. Without the proper documentation, they shouldn’t even be a consideration.
4. Payment Schedule: To save yourself time and aggravation, you need to know how your contractor expects to get paid and the manner in which you intend to do so. If your contractor is asking for money up front, you may want to make your next move a calculated one. Any time a contractor asks for money up front, it should set off a red flag. You can expect to pay for the materials, but never give them money for work that hasn’t been done yet. If you are on the same page, you need to come together on a payment schedule.Designate a milestone in which the contractor will be payed once they reach it. And once they do reach the designated milestone, pay them. I can’t stress enough how important it is to keep up with payments. Nothing irritates a contractor faster than waiting to get paid on work that was completed. The more you are on the same page with your contractor, the better off the job will be.
5. Work Ethic: You never want t to pay to have the same work done twice. Whoever you hire, you need to know that their quality of work will shine through, and meet your expectations. Obviously you need to be on the same page with regards to what you are looking for, but you also need to know what to expect form their work ethic. If a contractor is not willing to stand by their work, they may just do the minimal amount of quality and move on to the next job.
There are many good contractors out there. Asking the right questions before you hire anyone will save you time, money and headaches.