On every rehab deal, the relationship between investor and contractor is a critical one. If the level of communication is poor, you can expect numerous issues to arise. Conversely, if you work harmoniously with your contractor, you will have a much more pleasant and profitable experience. Just like working with other people on your team, you need to define what you want done, how you want it done, for how much and in what time frame. There are many great contractors out there, but not everyone will be a good fit for how you work and invest. To get the most out of every rehab deal, you need to be on the same page with you contractor. Working with contractors requires that you establish a working rapport and guidelines.
Most investor/contractor issues come about by a lack of communication. In a perfect world, you will have an established relationship with your contractor and they know what you want and you trust that they will do it. However, getting to that point takes time and numerous deals. If you are still feeling your way out with a new contractor, you need to take the time and share your vision on the business and not just on the individual property. This may seem like a wasted 30-40 minutes, but if you can get out your goals and expectations, it will save you hours down the road. Instead of dealing with multiple phone calls every day on every project, you and your contractor can be in lockstep from the very first deal.
In that initial meeting, you need to be clear as to what you expect in the quality of their work. Getting the job done at the best price will not get your rehab sold at a higher price. They may think their work is sufficient, but if you don’t you will have a problem. This could mean giving a little on your end in terms of scheduling and timelines, so you are not just pushing to get the jobs done quickly. Speed of work is always important, but any contractor can work fast if they don’t have no regard for how they are doing it. Most contractors will have a website they can refer you to, s to see previous projects or a few references. Never move forward with any contractor until you see the quality of their work. What you save during the rehab will come back to haunt you when you put the home on the market.
It is important for any investor and contractor to work within a budget. There are always unexpected cost overages and items that come up on any deal, but this shouldn’t be the norm with every property. If your contractor gives you an estimate for their work, labor and materials, they should be willing to stand by it. Many contractors will lowball their estimates in the hopes of getting their foot in the door, knowing that these numbers can never be met. The best way around this is by getting multiple estimates for the project. You should reach out to no fewer than three different contractors before you commit to anyone. Your budget holds the key to your profits on every deal. If you are constantly over, it will have a direct impact on everything else you do to get the property sold, including your sales price.
Money can get in the way of even the best relationships. When working with a contractor, you need to pay the right amount upfront without leaving you susceptible to getting ripped off. Before the first nail is hammered in, you should both have a schedule of when funds will be dispersed and what work will be done. Keep in mind that this is just a schedule and not etched in stone, but it needs to be agreed upon by everyone. If your contractor is bad with their budget or constantly asking for more money, you will surely not want to work with them again. The same is the case with you paying your contractor. Nobody wants to wait around to get paid for work they have already done. You need to pay your contractor within a day or two of completion, or on a predetermined agreed upon date. If you are both on the same page with your budget and distribution of money, it makes everything else on the rehab that much easier.
We live in a time where it is easy to think that everyone is out to get you. The reality is that there are just as many bad investors as there are contractors, realtors, mortgage brokers and so on. If you commit to working with a contractor, you need to let them work and move out of the way. There is nothing worse for anyone in a rehab deal than being micromanaged. You should spend more time on your due diligence before you agree to work, not after. It is your project and your money. You need to stay involved, but you shouldn’t stand over everyone’s shoulder and tell them what to do. Let your contractor work and give them some authority to make decisions about the property. If you do this, they will want to work harder for you. This is how successful relationships are developed. Once you and your contractor are on the same page, it will change the way you view the rehab business.