The Importance of Choosing a Good Contractor and How to Find One
Most of the time in real estate investment, what makes a property worth your time and money as an investor is the fact that it’s either likely to increase in value or you’re getting a good deal due to the condition of it. For most investors, upgrading, repairing, or maintaining their property prior to listing or renting is part of their overall plan, and generally they rely on contractors to accomplish this. In basic terms, contractors are specialists in property restoration or repair, and are contracted by the property owner to take care of the labor, materials, insurance, security, and logistics of a particular job – usually home repair – for a flat fee paid by the owner. Most are one-stop shops, as it were, often sub-contracting specialized tasks out themselves while coordinating the entire job, leaving the homeowner or investor free to focus on other aspects of the property or manage multiple properties. As we frequently say, real estate investment is a full-time job and finding a good contractor allows you to make the most of your time while restoring your property or properties to a point at which they increase in value.
So what’s the big deal? Aren’t all contractors pretty much the same? The answer is an emphatic NO. Finding a reputable contractor is an enormous task in and of itself when done correctly (more on that in a minute), but the importance of deciding on a competent, reputable one cannot be understated: for obvious reasons, they need to be able to stay within their budget and quote, coordinate logistics and resources judiciously in order to deliver quality work on schedule (for example, we’ve seen some contractors mismanage resources and end up delivering shoddy work, even though they adhered to their original quote given to the owner), and minimize your liability as the property owner. The last point deserves special consideration in that you ALWAYS need to ensure that the contractor is insured up to $1 million in case accidental damage occurs, and they need to have workman’s comp as well. This is non-negotiable. Were damage or an accident resulting in injury to a worker to take place on your property, you as the homeowner could be held liable. Obviously, you should already have your own insurance, but there’s no reason to raise your own premium because of a contractor’s accident or error. To sum up, make sure you get a contractor who’s insured, licensed, and reliable to minimize your own exposure to liability. In other words, don’t pay a buddy with a utility trailer and some tools to do your restoration or repairs.
How does one find a good contractor? We’ve talked about the importance of it, but what’s the process behind actually selecting one?
Compare and Contrast
Before taking a serious look at the credentials, references, history, and specialties of a single contractor, compare at least three different ones and get different quotes. As we’ll discuss shortly, cheaper is not always better. This is not to say you should allow a contractor to literally fleece you with random fees and overcharged materials and labor, but in general you get what you pay for. Make sure what you need is realistic, and ensure that the price for meeting that need fits into your overall plan for the property. That said, when comparing the contractors and keeping their quotes in mind, measure their timeliness and professionalism in communications. You may find a contractor who offers you a good quote, but that may not outweigh a weeklong lag in returning phone calls or emails. Be mindful of that, and consider the implications of a contractor who uses poor grammar; such things could indicate a lower level of professionalism and you should consider them to be red flags.
Look at Previous Jobs
This is pretty obvious, but it’s important. As investors who work with wholesalers, real estate agents, other investment firms, and property management agencies with whom we have solid working relationships built on trust and mutual respect, we love referrals! Start within your network and consider a contractor who comes highly recommended by a colleague or associate, because if you trust the people in your network you can be reasonably assured that the contractor in question is professional and competent, and in addition it’s much easier to examine their previous work if their client is a colleague of yours. Regardless, you should be checking the contractor’s business against the Better Business Bureau, consumer report sites such as Ripoff Report, and asking for references and looking at their previous work. This is not to say that one or two negative reviews is a reason to write them off completely and remove the contractor from consideration, but a string of bad reviews, reports of shoddy workmanship or unprofessionalism, and reported delivery of poor products should be considered red flags.
Check Credentials
Again, this seems pretty obvious, but we’ve seen other investors or property owners overlook this. As previously mentioned, the contractor you hire should be fully insured and licensed, and again, this should be a red line for you. Anything less than full insurance, workman’s comp, and being licensed by the state should be unacceptable. It’s one thing for the contractor to simply say they’re licensed and insured, but quite another to actually demonstrate it. Most will have certificates posted in their central office (and by the way, you should make a trip in person to such an office anyway for a face-to-face meeting), and if they don’t have an office, business licenses are a matter of public record, and can be searched for in state government registry databases. In any case, consider a contractor who is evasive about proving credentials to be shady and not worth working with, and also bear in mind that they should be used to providing them to all prospective clients – not just you – so you’re not exactly asking for the Moon when you request them.
Know Their Specialties and Who Their Subcontractors Are
While most contractors are de-facto one-stop shops, this doesn’t mean they can do literally everything in-house. Most have defined specialties, and it’s important to know what these are and how they relate to the work you need done. If your primary issues are the property’s roof, siding, electrical wiring, and interior drywall, it doesn’t make a lot of sense to hire a contractor who specializes in plumbing or HVAC. By the same token, if you have a variety of diverse repair or restoration needs on a property that’s decidedly a fixer-upper, consider that most contractors have to subcontract out some specialty work. Again, while most will sell themselves as a one-stop shop, it doesn’t mean they won’t end up outsourcing specific needs to get the job done, and as the investor or property owner you’ll want to be aware of who your contractor’s subcontractors are. All the same criteria we’ve listed here should apply to them as well, and a contractor without licensed, properly credentialed subcontractors should not be considered for the job.
Remember, restoring the property in which you’re invested should be just one step in your overall plan. By failing to choose a good contractor and incurring extra expenses or wasted time (and those are best-case scenarios with poor contractors, with the worst-case scenario being outright disaster), you ultimately cut into your profit margin. Choosing a good, timely, professional, and competent contractor who gives you a reasonable quote within your budget for quality work, on the other hand, can ensure that you increase your property’s value to the highest possible extent for the lowest cost, and that’s what real estate investment is all about.
– Get It Right Solutions