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Don't Settle for Subpar Work - Vet Contractors Carefully
Contractor Pitfalls - and How to Avoid Them
You've found the perfect house to flip - good bones, great neighborhood, and tons of potential. But without the right contractor, that diamond in the rough could turn into a money pit.
We've all heard the horror stories of contractors who disappear mid-project, do shoddy work, or rack up unexpected costs. Don't become another cautionary tale.
By taking a few simple steps upfront, you can find a reliable contractor who will transform your flip into a showpiece - and maximize your profits.
Where to Look
Your network is one of your most valuable resources when it comes to finding quality contractors. Start by asking other investors for referrals, especially those who do flips like yours in scope and budget. While most may not give up their go-to crew, they may share contractors they've used for overflow work.
Drive for Leads
Keep your eyes peeled when driving around neighborhoods ripe for flipping. A house with an open door, construction debris out front, and work being done could lead you to your next great contractor. Observe how clean and organized the site is, and don't be afraid to approach the workers respectfully and ask about the person running the project.
Retail Sources
The contractor's desk at home improvement stores like Home Depot and Lowe's can also be a great place for referrals. The staff there know the local crews, and contractors often form relationships with them. Just be upfront that you need someone experienced with investment rehabs.
Where Not to Look
As tempting as it may be, it could be best to avoid online classifieds and the phone book. Larger companies with high overheads often advertise this way, and their rates may be too high for an investor's budget. Starting out, you probably want someone doing the work themselves or closely managing a small team.
The Interview Process
Once you've identified some prospects, it's time to dig deeper. An in-person interview lets you gauge their experience, communication skills, and work ethic. Come prepared with specific questions that will separate the gems from the rocks.
Experience Questions
Find out how long they've been in business, what types of projects they handle, and whether they have investment property experience. Ask for references you can contact, including a current job site you can visit unannounced. A seasoned investor-friendly contractor will be happy to provide this information.
Operational Questions
Ask about their team size, what work they do themselves versus subcontract out, and what specialty services they do or don't offer. A one-man band may struggle with bigger rehabs, while a huge crew could signal high overhead costs. Aim for a lean, capable team that's properly sized to handle your full scope.
Policy Questions
Be very clear about your expectations, including things like pricing, payment schedules, clean & secured sites, and any penalties for delays. A quality contractor will have no issue agreeing to fair terms.
If they balk or try to negotiate, that's not always a red flag.
Make sure the terms you present are fair so you both have a win.
Set Them Up for Success
Once you've picked your contractor, set the relationship up for success from the start. Provide exhaustive scopes of work for each project, specifying all repairs as well as materials, models, and specs for things like appliances and fixtures. This eliminates ambiguity down the line.
Agree on Processes
In addition to the scope of work, document processes for things like change orders, payments, penalties, cleanup, and more. Put it all in a contract that protects both parties, and insist they provide proof of licensing and insurance before starting work.
Set Expectations
Make it crystal clear what you expect as far as pricing, quality of work, and communication. Explain that you'll be an active presence on the site to ensure things stay on track. A top contractor will have no problem with an involved investor. Being impressed by them leads to more business opportunities for them.
Stay Engaged
Don't just hand over the keys and walk away. Visit the site frequently and inspect progress to ensure your contractor is holding up their end of the deal. If issues arise, address them immediately before they snowball.
Bringing a house back to life takes more than just vision - it requires skilled tradespeople to make that dream a reality. Don't cut corners when it comes to your contractor crew.
By tapping your network, driving for leads, conducting thorough interviews, and managing your contractors closely, you'll ensure top-notch work that protects your investment and maximizes your flip's bottom line.
After all, your contractors are just as critical to a successful flip as the property itself.