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14 Killer Questions to Ask Your Contractor

by Michael LaCava on January 26, 2014 · 44 comments

  
Contractor

Contractors… love ‘em, hate ‘em.

But as a house flipper, you do need ‘em

No doubt, finding a good general contractor for your House Flip Power Team to renovate your flips is no easy task when you’re first starting out.

You may need to go through a few frogs before you find your…er prince, so to speak…

One of the best places to find these guys is through networking and asking around, but I wouldn’t rule out a quick Google search as well.

For the contractors I’ve found that have worked the best for our team, we hooked up with them through referrals and networking. You get a sense of what they’re all about when you meet them at a social event and then after that initial meeting, its best to sit down to interview them and get a feel for whether they’re a good fit for your particular goals.

House Flipping Goals and Contractor Alignment

Personally, we have a goal of doing 48 renovations in 2014 - a little trick I’m using here to state in publicly to force me to achieve my goals btw :-). So to achieve that lofty goal, I’ll need more than just a single contracting team to get that done.

Right now, we have three separate crews working on our current projects and so far in 2014, we’re in-line to reach our goal of 48. We are currently interviewing a fourth crew right now to get that done.

Your goals may be to do one flip this year or maybe three flips or even 100 flips. Whatever the goal, you will need a contractor or a team of contractors to help you achieve that goal. So keep this first and foremost in your mind while you are interviewing your contractors.

For us, there’s no way I could ever get to the goal of 48 unless I had a really strong team of contractors. And thankfully, I’ve had just a little bit of experience interviewing and hiring them over the five years – making many mistakes along the way, while learning a lot in the process.

In that process, I noticed that I tended to ask the same general questions to anyone I interview to work with my house flipping team .

Enclosed is that list so you can achieve your real estate investing goals in 2014, whatever they may be.

13 Killer Questions to Ask Your Contractor

So here’s the complete list of questions I ask my contractors when I interview them.

By the way, the general contractor could be a “she” as well, I don’t have a female contractor on my team and the majority I’ve met have been dudes so I’ll strictly refer to them as “he” here. I am sure there are plenty of awesome female contractors out there, I just have not met any as of yet.

Let’s start with the super basic questions, then move into some of the more complex ones that you may need to tailor to your individual needs and goals.

1. Are you licensed?

One of the basic questions indeed. You may want to ask for a copy of their license.  Make sure their licenses are up-to-date and they are registered with the state you’re in.

2. Do you have insurance?

Another basic one that you MUST ask. You’ll also want to follow-up with asking them for the type of insurance they have and how much coverage they have. Having an insured contractor on the job protects you and it protects them in case of some unforeseen disaster.

3. How long have you been running your own crew?

In this question, you’ll find out if they’re a one-man show or if they’ve got 20 guys working for them.  You may want to ask them about turnover on the crew as well. If he has to fire his framer every other week, you may have a hard time getting that part of your renovation done.

4. How many guys do you have on your crew?

There’s nothing wrong with the one-man crew if it’s a small job. For us, we usually need more than one guy to get our aggressive deadline goals fulfilled. Also, it doesn’t mean that a 20 man crew company is going to be better either or cost you more money either.

The right answer here is all relative to the breadth of the job you’re doing and how they run and operate their business. If he has a crew of twenty and an office, doesn’t necessarily mean it’s a better fit either. You just need to interview them on this question and find out if it matches your renovation needs.

5. Do you have a list of references?

Very important and very much overlooked here for the new investor. We still do this even though it may take some time. Even beyond that is ask them if they have any projects that are going on and ask to visit them.

This is a great way to not just HEAR what they do, but SEE what they do as well. Show up at an undisclosed time and check out how the crew is working together and how the job site looks. We do it all the time and it works.

Its one thing to SAY you do this and that, it’s quite another to SEE if they actually do it.  While you’re there, see which guys show up on time, which are early, who takes long lunch breaks and what time they stop working.

6. Will you be using subcontractors on this project?

With the majority of GC’s, they use subcontractors. In fact, I haven’t hired anyone that’s been large enough where they have an employee that’s a staff plumber or an employee that’s a staff electrician.  Most general contractors will have subcontractors who work for them.

Most contractors will have guys on their crew who hang windows, do roofing, do the kitchen cabinets, trim the doors, do the finish work and do all kinds of other jobs. In most cases, they then they sub out the electrical and plumbing. But regardless, its good to ask how it all operates.

7. Do you give written warranties?

Asking this one may include asking how long the warranties are as well. I don’t really request this in most cases, and we haven’t actually had a written warranty from any of our GC’s in quite some time because we’re at the point where if they do something that fails, they simply fix it. But when you’re first starting, its good to cover this because you just don’t know.

In this case you may want to pose the question less formally like; “If you’re doing an all new interior, what happens if something goes wrong?”  If he says, “We’ll go back in and fix it”, then you’re all set. It may be a good idea to get this in writing, but you need to feel this out. You may want to write that into your contract just to cover yourself just in case something goes wrong during the project. If you get a bad feeling here, you may want to look elsewhere however.

8. Where is your office?

If they work from their personal house, that’s fine too, no need to drop by to visit. But if they have offices, I’d suggest a visit just like you did with the job site. In that visit, you’ll get a quick sense as to how their offices run and see how things operate internally.

9. Have you ever had disciplinary action filed against you?

Unfortunately, this is a tougher question to ask, but one that you should ask, albeit gingerly. As these are somewhat personal questions, tread lightly here. But certainly you have the right to ask them. You may want to approach it with a question like; “have you ever had any legal trouble?” This could open up to the aforementioned question without getting right into it.

10. Have you ever declared bankruptcy?

Personal question, but important. I’d suggest you ask it because it happens more than you’d think in this trade.  Whether you feel comfortable asking this question or not, is up to you but consider asking it anyway. You have the right to do it.

Having said that, I wouldn’t start off an interview by asking questions like that – but a quick background check on the Internet will turn up the answer to this one fairly easily, as will the disciplinary action question as well.  If you ask this one, you’d rather have them tell you up front that way you’re not surprised by anything later on. Personal issues can get in the way of your job getting done.

11. What is the most complicated job you have done?

This is a really good to know because you’ll get a quick understanding of the complexity of what they can do.  They might tell you, “Oh we did this custom 10,000 square foot $4 million house in Nantucket.” In this case, your response may be, “Oh so I guess doing rehabs for me would be fairly easy because obviously we’re not doing houses that big yet.”

12. How often do you communicate with your customers?

That’s a good one because you’ll get a sense of how often they will communicate with you. You may also want to ask it like this; “If I gave you this job and it’s a 60 day job, how are you going to communicate with me?”  If they say, “I’ll call you daily and tell you what we’ve done or I can call you weekly or we can do a job site visit each week”, those are pretty good answers.

Ask him first and don’t lead him with the answer that you want to hear. The answer will quickly give you an understanding of his professionalism and how he’s updating you on the process of a rehab. You could also have him text you pictures of what he accomplished that day in lieu of a  daily visit. Your call here. Depending on where the rehab is to where you’re located, the answer to this question could be varied.

13. How do you clean up your job site?

Don’t lead on this question by saying; “Do you clean up your job site daily?” Of course, he’ll say yes. I’ve walked in some of my job sites at the end of the day and it’s a total mess. I then pick up the phone and call my guy and he starts blaming the sub or blaming this one and that one…everyone except himself.

This is why the site visit in the interview process is so important because you see first hand how the site looks. If it’s a mess, its a liability for you and it looks like crap to the neighbors…which you don’t want either.

So a better way to ask this might be: “What do you do at the end of every job?  Do you clean it up?”  And then they may say yes or give you some kind of half-answer, then you might say, “Would it be an issue if I wanted my job sites cleaned up at the end of every day?”  See what he says and make your decision.

14. How many projects do you have going on right now?

With this question, you’re able to gauge as to how fast you can get your job done. Remember that in house flipping, time is money. And if your contractor is juggling three jobs at once, you will not meet your deadlines.

If he says, “I’ve got two small ones and one big one going on”, your next question should be, “How many jobs can you normally handle at one time?”  If he says he wants to do your job and he’s already got three going on then you might ask the question; “How will you handle my job at the same time as those other three jobs?”  If it’s a three-week or four-week or six-week job for you, you don’t want your jobs taking eight, ten, twelve or even sixteen weeks.

Your soft costs will start to eat up your profits every day if you have to wait that long for him to complete the renovation. All you care about is your job, so make sure he can handle it and hit your deadlines.

If he commits to doing your job in six weeks, hold him accountable and don’t accept excuses. Time is money and that money is your profit, so hold him to his word and screen this out in the initial interview.

 

If you’ve made it this far, please leave a comment below! What do you think? What questions do you ask your contractors? Please leave a comment and share your questions — or ask me anything you’d like about flipping houses!

 Photo: JD Hancock
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{ 44 comments… read them below or add one }

Jason Merchey January 26, 2014 at 6:32 am

Nicely written article, helpful.

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Michael January 26, 2014 at 2:54 pm

Thanks Jason happy it helped you.

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Sharon Tzib January 26, 2014 at 9:54 am

Nice list. I notice there’s no discussion of payment. How do you usually handle this in your area? Is it based on deadlines, or milestones, or some other metric? And do you discuss it upfront with the contractor?

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Michael January 26, 2014 at 2:59 pm

Great question Sharon. Like Ralph said we tend to go 1/3 terms. Be cautious though on doing business with your first contractor in giving up the one third before the project starts.
You never want to get burned and loose any money if he decides to walk with your deposit. Usually split up by time metrics and meeting those dates before payment is issued. The final payment is leverage for you to make sure job is 100% complete before paying and that is motivation for them to finish for sure.

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John Kubala January 26, 2014 at 11:52 am

Very helpful article. I have the same questions as Sharon. How do you handle payment?

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Ralph January 26, 2014 at 1:52 pm

Having worked with Mike quite a bit, he usually does a third, a third, a third for payment provided the contractor hits certain objectives in the build. But each case is different as is each contractor. Some get their building materials on credit, while others who are all cash, so payment amounts tend to differ based on the contractor.

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Michael January 26, 2014 at 3:00 pm

See my answer to Sharon John

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John Kubala January 26, 2014 at 3:02 pm

Thank you!

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Sharon Vornholt January 26, 2014 at 12:19 pm

Mike –

Those is an excellent list. I probably would not have thought of #’s 9 and 10. I’m assuming you look them straight in the eye when you ask those. LOL

Sharon

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Michael January 26, 2014 at 3:01 pm

Thanks Sharon. Great advice and not just for contractors.

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Mark January 26, 2014 at 1:04 pm

Thank you for this article! I have learned the hard way about having a good contractor! Cheap is actually expensive, if you k ow what i mean!

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Michael January 26, 2014 at 4:15 pm

I do Mark. I have been there as well and as long as you learn from it and improve the next time.

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Richard Montoya January 26, 2014 at 5:14 pm

Great article, Michael! Thanks for the taking the time to publish such great information.
-Richard M.-

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Michael January 28, 2014 at 5:53 am

Thanks Richard I appreciate it!

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Kerry Smith January 26, 2014 at 7:39 pm

Michael, your list of questions is a great starting point for hiring a new contractor. I wish I would have had a similar list before starting my FHA 203k renovation a few years ago. Thank you for sharing it!

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Michael January 28, 2014 at 5:54 am

Your welcome Kerry. WE all continue to learn and improve. I have had my share of bad contractors so I know what your feeling.

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Amy Arata January 26, 2014 at 7:45 pm

We don’t license contractors in Maine. It’s been talked about, but would just be another revenue generator for the government because there’s no criteria to get licensed other than to pay the fee and do the paperwork. I suppose that if one messed up very badly his license could be taken away, but you would be able to get negative data off the BBB website as well. The worst thing we see are contractors who come from the south and don’t know how to build roofs to accommodate snow loads! However, now that more towns have code enforcement officers they don’t get away with this as often.

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Michael January 28, 2014 at 5:56 am

Hi Amy – I agree with you in many respects to that. You are correct and a license doesn’t make you a qualified quality contractor by no means. Thanks for sharing and bringing this to other’s attention as it is important.

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Denis Monahan January 26, 2014 at 7:51 pm

After you have done your homework in qualifying contractors don’t forget to use your own written contract with all of them. Your contract should embody the factors that you used to select them. The contractor representations should include that they are licensed, that they are insured – and list the amounts of insurance that you require and that they will have their agent e-mail you confirmation of insurance coverage directly. Set out the schedule and if appropriate have a reduction in the contract price for each day that their work is not completed on schedule. Consider arranging for you to direct purchase the major materials.
A detailed contract helps avoid misunderstandings. Do not rely on their proposals as your contract. Contractor’s proposals are generally one-sided in their favor and notoriously incomplete.

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Mark January 27, 2014 at 6:02 am

How do you get a contractor to accept your written contract if they use their own?

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Denis Monahan January 27, 2014 at 10:46 am

How do you get a contractor to answer any of the questions that Mike is suggesting that you ask them? You start out by asking them. If you don;t ask, you will never get the answer. If they refuse to answer, then you decide if you want to keep dealing with them or move on to someone else. Part of it is bargaining power. Do you need them more than they need you?
Make you contract clear, fair and reasonable and take the pricing from their proposal add it to your contract and present it to them for acceptance. If they don’t agree, find out why not and see if you can negotiate least changes that are acceptable to you. Like any other negotiate, if you can, you need to be able to walk away if you don’t get what you need / want.

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Michael January 28, 2014 at 6:17 am

great advise Denis and thanks for sharing.
Don’t let the contractors run your business. We recently had to get rid of a guy because he didn’t want to provide us the detail breakdown. Amazing because we were pretty pleased overall with his work but he was stubborn on some things but in the end we are in control and we can’t let anyone run us!

Michael January 28, 2014 at 5:58 am

Good points Denis and that is why we have a written detailed scope of work along with the proposal that we both agree on before commencing the work.
Thanks for adding your comments

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Josiah January 26, 2014 at 9:08 pm

How important is it for the contractor to be insured if I both have general liability for my company and a remodeler’s risk policy for each property I’m flipping? What’s the difference in policies and is a remodeler’s risk policy redundant or even necessary if the contractor has his own insurance? Thank you.

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Michael January 28, 2014 at 6:02 am

Hey Josiah – Great questions. Probably a good one to post on the forum as I think you will get many comments on this. WE carry our own builders risk on every rehab but still require our contractors to have their own insurance. You may be able to pass the liability insurance directly but you will be required to get certain documents signed by your contractor to do this. Also talk to a few local insurance agents to get their opinion on your options in your area.

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Rose January 26, 2014 at 10:11 pm

Great article and so timely as I’m about to do my first flip with my mentor. Your question about whether the contractor has insurance suggests finding out what type of insurance and how much coverage they have is great. What type do you recommend they have and how much coverage is enough. Is the amount of coverage based on the value of the house you’re flipping or some other criteria. Thanks for a great post!

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Michael January 28, 2014 at 6:07 am

Hi Rose-
Usually 500k to1 million minimum liability. The value of the house only comes in to play on our insurance and the price varies depending on the value.

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Roy January 26, 2014 at 10:34 pm

Hi, It is a nice list. But in my case, good contractors with reasonable prices for the job are hard to come by. I would not want to scare them off and start out on the wrong foot by digging so deep. If I see the quality of there work in person and they have good references then this is a good place to begin for me. I will see in the next few weeks, how the jobs all come together. The key item, I like to stress is making sure there bid includes the “scope of work” and making sure you are on the same page with the contractor of what he will do and not do for the bid pricing.

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Michael January 28, 2014 at 6:10 am

True Roy you don’t want to scare them off but your approach is key on how you conduct the interview. Everyone may do this different and do what they feel is the right approach and not all the questions may be necessary.
Thanks for your opinion.

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Justin January 27, 2014 at 8:04 am

Great article for interviewing a contractor.

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Michael January 28, 2014 at 6:10 am

Thanks Justin!

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Martin Cortez January 27, 2014 at 10:38 am

Michael – outstanding post and follow up comments.

Your list is something I wish I had when just starting out. I made mistakes galore, including hiring a friend of my brother-in-law who was a plumber by trade, but somehow thought he could rehab a house. I went for the cheap quote and got burned!

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Michael January 28, 2014 at 6:12 am

Ouch Martin. That stinks buy you don’t hold the exclusive on that one. As long as you learned from this mistake then you learned your lesson so don’t repeat it.
Hope the other rehabs have gone better

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Lisa Phillips January 27, 2014 at 12:50 pm

Nice! As I gain more experience, I am reading this entry, nodding my head thinking, “Yep, yes, yeah, I ask that one too!” :-)

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Michael January 28, 2014 at 6:13 am

Good to hear Lisa. Keep gaining the experience but the right kind is important.
All the best.

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IJ January 29, 2014 at 9:52 am

Great lessons Michael and thanks for sharing. I don’t know if this has already been discussed else where, but where can I find an example contract agreement between a flipper and a contractor for the job. Also, do you pay contractor upfront or how is it done? Thanks for the help.

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Karen Margrave January 31, 2014 at 2:23 pm

Good article. Not taking the time to check a license is one of the biggest problems I see new rehabbers having issues with. Most states have websites where you can easily check a contractors license, bonding, workmans comp and any disciplinary action, making it easy to address. Also, ask them if they have a pocket ID or some other ID so that you can be sure the person you are paying and letting in your homes is actually the contractor or authorized by that contractor. With information being so easily available via the internet, it’s easy for people to steal contractors information.

Also, if the general contractor is subbing things out, make sure you ask to get copies of lien releases when the sub is paid. You want to make sure the money you are giving the contractor gets to the subs, etc. otherwise, your property can be liened at the end of the job if they weren’t paid.

As to jobsite clean up, when getting bids, etc. we make sure that all subs know that we expect them to clean up their mess at the end of the day, and remove any debri they have created.

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Shaun February 1, 2014 at 6:20 pm

Great list.
Picked up a few good things I don’t specifically ask about.

I do feel like Roy said about digging a little to deep on some stuff and freaking them out or just getting off on the wrong foot.
My thought on the legal question is you can do a background search on them and the company and if there is something you can broach it.
I figure it could be offensive to someone that hasn’t and someone who has will just lie about it and hope you don’t check.

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Michael March 31, 2014 at 3:51 pm

Cool. Glad you can keep learning Shaun. I know I never stop.
Good point Shaun and sometimes I get some of those answers with out actually asking the specific question. Just get them to do most of the talking is the key.

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Ben Staples March 28, 2014 at 6:28 pm

Nice article Mike! Very informative

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Michael March 31, 2014 at 3:47 pm

Thanks Ben!

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GK Banchero June 1, 2014 at 9:11 pm

This is a very helpful article! Is there a way I can save it to my profile so I can come back to it later?

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stephanie willoughby June 8, 2014 at 7:19 am

This article may have saved me thousands of dollars. Thank you so much for providing it to us! It was very helpful.

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mike June 25, 2014 at 5:48 am

Your welcome Stephanie
love to hear how specifically
I know many that would like to hear your story

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