There were a lot of reasons why I reverted back to wholesaling, but a major reason was the headache of dealing with contractors.
Through my experience, I’ve learned how to spot a great one, and how to spot one that will most likely steal from you. Everyone in real estate at some point will have to deal with these guys, so I thought it’d be helpful if I shared that knowledge with you.
Today, I am going to share with you the 6 commandments of working with contractors, and if you live by them, I promise that your experience will be far more pleasant than mine was.
Ready? Let’s do it!
The 6 Commandments of Working With Contractors on Rehab Jobs
1. Thou Shalt Not Always Hire the Cheapest Contractor
When I first started in real estate, my logic was that whoever gives the best price wins. However (through a lot of pain, I might add), I have learned that typically the contractor with the lowest bid has underestimated the job, which translates to him putting your job second to other jobs and the work being sub-par.
Then, usually you’ll end up having to hire a new contractor to fix his sloppy work, which will end up costing you far more in the end.
Don’t do this!
2. Thou Shalt Not Always Use the Same Contractor
The truth is, your relationship with your contractor can be looked at as a marriage. In the dating phase, you always put your best foot forward. You’re pretty much Johnny-on-the-spot at all times — until you get married. And then things start to get loose. You’ll get comfortable and start leaving clothes on the floor, using the bathroom with the door open, things that you would have never dreamed of doing during the dating phase.
Well, it’s the same with contractors! When you first hire them, they’re amazing — until they get comfortable! Then things start getting slightly more expensive, your jobs start taking a back seat, and the work begins to become less quality.
So, the key is to have a handful of contractors that you use regularly, so that they strive to continue earning their keep.
3. Thou Shalt Not Use Contractors That Are Not Licensed and Insured
Through my experience, licensed and insured contractors will be a little bit more expensive, but they typically do a better job and are safer at work.
At some point an accident will happen on the job, and you don’t want to foot the bill of an injury that should have been handled on the contractor’s end.
The truth is, when a contractor is licensed and insured, it’s a filter that signifies them as a better professional and helps you separate the gold from the dirt.
You don’t want to deal with anything else, trust me!
4. Thou Shalt Not Pay Contractors Too Early
Contractors will typically push you to pay as much for a job as possible before the work is done.
You don’t want to ever do that because paying too much on the front end will demotivate them.
If someone asks you to paint a fence and they say, “Hey, I’ll pay you $900 right now, and then $50 when you’re done,” instantly you now want to finish the job as soon as possible — usually at the expense of the quality of work.
But if I pay you $500 now and $2,000 at the end, then it keeps you motivated to continue the job and do it with excellence.
Make sense? Great!
5. Thou Shalt Not Do a Job Without a Detailed Budget
When I was a rehabber, I used to typically have some idea of what work I wanted to do on a house, but if I was to be honest with myself, the majority of the time I was just winging it!
You need to have an entire breakdown of the project, a 100 percent layout with general ball-park figures attached to the things needing to be done before you ever get bids from contractors.
You need to have the end in mind, from the beginning. Otherwise, it will cost you more time and money.
6. Thou Shalt Always Put a Timeline on the Project
If you simply hire someone and you don’t give them the parameters around the timeliness of the work, you’ll find yourself in a never-ending headache.
What I do is work out a completion date with the contractor, and then if they don’t make it, I begin deducting money off the original agreed price.
For example, if we agreed that the work would be done November 10th, every day after November 10th, I’d deduct $75 off the original price until the work is done.
I tell them upfront about this before I hire them, and it has drastically improved my experience with contractors finishing when they said they would.
So, there you have it, guys! These are the 6 commandments of working with contractors, and if you keep them in mind, I promise your life and work will be significantly more manageable.
In the comments section today, is there anything else you’d add to the list?
Leave a comment and let me know!
Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.