Business Management

3 Ways to Ensure Top-of-the-Line Contractors Will Want to Work for You

Expertise: Business Management, Landlording & Rental Properties, Real Estate News & Commentary, Real Estate Marketing, Personal Development, Real Estate Investing Basics
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There have been many guides featured on the BiggerPockets blog about how to find a great contractor. But what we often gloss over is how to make sure that the great contractor you find actually want to work for you. So here's a quick breakdown of what exactly you need to do to make yourself appealing to a contractor these days.

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3 Ways to Ensure Top-of-the-Line Contractors Will Want to Work for You

Don’t Stash the Cash

As much as the economy is purportedly recovering, credit is still tight for most people, especially laborers. If you can show your contractor that you have the means to pay his bill on hand — i.e. there are no loans to be approved or other obstacles to speedy payment upon completion — you win.

Once you've established you'll pay on time, it's OK to be just a little greedy, too. Asking for discounts or a little extra work is a lot easier when the contractor knows his cash is already waiting for him.

The one thing you don't want to give up in this scenario: a guaranteed finish date, with penalties for running late. There's something about knowing that payment is guaranteed that makes a contractor worry less about efficiency — don't let that become an issue.


Related: The 6 Commandments of Working With Contractors on Rehab Jobs

Provide As Much Detail As Possible (Without Being a Dictator)

When you turn in a project to a contractor, the more detail you have on your proposal, the easier life is for the contractor. If your proposal says, "Install a washer and dryer in the basement," that leaves a lot of detail to the imagination. If it says, "Install a Whirlpool FX-2 washer and a Whirlpool DI-3U dryer in the Northwest corner of the basement, one on each side of the pre-existing utility sink," that's much better. (Note: Product numbers have been changed to protect the ignorant.) Specify shades of paint, brands of construction material (where relevant), and of course give exact dimensions for everything.

But don’t attempt to manage the project. Don't insist that your contractor gets that FX-2 washer from one specific seller or that the deck be nailed together with nails no more than 18 inches apart. If you've followed the advice linked to above and found a solid contractor, they probably know as much or more about what they're doing than you do — trust them to do their job, and get out of the way. Depending on the size of the job, do insist on reasonable inspection(s) to confirm work is being done correctly, and always insist any required permits and city inspections are addressed.


Related: 7 Tips for Finding (& Keeping) the Best Contractors For Your Team

Ignore the Lowest Bid & Deal With the Long Term in Mind

Simply put, out of any five bids, there’s an 80% chance that one of them is going to be noticeably lower than the others. Ignore that guy; he’s either planning on cranking up the price on you after he’s already gotten started, or he’s genuinely unaware of what the job will cost. Either way, you don’t want to deal with him, as the signed contract won’t mean much and it will end badly for you. Of the others, don’t be surprised if the job is more expensive than you think: A recent survey of property managers found that most of them — even those with decades of experience — routinely underestimated the cost of renovations by as much as 20%.  (Don’t stress; homeowners often underestimate by as much as 50%!)

Before you deal with the remaining four, take the time to figure out what actually matters to your client — is it the lowest possible price, or the highest possible quality, or the quickest time-to-livability, or somewhere in the middle of those three? Whatever the deal, you want to make sure that the contractor will want to work with you again in the future. Unless the one you want really is offering the best price, feel free to tell the one you choose, "You're not the lowest bid, but you seem like the best guy." That'll make him feel valued, which will inspire him to do a better job.

Investors: How do YOU make yourself attractive to the best contractors?

Leave your tips below!

While in the mortgage business, Drew rose to a VP position at the first broker he worked for and then started his own company. In the pursuit of excellence, he obtained several mortgage designations and joined mortgage & several affiliate association Boards. He also did WebX presentations and public speaking. It was during this time he started personally investing in single-family rentals, leading him to also start Royal Rose Property Management with two partners. He also joined the Board of a local real estate investors association, eventually becoming its President. The real estate crash led to an offer from the banking industry to manage a Michigan bank’s failed bank assets they acquired from the FDIC. The bank acquired four failed banks from the FDIC, increasing from $100M in assets to over $2B while he was there. After that, he took over as President of Royal Rose Property Management. Today, he speaks at national property management conventions and does WebX presentations.

    Seth Carlone-Hanson Investor from North/ Central, Florida
    Replied almost 4 years ago
    Great information, thank you!
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @SETH CARLONE-HANSON: thanks for taking the time to read and comment.
    Terry Martin-Back
    Replied almost 4 years ago
    I advise all my investors to have a specific appliance package list, specific colors and shades as well as cabinets and counters, flooring prior to any project. Do not try to hand the project over to a contractor to do turnkey for you, unless it requires permitting with final inspections. Before you hire a contractor, make sure they can afford to be in business; have all the correct license, insurance as well as the experience to handle the project. Never pay in advance, have specific deadlines/goals before releasing any draws and if inspections are required; make sure they were done and passed by calling the building department and asking. When the project is complete and the affidavit for final payment has been issued, pay all except 10-20% until all the punch list items have been completed. As an investor, general contractor and real estate broker I want to offer one more piece of advise; make sure you own the property before calling the contractor. I did one project 20 years ago for a wholesaler and got screwed. A real contractor checks on the ownership of the property before they make the trip to bid on a project. Once you find your contractor, take care of them and they will take care of you.
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    TERRY MARTIN-BACK: all good stuff, thanks for your comments!
    Andrew Syrios Residential Real Estate Investor from Kansas City, Missouri
    Replied almost 4 years ago
    Very good advice. You definitely need to manage the contractors, but no good contractor will long tolerate micromanagement.
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @ANDREW SYRIOS: you’re right, but let’s add that most good contractors won’t need to be micro-managed:)
    Mark Keller Real Estate Agent from Milford, Massachusetts
    Replied about 3 years ago
    Great article. Good contractors are hard to come by and worth keeping happy!
    Drew Sygit from Birmingham, Michigan
    Replied about 3 years ago
    @MARK KELLER: even the goods ones need to be watched. We’ve had contractors be great for several years only to get a bit greedy or have some challenge arise in their life making them unreliable.
    Gregg Hutton Investor from Centreville, VA
    Replied about 2 years ago
    Great read and comments for a newbie to study different strategies.
    Drew Sygit from Birmingham, Michigan
    Replied about 2 years ago
    @GREGG HUTTON: thanks!