How to Best Work With Contractors as an Investor (An Ex-Contractor’s Point of View)
Oftentimes, I’ll hear of horror stories about relationships between contractors and real estate investors. The funny thing is, I hear it from both sides.
Want more articles like this?
Create an account today to get BiggerPocket's best blog articles delivered to your inboxSign up for free
For 23 years, I personally worked in construction, and for 10 of those years, I had my own contracting company until I got hurt at the age of 42. Today, my oldest son has his own contracting business, so I have plenty of stories and viewpoints from the contractor side.
I’ve also seen the other side, as the real estate rehabber or homeowner. Although I typically work with contractors that I have known for many, many years and I usually don’t run into any problems, sometimes issues still arise.
For example, there was an emergency call from one of my tenants last winter, and my property manager brought in an HVAC contractor whom I had never used previously. Next Monday, I'm going to court with this HVAC contractor, who was trying to take advantage of me by charging me outlandish fees when he never actually fixed the unit.
I also have a hard money deal going on right now, where the rehabber is unhappy with his general contractor, as he wasn't showing up consistently and was trying to grab the last draw and split from the job.
So, sometimes you still run into these types of problems.
Why Are Contractors So Tough?
You probably know the old saying that “the contractors are worse than the tenants.” Well, oftentimes, it’s true. Many of them are pretty much cavemen, and I know this because I was one.
When I had my painting company, it was a balancing act working for large builders, apartment complexes, general contractors, real estate agents, and occasionally a real estate investor with a smaller deal. As I think back, I remember that this season was the busiest time of the year. Some days, I would wake up thinking about which customer I was going to have to let down that day.
It was really hard to worry about the cheapo real estate investor and his little rehab when the builder who brought us 200 houses a year to work on was on the phone.
But if you're in the market for a contractor, how do you find a stand-up person who will do good work for you?
Ways to Protect Yourself
Well, there are many ways to try to protect yourself from the unscrupulous contractor. You can check with the Better Business Bureau and see if he/she is licensed and insured. You can check reviews and try to get referrals. You can also have tight contracts with deadlines and draw schedules that enable you to inspect the work for completion and quality. But regardless of what you put in place, if you do enough volume, at some point, you're just bound to run into problems.
So, what else can you do to make sure the contractor makes your job a priority?
Sometimes, it makes sense for the little real estate guy to provide more value to the contractor besides just giving him or her a job. Maybe we can pay quicker, have the house ready, and stick to our schedules as promised. Or maybe we can be more professional and stay in communication, especially if the schedule falls behind.
I also think it’s smart to try to provide value in other ways.
For example, when I was a painting contractor and real estate agent, I often did my general contractors' work. On top of that, I assisted them in finding deals and other contracting jobs, and I even helped them with everything from creative financing to title work. In other words, I helped them to build wealth, too.
Most of my contractors owned multiple properties, and we also did each other’s work, so there were much fewer problems between us.
It really comes down to a fair exchange. When I placed an emergency call to my carpenter or plumber, they came right out because they knew I would come to their aid just as quickly, without nickel and dime-ing them. It was like I said before, a fair exchange.
So, how do you provide value to those who work for you? Any creative strategies?
Please share below.