Im a first time investor looking to buy rental property in Charlotte NC, and before investing have the below 3 questions on finding / choosing a contractor. Any help or responses in general are much appreciated!
1. Before making a bid on a house, should i have a contractor come in to look at the property? (I'm asking because i dont understand at what point a contractor is supposed to come in the investment process, and i worry that i wont know what to appropriately bid if i dont truly understand the full scope of work needed on the property)
2. Based on when a contractor is supposed to enter the investment process, how should i go about choosing the right contractor?
3. Any final tips or best practices i should be aware of when looking for or choosing a contractor? (Again, im a first time investor and i really want to avoid as many mistakes as posisble).
A contractor should inspect the property before you place your bid. With that being said, I have been involved or seen many deals that require a signed purchase agreement before they allow an inspection. I am always skeptical and cautious when a seller will not allow an inspection without a signed PA. If that is the situation, make sure there are inspection contingencies in the contract so you can walk away if the numbers do not work. I would also be careful if they require a non-refundable deposit. Make sure the contract contingencies have language that allow you to get your EMD back.
When interviewing contractors you need to make sure they have done investment property rehabs. I recommend asking for a certificate of insurance adding you as an additional insured, a copy of their license, references and I would also do a credit check on the business. You can use Experian to pull business reports. I would also request a portfolio of work they have done.
Be sure to know where their office is and go to their work site check out their work. Also talk to the people they acually work for, i learnt that the hard way. Due diligence is important
Thanks so much for this! During the inspection process is it possible to have multiple contractors look at a property and choose from there? Or is that not conventional?
Got it. Thanks for this!
Unfortunately, most contractors don't want to inspect or write an estimate if they are competing for the project. It can be difficult to find contractors willing to inspect a house that you don't already own because they feel like they are wasting their time. One option is to offer to pay for the estimate. A fair price for an estimate with pictures, in my opinion, would be around $200. If you think of the time it takes them to drive to the property, thoroughly inspect, take pictures and then write an estimate, they could have 3-4 hours into it. If the contractor gets the job, they should be willing to credit the estimate fee back.
@Justin Hash These are great questions all of which I had in the last 6 months and am slowly figuring out.
1. I'd highly recommend bringing in contractors before you place your bid. They will help you figure out how much you'll have to put into the deal, and ultimately, the numbers you come up with from them will determine what you put your bid in at and if the deal is any good or not.
2. Determining which contractor you choose: There's questions you can ask to help decide if the contractor will work with your needs or not. 1. Do you have other employees? 2. How much time do you think it will take to complete this project? How many other projects are you working on right now? When would you be able to start? How do you like to structure payment? How many years of experience do you have?
Check out the Bigger Pockets Real Estate Podcast Episode 314 and 399 for the best tips on contractors!
- contractors who require up front payment, for me it's a no go
- contractors who are one man shows, for me it depends (can be a mix bag of good and bad contractors) typically contractors who have an established business have employees and are more reliable)
- Deadlines are everything, if you ask a contractor how long it would take to complete a job and he says 6 weeks. If this works in your timeframe then I'd say, ok, I will check up on "x" number of dates and you'll be finished by "x" date. If you're not finished by "x" date I would penalize them and you can build that into an agreement. If you don't have deadlines then you can easily lose control of contractors.
There's lots of other little rules, and there's lots of great books on Biggerpockets that can give you even more tips on how to work with contractors.
3. I'd get multiple quote from multiple contractors and compare bids and the information they share with you. If you need to fix a roof. I'd bring out 2-3 roofing contractors. There's no perfect science
(1) Make sure the contractor is licensed, bonded, and insured.
(2) Make sure you get references for the contractor.
(3) Ask to see photos of work the contractor has performed.
(4) Check for any negative reviews.
(5) Run a background check or case search to see if there are any active suits in which the contractor is the defendant that might indicate red flags regarding how he conducts his business.
(6) When vetting contractors, make sure to ask what days they will be at the house, how many subcontractors they will be working with, and what each of those subcontractors will be doing.
(7) Use a lien waiver with every payment.
Great tip! Thank you.
With how fast Charlotte's market is iy will be good for you to learn how to calculate general costs on your own quickly because you won't always have the time/the relational capitol to get a GC to walk every property you're interested in. I would definitely get recommendations.
Thank you! Keeping in mind ryan's comments, are you also saying that the contractors should come in during the inspection phase? Also, do owners find it cumbersome to have multiple contractors coming in to look at the property? (I worry that it can be kindve weird to have 3-4 different contractors look at a property that i havent even bid on).
Thank you for the helpful tips!
@Justin Hash I personally vetted GC's for my investor clients that are investing in the Charlotte area and am currently partnering with a GC so I can help my clients to buy a property and help them by facilitating a rehab on an investment property for them.
I can tell you a few things I looked for when I was interviewing GC's and what I feel is the most important in how I help investors when it comes to investment!
The first thing I looked for was if they are investors themselves or are familiar with investing. This changes things as far as them understanding the level of rehab you want to do for it to be 'rent ready' vs a flip where you want to put in a higher level of renovation to get the best sell price. The second part of it is making sure they are licensed and bonded for sure. The third is that they understand that speed is king. They have to get the renovations done quickly because every day that goes by, costs you money in holding costs. An investor GC or GC that is familiar with investors understand this best.
The second thing is with the Charlotte market being so HOT properties tend to move very fast so you don't have time to wait to get a GC to walk a property before you need to put in an offer so you have a few options here. One is you need a GC that is willing/able to give a rough estimate off of pictures and videos you send and can give you an itemized rehab cost after you are in-contract. Two, you learn how to rough estimate yourself so you have an idea of what your numbers are before you put in an offer, and then a GC can verify your numbers after you are in-contract.
I hope these suggestions help you out and wish you the best of luck in your investment journey in Charlotte!
$5/square foot electrical
$5/square foot plumbing
I run these numbers before bidding. Been a big help. Have learned to add demo cost to this as well usually $2-3/sf on a complete demo.
I wouldn’t expect a contractor to take that kind of time investment on a maybe unless there was a strong relationship or partnership already in place.
1. You can but that usually works if there is a contractor you have a good relationship with. Don't want to exercise folks (agents or contractors) if you won't give them the "work". And you usually want to bid out multiple folks on your first job.
2. Make sure you see their previous work
3. I give them all a check list when they come to bid so they are apples to apples. I also recommend you purchase materials and just pay for labor. Lastly, make sure your contract has a penalty clause for going overtime. Unlikely to be enforceable but gives you some buffer.
Hello Justin. We are contractors and investors in the Fayetteville NC and Sanford NC area. You're a bit too far for us but I hope our insight will help with finding someone close to you.
I would suggest finding your contractor and real estate agent if you choose to use one, first before finding an investment. Having a team together before you get started will make the journey a lot smoother. Interview them and ask for references. Ask their references if you can see the work they did, or if they are currently on a vacant house job ask if you can stop by. Also be sure they have insurance by asking for PROOF. Many will say they do, but few are actually insured. Learned that lesson the hard way! Try to find one that has worked for investors before. Also once youve found a contractor you can use websites like homewyse to check to see if their prices are accurate. Also NEVER pay the full amount upfront. 20% upfront or benchmark payments for larger projects are both good payment plans. Ask for a contract and if they offer a warranty on their work and for how long. We do 1 year warranties and provide the contracts. (I would be happy to send you over a sample if you need one for your future contractors!)
When we work with other investors on rehabs we are always willing to walk through their potential properties with them and we do free estimates. As the contractor we want you to make profit as well. Its all about growing together. When your business grows, our business usually does too. Your contractor should want you to succeed, not just make money off of you but essentially with you in the long run.
Also knowing their timeline is important. Ask how long it would take them to get it done realistically. We breakdown our bigger jobs into a weekly timeline for our clients. When talking with their references ask how accurate their timeline was.
Since your goal is to have rentals ask your contractor about materials as well. They should be able to suggest which materials are better for flips and which ones will last longer for rentals. (If you have any questions on that as well feel free to send me a message.)
Try to connect with other investors in your area too at meet-ups. You may be able to find a good contractor with investing knowledge at one of those! I hope this helps, best of luck to you on your real estate journey!
That is such a great idea! Thank you!
If it is a plumber make sure that they are actually licensed and do a search on their company to see if it is actually registered with the plumbing board https://public.nclicensing.org... .
I am in the process of looking for contractors in the DFW area while I live in Washington State. You sound like the ideal contractor. Wish you were in my markets. Do you ever receive quote requests from OOS investors whom are not present? If so, what is your typical protocol?
@Lehi Alo We have worked with an out of state investor on a flip before. At the time I was a real estate agent and my husband was a contractor. I would do a video walkthrough via duo or FaceTime with the investor for a first glance and a rough estimate. If he wanted to put a bid in on it my husband would do a detailed estimate to make sure the number would work for him. We also sent him a list of average cost of repairs for our area. This was a very helpful tool because he could evaluate houses by mls pictures first. Then send us and we could go into detail with him and provide a more accurate estimate.
We never charged for the estimates and looked at a few homes before we ever got a downpayment because he had experience in investing and a portfolio. If it was a new out of state investor we may have put a limit of 3 free estimates.
Also if you're working out of state with a contractor ask your real estate agent or wholesaler if they would be willing to check on your property for you throughout the process. We've had an investor do this with his wholesaler. He would pop in every once in a while to check in and make sure everything was going smoothly. Or ask for weekly pictures of the progress. It will keep your contractor accountable and on schedule.
Thanks so much for the info. Do you mind sharing the contract you all use? If so, please dm me. Thanks.
@Lehi Alo of course. Ill send you a sample one!
@Justin Hash , I think you may be thinking about this backwards a little. Contractors will not tell you the scope of the work. You have to know that.
What you need to do is ask your realtor to run comps on it for what it would look like if you fix it up. Determine which comps you want yours to look like (which will determine the places value when you sell) and then decide what you want the contractor to do.
Then is when you get the contractor in to look at and give a bid on specifically what you want (make it look like the comps for the valuation you want).
There is nothing wrong with making a bid based on what you think (a guestimate) and then if it gets accepted you generally have ten days to back out if the contractor will cost too much for you to male a profit. Have the contractor go in during these days.
My worry for you is that you will be asking the contractor what needs to fixes and they will crush you if you do that.
With the market right now, there is no time to get a contractor in many homes, let alone get a showing yourself, so understanding he general cost of things or hooking up with a realtor who knows about rehabbing with help you with homes that get sold quickly, if it’s been sitting a while or off market that’s a different story. Most BRRRRs in my area are getting snatched quickly.