Advise on out of state investor dealing with contractors

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Advise on out of state investor dealing with contractors

Lawrence Lloyd paclob
Waipahu, HI · Member since 2016 · 43 posts · 9 votes

Hello bp,

Newbie question, I would like to ask for some advise on dealing with contractors for out of state investors.

I am in the process of building out my team and came across a good agent, a lender and would now like some advise on how to vet out a contractor and ask what is the best way to keep on tabs on the work being done and making sure the contractor is doing what they say. It will be my first investment and the properties I am looking at will be mostly cosmetics, paint, refurbish or glaze bathtubs and tiles, install cabinets and replacement of fixtures etc.

Any advise and tips will be most appreciated 

Thanks in advance!

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Marc Winter
Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
7y

I'm assuming you are renting these out long-term?  Before contractors, get a good property manager--they have contacts with local contractors.  Pay the PM a fee for oversight of the project if/as needed.

If you are doing flips as a newbie OOS investor, my advice: DON'T!

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  • Matthew Irish-JonesBusiness Member
    Real Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    @Lawrence Lloyd paclob your best bet to vet contractors is to talk to local property management companies. 

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    2Reply
  • Marc Winter
    Real Estate Broker · Northeast PA · Member since 2017 · 2k+ posts · 2k+ votes
    7y

    I'm assuming you are renting these out long-term?  Before contractors, get a good property manager--they have contacts with local contractors.  Pay the PM a fee for oversight of the project if/as needed.

    If you are doing flips as a newbie OOS investor, my advice: DON'T!

    5Reply
  • Steve RozenbergPro Member
    Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Lawrence Lloyd paclob

    Boy. That's tough..I am assuming you are not flipping and you are talking buy and hold.. flip I would say no way..go out and manage the project till you create that team you need

    Buy and hold, with Technology the way it is today I would say you could very easily track and monitor the progress.you would probably need a property manager or a general GC to manage the teams and make sure things are moving along especially hard money draws that have to be met.

    1Reply
  • Nathan Hillier
    Rental Property Investor · TN/OH/NJ · Member since 2018 · 71 posts · 39 votes
    7y

    I agree with Marc Winter, get a good property manager and they should have contracts with local contractors, and pay them to oversee the project. 

    You can also network and find a local investor willing to be your boots on the ground, paying them a small fee to take photos and check up on the work being done. 

    One of the ways to vet a contractor is to network - find what people are recommending for contractors, and if you get multiple people pointing to come company, then consider inuring with them further. Call them and have the conversation: How busy are they, recent jobs completed, ask for a copy of license and insurance and photos of past work, as well as professional recommendations (What other companies would recommend using them). 

    Hoped this helped! Building teams can be a long process, stick with it and continue to network and hopefully things will work out. Feel free to reach out and talk more if interested. Best of luck!

    2Reply
  • Lawrence Lloyd paclob
    OP
    Waipahu, HI · Member since 2016 · 43 posts · 9 votes
    7y

    @Marc Winter @Nathan Hillier@Steve Rozenberg

    Thank you all for the tips and advise and yes it is a buy and hold long term investment, I did get in touch with 1 property manager and they said that they do not do over sight services. I will get in touch with several others and see if they are open to doing a oversight service while in rehab.

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  • Steve RozenbergPro Member
    Specialist · Houston, TX · Member since 2015 · 1k+ posts · 1k+ votes
    7y

    @Lawrence Lloyd paclob

     Here is a good outline of questions you can ask property management companies to see if the number one they are aligned with you and your goals but number two they know what they’re doing 

    I would look up NARPM and start with them..Below are some questions I would think would be a good starting point for you to see who really treats their company like a business or a hobby.

    My business partner is a regional VP for NARPM and I am happy to help if you need anything please reach out

    Questions to Ask prospective management companies

    • What are your average days on market for vacant homes?
    • What is your average rent amount for all properties managed?
    • What is your average work order cost for the owner?
    • What is your average make ready cost for the owner?
    • Are all my invoices uploaded to my owner portal?
    • How do you advertise your vacant units?
    • Do I receive video of my pre and post make ready?
    • Do you have a setup fee?
    • Do you upcharge on maintenance?
    • When do you make owner payments? How often?
    • Are you a Certified Property Manager?
    • Are you a member of NARPM?
    • What is your Guarantee?
    • Do you provide move in and move out reports
    • How many pictures do you take of the property prior to tenant moves in and after the tenant moves out
    • Do you get weekly reports when the property is vacant what prospective tenants are saying about your home
    • Do you provide monthly newsletters to your tenants
    • Do you hold investor education classes to help me become a better investor
    • Do you have single point portfolio based management services?
    • How many properties do the owners actually own themselves?
    • What do you do to ensure that the tenant is responsible for security deposit disputes since that is the largest reason for owner lawsuits
    • How familiar are you with the newly changed laws that can affect you the owner if they are not used correctly?

    .

    3Reply
  • Michael O.
    Boston, MA · Member since 2019 · 35 posts · 21 votes
    7y

    Hello Lawrence, fellow newbie here so take my advice with a huge grain of salt. I think you should ask your real estate agent to refer a good property manager and contractor, they usually know people or you can go to the bigger pockets forum for the area or city you are investing in and ask people who are already investing for referrals for a good general contractor they have used before. If you get good referrals I would advise that you still thoroughly vet them and hope for the best. As for vetting them you may want to use @Steve Rozenberg`s exhaustive checklist as I think it covers everything. Congrats on your 1st investment and really hope you crush it. 

    0Reply
  • Anthony Rosa
    Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    7y

    A good property manager is a start and can recommend contractors.  Also, do you know any construction managers that are local to you? If you do, you can hire them as a manager to oversee the work, budget and make decisions.  

    Pay your construction manager a salary for the duration of the job and pay for expenses. Your manager will make sure that you are getting what you are paying for.  His expense can actually save you money & give you a piece of mind.  

    0Reply
  • David BarnettPro Member
    Rental Property Investor · Cambridge, MA · Member since 2016 · 634 posts · 415 votes
    7y

    I wanted to throw out a more tactical way to keep track of how to manage a contractor remotely (which I do in my properties).  As others have mentioned, any property manager or realtor worth their salt would have contacts in these arenas.  Paying the PM a fee to manage the projects is certainly one way to do it.  Another way would be to ask the contractor to send pictures of the completed work prior to the second 50% payment (most contractors are 50% upfront and 50% after the job is completed).  Another item that I found to be super helpful if showing up unannounced on the site during the job being done.  If you show up unannounced, or have one of your local contacts do quick pop-in, it holds the contractor accountable.  Last and not least, whenever I'm in town, I walk through the property with a list of completed work and make sure (in person) that the work is done based on what I was billed for.

    1Reply
  • Daniel Kong
    Rental Property Investor · Honolulu, HI · Member since 2018 · 335 posts · 251 votes
    7y

    @Lawrence Lloyd paclob Where is your investment property? I've got a guy I pay to manage my contractor and he's been an absolute rockstar for me. Checking to make sure the work is getting done and giving me pictures of progress, making suggestions about the rehab, following up with the contractor, and basically being the ahole that I can't or dont want to be since I'm so far away from the actual work. 

    2Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    7y
    Originally posted by @Lawrence Lloyd paclob:

    @Marc Winter @Nathan Hillier@Steve Rozenberg

    Thank you all for the tips and advise and yes it is a buy and hold long term investment, I did get in touch with 1 property manager and they said that they do not do over sight services. I will get in touch with several others and see if they are open to doing a oversight service while in rehab.

    As I'm sure you're beginning to see, OOS investing starts becoming a higher-risk proposition once you get into rehabbing properties. Can you tell us a bit about the kind of target properties you're acquiring? I typically work rehabbing local older homes up to about 100 years old. There are significant differences between doing the "cosmetic" sort of rehab you're talking about in those places and more modern properties built in, say, the 1980s. Another significant question is how much work are you going to have going the contractor's way initially? If it's, "Well, we'll start with one house and then we'll see..." you probably shouldn't expect a lot of enthusiastic takers.

    Let's take this back to basics. Have you read up on out-of-state investing? Do you have someone you really trust to work intelligently with your best interests in mind in your target area? Usually, for a lot of OOS investors, your go-to local guy is a very good friend, a family member, or a property manager, which is why so many people are asking you about property managers.

    1Reply
  • Frank Wong
    Real Estate Broker · Bay Area · Member since 2018 · 1k+ posts · 3k+ votes
    7y
    Originally posted by @Daniel Kong:

    @Lawrence Lloyd paclob Where is your investment property? I've got a guy I pay to manage my contractor and he's been an absolute rockstar for me. Checking to make sure the work is getting done and giving me pictures of progress, making suggestions about the rehab, following up with the contractor, and basically being the ahole that I can't or dont want to be since I'm so far away from the actual work. 

     This is such great advice from Daniel.  You really need someone to keep your contractor in check. He might be a great guy and do great work and trustworthy but you need a 3rd part to it just in case.  

    I have guys that have been working for me for years and I still check them.  You have to.  People get comfortable and complacent and they need to feel that you are serious on your side.

    1Reply
  • Michael O.
    Boston, MA · Member since 2019 · 35 posts · 21 votes
    7y

    @David Barnett, what do you think is an appropriate fee to pay a property manager to manage your project if you are an out of state investor and don`t know anyone in the state that you are investing. Thanks

    0Reply
  • David BarnettPro Member
    Rental Property Investor · Cambridge, MA · Member since 2016 · 634 posts · 415 votes
    7y

    @Michael O. Frankly, I don't pay the property manager to manage the projects for me.  From what I've seen with others, it is usually in the neighborhood of 5%-10% of the total cost of the project.

    1Reply
  • Michael O.
    Boston, MA · Member since 2019 · 35 posts · 21 votes
    7y

    @David Barnett, Thanks for the quick reply. Much appreciated

    0Reply
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