using contractors properly

Indiana Real Estate Q&A Discussion Forum
7yFollow

using contractors properly

Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 899 votes

One of my biggest fears is getting ripped off by contractors, them stealing my money, rehab cost exceeding budget . However, I realized to maximize my returns I need to consider distressed properties as an out of state investor.

Here are the ways I am using to mitigate those risks:

1. Asking my agent for contractors they can recommend to me. I also ask people who work in the market/ city if they ever heard of the contractors and what they think of them.

2. I need to check contractor is properly licensed. Where do I check this?

3. I told contractors I have been interviewing that I want to buy/pay the materials myself. Contractor saiid that's fine, but they will pick out the material and quantity and store will call me to approve purchase / process payment? Is that ok since I don't know myself what kind of material they. use or quantity needed. The worst thing that could happen is contractors dont pick the best priced ,materials (excess expense), or they order too much material and they keep the extra material for another customer.

4. I'm going to ask for itemized breakdown or scope of work

5. I'm going to pay deposit and installments as portion of job is completed

6. Like what David Greene said, I'm going to pay a bonus if job is completed early, and impose penalties if job is not completed by deadline

7. I'm trying to avoid jobs that have potential foundation, roof, furnace, plumbing, and electrical problems. One of my contractors have a service where they an visit a property and determine if there are any major foundation, roof, plumbing, electrical, and roof for $100. I'm going to use this service right before we make formal offer because buying inspection for all those properties for $400 just to find out we have to walk away because of major repairs needed wouldn't be feasible.

8. My contractors said rehabs that dont involve foundation, roof, furnace, plumbing, and electrical problems in Indianapolis should be under $10k.Does that sound about right?

9. Should I be concerned about subcontractors not getting paid and going after a mechanics lien ? If yes, how do I avoid this?

10. What other questions should I ask contractors?

11. What else could go wrong when using contractors?

12. Have you guys ever used CREW or Indiana Residential? If yes, would you recommend them?

Thank you,

Jason

Malabute & Company CPAs525 Reviews
WebsiteView Page
0Reply
12 views

4 Replies

Jump to latestLatest
  • Ryan B.
    Investor · Indianapolis, IN · Member since 2015 · 126 posts · 141 votes
    7y

    I'll give it a go.

    1) Sure, that sort of referral has been touted by David Green on the podcast multiple times... rockstars know rockstars.

    2) For Indianapolis, look here: https://www.indy.gov/activity/licensed-contractors.  Depending on where you are buying, some places (such as Lawrence township) have licensing requirements of their own.

    3) Not ideal, but if you've properly vetted the contractors, it should mitigate the problems you are worried about.  While you don't want to waste a contractor's time, if you come with a list of products you'd like to use, let them tell you if they aren't satisfactory and explain their reasoning.  

    4) Sure.

    5) Sure.

    6) Ok.

    7) Sounds good 

    8) Potentially... depends what you are buying.  If you are buying older homes, siding could be an issue.  In general, that sounds like a reasonable expectation if you are just doing a light rehab.  

    9) Sure, be concerned... but again, hopefully you've properly vetted the contractor.  If you are really concerned, you can enter into a no-lien contract (https://news.zlien.com/no-lien-clauses-and-other-ways-of-getting-paid-in-indiana/).  However, note that there are hoops to jump through to make them enforceable.  Furthermore, asking for them makes contractors nervous (even though they shouldn't really be).  

    10-12)  nothing to add. 

    - Ryan

    0Reply
  • Denelle Kaufman
    Member since 2018 · 15 posts · 1 vote
    7y

    My only concern would be what type of finishes are they picking out (tile, flooring, paint, etc.), hopefully they have good taste !  I am enjoying reading your posts, I will do all of this myself soon, when we get out of California.

    0Reply
  • Jason MalabuteBusiness Member
    OP
    Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 899 votes
    7y
    Originally posted by @Ryan B.:

    I'll give it a go.

    1) Sure, that sort of referral has been touted by David Green on the podcast multiple times... rockstars know rockstars.

    2) For Indianapolis, look here: https://www.indy.gov/activity/licensed-contractors.  Depending on where you are buying, some places (such as Lawrence township) have licensing requirements of their own.

    3) Not ideal, but if you've properly vetted the contractors, it should mitigate the problems you are worried about.  While you don't want to waste a contractor's time, if you come with a list of products you'd like to use, let them tell you if they aren't satisfactory and explain their reasoning.  

    4) Sure.

    5) Sure.

    6) Ok.

    7) Sounds good 

    8) Potentially... depends what you are buying.  If you are buying older homes, siding could be an issue.  In general, that sounds like a reasonable expectation if you are just doing a light rehab.  

    9) Sure, be concerned... but again, hopefully you've properly vetted the contractor.  If you are really concerned, you can enter into a no-lien contract (https://news.zlien.com/no-lien-clauses-and-other-ways-of-getting-paid-in-indiana/).  However, note that there are hoops to jump through to make them enforceable.  Furthermore, asking for them makes contractors nervous (even though they shouldn't really be).  

    10-12)  nothing to add. 

    - Ryan

     Thank you for giving me straight to the point answers. This is exactly what I'm looking for.

    Malabute & Company CPAs525 Reviews
    WebsiteView Page
    0Reply
  • Tia L.
    Member since 2019 · 29 posts · 13 votes
    7y

    if you are buying older homes it could be many issues over 10k, you need someone that lives in the city that knows many trustworthy contractors for your projects or rehab houses.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free