How to screen good contractors & set up a scope of work

9 Replies

I am nearly at the end of my first reno on a BRRR property and used a contractor that my Realtor referred to me. I really like my Realtor who is super professional and does what he says he's going to do and goes the extra mile. His contractor friend however is the opposite, he tells me things have been done when in fact they have not been. He doesn't do what he says he's going to do and often times can't be reached and goes missing for days. I texted him this morning letting him know I'd be at the house expecting him to be there hustling to finish the job since I haven't heard from him in days and I need the CO in order to list the 2 units for rent. So he wasn't at the house and there was no sign of any progress since last week. So I decide to go to the zoning office to see what can be done if my contractor disappears in the middle of a job. I then find out the this guy hasn't even submitted the permits for the job despite telling me that they were filed and he got them back! I can't get a clear CO without that inspection since I am converting the property.

Now I am in super hustle mode to find a new plumber and electrician to get these permits submitted (in between my day job) so I can get this place done and move on. Just venting here and I'm sure there are plenty of stories like this one out there and would love to hear them. I would also love to hear about how to outline the scope of work in the future so that I could have fired this guy sooner.

Signed an exasperated first time investor

I like using the inspection report as a starting point for the scope of work. Have you asked your agent about this guy and why he referred you to him? Had your agent used him before? Referrals are usually the best way to find contractors, but it seems like your agent really screwed you over here. 

Thanks Doug, I did speak with my agent yesterday and told him what happened. He was surprised and will hopefully not recommend him anymore but they are long time friends. Going forward I am definitely not going to use a contractor that hasn't been referred by someone that actually used them before. In the meantime I found an electrician and plumber and am trying to make my emergency theirs in a not too pushy way.

Has anyone used a Gantt chart with their contractors before where you lay out every detail and a timeline for each item in the list?

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I used to use Gannt charts - more to keep the customer in line and in touch with reality. They are just an adjustable schedule and really has no power. What you need is a precise and firm Scope Of Work that details every thing expected during the project. It should address each trade and everything performed by that trade, and have an attached price for that trade. The timeline is usually addressed in the corresponding Contract with expectations outlined and any penalties or rewards firmly stated in that section.

Funny, but I found that customers wanted a penalty for late performance, i.e. $500 a day for late completion. When I said, 'well ok, I'll do that if you'll agree to $500 a day for every day I finish before this date', that conversation usually ended right there.

If you find a good contractor and want them to stay on your job ONLY, then be prepared to pay them well. A basic contract price will not allow them to make enough to keep their business running between typical job delays, weather etc...., so they will take on another job or two to keep their cashflow going. This is just the way business is done.

Now it sounds like you got a bad one for sure, I'm not defending him, but I'd bet your Scope Of Work and Contract would not pass scrutiny. [Request to contact removed by Moderators]

I think a detailed schedule is important regardless if it is in a gannt format or standard calendar format. Scopes of work are essential and per Bruce's comments above, I love using the penalty/bonus feature in my contracts when i hire contractors and have no problem with them as the contractor. As the investor, I take what my daily periodic holding costs are (which include interest costs, utilities, property taxes, insurance, any recurring monthly payment to hold the property) and total that. I use my cost as a per diem penalty for late completions and am happy to give it back for early completion. Sounds like a break even, right? No, it is actually a benefit when you consider the fact that finishing a day or more early gives your velocity of money one day or more to work faster. In other words, if the contractor finishes the work 1 week earlier than scheduled (agreed to by both parties of course), and I give him back via the early finish bonus my exact daily cost, I can move on to the next investment that much faster so in the end, it is a net gain to me AND a net gain to the contractor. Win, Win.

Originally posted by @Bruce Woodruff:

@Will Barnard Where were you when I needed good customers......? :-)

 LOL!! I was right here all along Bruce, ha ha. I would point out that there is a big difference between a owner occupied client to contractor relationship as opposed to an investor/flipper one. The investor has a clock ticking on costs whereas in the case of the homeowner client, they only want the speed out of convenience to "bring their toothbrush" moreover than worrying about holding costs so this penalty/bonus works much better with flipper clients.

Where were you when I needed a good contractor Bruce?!

Great info Will! I completely understand the value of getting the job finished and moving on because I am still stuck in this reno now and can't focus on finding my next deal until it is settled. I did find a new contractor and he has already filled out the permit paperwork and we plan on submitting it this week! 

My new guy is someone a family member used and has been happy with, the guy literally texted me last night at 8:40 pm a video of him putting the permit application in my mailbox at the property. I now need to work up the detailed scope of work and get that over to him for sign off.  

I am also glad that you found another good contractor Will!