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.
Recommendations are always a good place to start. People are protective of their contractors though because they can be difficult to replace if they are unavailable because they've gotten too busy with other people.
2. I need to check contractor is properly licensed. Where do I check this?
I'm sure that most cities have a database, but in Indianapolis you can check here. https://accela9ca.indy.gov/citizenaccess/ You can search by name or company name, but it's not always the best way to search. My preferred contractor goes by his middle name so can't be found by searching the name he goes by. Instead, ask them for their license number and then verify in the database.
3. I told contractors I have been interviewing that I want to buy/pay the materials myself. Contractor said 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 don't pick the best priced ,materials (excess expense), or they order too much material and they keep the extra material for another customer.
If you have specific materials that you want to use, you can pick them out on the hardware stores website. If you are working with a solid contractor and you are paying for materials, they shouldn't be making poor choices on materials. (green counter tops from the clearance rack, pink plastic backsplashes on special, etc.)
4. I'm going to ask for itemized breakdown or scope of work
Good luck. Most good contractors are busy enough working and running their business to measure everything, price all materials, and price all labor in a full breakdown. Usually I get something like looks like this:
Exterior Landscaping - $3,800
*Trim trees
*Trim bushes, remove vines and vegetation growing on home, and remove small trees growing around foundation
*Remove trees growing through fence and around fence line
*Install fill grade dirt around foundation and level yard
*Install mulched flower beds
*Slurry seal driveway
Typically, they are going to charge to give a quote for a breakdown like this unless you have an established relationship. Good contractors hate giving multiple free quotes to people who never close deals or use their services.
5. I'm going to pay deposit and installments as portion of job is completed
This is standard and most contractors work that way. Be leary if someone wants payment for larger jobs in 1-2 installments. If you are working with a project manager though, they may want you to send over all the money in advance that will be held in escrow until the installments are paid. This ensures that you do have the money, but also ensures that the contractors isn't getting to far ahead with money in case that their is an issue.
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
I personally don't use this idea anymore my contactors, but we have good communications and have established great rapport over the years. Definitely something that you want to do when starting out though.
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.
The biggest difference is liability. An inspector is licensed and his license is subjected to being revoked if he is challenged for these kinds of issues. There really isn't any surety like this with a contractor. The real question is this though... do you want the person who is going to profit from a deal if you close on it to be the one to tell you that their aren't problems and then find out later that they missed something (possibly on purpose) just to get the deal closed and land the job. The reason that I point this out is that early on I worked was the business manager for a GC who would purposefully go to a property and underbid a job to get it and then add change orders later on to address all the things he "missed" initially. To me, a home inspector is part of the checks and balances and a third-party who has nothing to gain from whether or not you purchase the home.
8. My contractors said rehabs that don't involve foundation, roof, furnace, plumbing, and electrical problems in Indianapolis should be under $10k.Does that sound about right?
Typically, yes, but I've also installed $10k kitchens. It's easy to eat up with new cabinets, nice counter tops, tile back splashes, new appliances, new flooring, etc. It's actually easy to drop $25k in a kitchen if you want a really nice one.
I've seen asbestos in homes that can get costly as well as other hazardous remediation, like racoon feces all over the attic space. I've also seen termite problems and mold cost a lot more than installing a $2,000 furnace... and your contractor may miss these kinds of things. I've seen it happen more than once.
9. Should I be concerned about subcontractors not getting paid and going after a mechanics lien ? If yes, how do I avoid this?
I haven't had to deal with it, but I have good GC's that pay their subs. I would recommend having someone perform a punch list inspection and having your GC sign a lien waiver before the last payment is paid. I'm not sure what the liability with the sub-contractors are, but legally, as long as you can prove that you paid the GC, the sub-contractor should have to go after the GC for payment.
10. What other questions should I ask contractors?
I like GC's that work with investors or invest themselves. Not only should they be licensed, make sure that they carry insurance and a serious GC will also be bonded. They should have documentation to prove those things readily available.
How long have they been in business? How long have they been in the industry? What is their best skill? Some are great with drywall but terrible with tile work.
How big of a team do they have? If they are a one man outfit, they may appear to be cheaper, but will likely not finish on time or at all. If the only worker spends the weekend in jail for a DUI and loses his drivers license, gets sick, or has a personal emergency you're likely to find yourself in a bind.
Do they have pictures of work from other jobs? Are they currently working on a job that you (or someone from your team) can visit.
Ask for referrals. This isn't always that fruitful as they are going to give you their happiest customers, but if they can't provide any, that may be a red flag.
11. What else could go wrong when using contractors?
Everything imaginable. Poor quality work. Time delays. Inability to complete work. Tons of change orders that increase the budget. Not pulling permits when they are supposed to and getting fined by the city. Disappearing with your money. Stealing your materials (even after the work is completed.)
This is why you want checks and balances. Work with quality and experienced contractors and work with another local investor or professional to help manage the project until you can build trust.
Understand this... money is only part of the equation and the least important part to me. Quality and timeliness are just as important. I saw a bumper sticker that I loved last year... "Imagine a World built by the Lowest Bidders"
I've seen homes that we have trouble renting because the quality of work was terrible. Horribly apparent seams in carpets. Terrible paint jobs (painted over nails, paint on ceilings, trims, doors, floors, windows, etc., drips and thin coats, etc.) Poor/unlevel framing. Poor drywall seams or repairs. The list goes on.
Now that I've completely scared you... It's really not that bad. Ask for referrals from investors and professionals. Ask from references and pictures of work from contractors. Get third parties to verify work. Keep your contractors on a short leash until you understand more about how they work.
