The Investor’s Guide to Working with Contractors

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“My contractor took all my money and didn’t do any work!! Help!!”

So often we hear nightmare stories about contractors. Homeowners are bewildered, wondering what went wrong. Let me help you demystify the  process for you – and hopefully help out both you and your contractor. Unfortunately, most of the stories we hear are when something goes wrong, not the millions of stories of how great things went. Most of the time the horror stories could have been prevented, had the homeowner done their due diligence. It takes some effort, but in the long run, it will save you time, and money.

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Types of Contractors

First off, the term contractor is often used interchangeably with carpenter, handyman, project manager, etc. , so let’s discuss each.

Licensed Contractors

Licensed contractors are just that. Each state has their own laws and regulations when it comes to contractors, learn yours. Some states require all contractors to be licensed. Others require that only residential contractors be licensed, and other variations. In California, where I am licensed, you must have 4 years experience in order to take the test to become a licensed general contractor. However; there are many classifications of contractors, and each much have a license. Should I want to do something not covered under a General Contractors License, I would need to have a separate license for that specialty, or sub contractor classification.

Think of it like this. The General is the one that usually oversees the army of subcontractors on the job. Oftentimes the general is the one that is also tasked with being the project manager, overseeing choosing subs and trades, scheduling, etc. However; it’s not always the case. An owner of a property can choose to act as their own general contractor, and do all of those things too, or come to an agreement with the general contactor on a variation of what each will do etc. Whatever you decide, be clear on who is responsible for what, what the compensation is, and all the terms. Put it in writing, and clearly spell it out!

Sub contractors work under the general contractor. However; each must be licensed, bonded, and carry their own insurance. Ask for copies. they won’t be offended.


People often think that all general contractors are carpenters. They aren’t. Carpentry is a specialty trade. There are rough carpenters and finish carpenters. Rough carpenters are those that do the framing, etc. on a job, and usually don’t get involved in the finish work. However; some rough carpenters are also finish carpenters. Finish carpenters are those that do the wood work that is more detailed, and ‘finish’ the project. Trim, moulding, cabinetry, etc. Just as the name implies.


Handymen or people, know how to do a multitude of tasks; and are multifaceted (handy).  All of us like having someone around on the job that can do detail work, or smaller jobs that don’t really required a licensed contractor.

Project Manager

A project manager is  oversees many facets of the job. It varies by contract. They can hire, fire, schedule subs, materials deliveries, track expenditures, etc. They can work with a general contractor, or the owner of the property in various capacities. The general contractor or property owner may act as the project manager too. Once again, it is all determined BEFORE work begins, and is specified in the contract, with all compensation and terms spelled out and agreed to by all the parties.

Hiring a Contractor:

When hiring a contractor, it’s your responsibility to check their licenses, bond, and insurance. Most states have an online database making it easy to do. In addition, you should actually ask to see some other form of ID, to be sure the person in front of you is actually the person that is licensed. The fact that it is very easy to access the database to check license status, also makes it easy for people to steal the information of licensed contractors; and set themselves out as contractors, when they aren’t!

Ask for references, with phone numbers. Check websites, etc.

When you are getting bids, make sure you are comparing apples to apples. If new appliances will be installed, make sure they are the same brand/quality being bid by each contractor. If you’re getting a bid on cabinets, don’t just go by what they “look” like, know if they are solid wood, composite material, glued joints or dove tail, etc.  Carpeting is another area where there can be a huge variation, and it’s very hard to compare. Get the details, and ask questions.

Most of the problems people talk about with contractors can easily be avoided if the homeowner does their homework, and takes responsibility for knowing what it is they want, and exactly what is being contracted for. Be sure to GET EVERYTHING IN WRITING on the bid that spells out exactly what you want to have done, are permits needed? Who is responsible for applying for them, and are the fees included in the bid or extra? Find out the grade of materials, or brand name of products if applicable. How will materials be purchased? How will payment be made? Put EVERYTHING in writing so that there are NO misunderstandings.  People think differently. You might be thinking solid wood cabinets, granite countertops, but the contractor is hearing,  cabinets, granite look formica, etc. BE CLEAR.

Remember, cheaper isn’t always the best deal. An experienced contractor may charge more, but may end up shaving off time on a job, or catch mistakes before they happen. If there’s any problems, deal with them quickly, and don’t be afraid to ask questions. Miscommunication is the biggest issue of all when it comes to homeowners and contractors.


Be sure to spell out how payment to the contractor, subs, materials suppliers, etc. will be made.  If a contractor hires subs and doesn’t pay them, your property can be liened. If there will be materials bought, or subs hired by your general contractor, you need a system to be sure the material supplier or subcontractor signs off and releases any lien rights to your property at the time of payment. If you aren’t experienced in this area, make sure you TALK TO YOUR ATTORNEY, AND DISCUSS WHAT NEEDS TO BE DONE TO LEGALLY COVER YOURSELF, AND YOUR PROPERTY.

Though this is not a detailed list, it’s a good place to start when talking to contractors. Do your research!

Would you hand the keys to your car over to a stranger?  Then spend some time checking the contractors license, and going over bids, etc. for the work to be done on your house. Make sure the person you are letting in is who they say they are, and can do what they say they an do! 

Good, legitimate contractors want to stop those fly by nights that prey on unsuspecting homeowners, and give all of us a bad rap! Help us by doing your part.

Photo: eldeeem

About Author

Karen Margrave

Karen is a partner in a family owned real estate development company, in Orange County CA. The company specializes the building spec projects (SFR, MFR, Medical Office, and other types of properties), designed to meet the needs of both investors and owner/users. Licensed in both real estate and construction.


  1. This was a great post for me. I just bought my first rental, but knew nothing about the contractor or his work. He was recommended by my real estate agent, and I lived out of the area, so I just went with him out of ease. However, I feel like I should have asked more questions.

    I think the biggest challenge for me was asking questions. How can you ask questions about something you don’t know about? How can you judge the work as good or bad without knowing or having experience?

    For example, I checked all the work he did not the home (about 3k worth of work). I thought it all looked fine. Then a friend of mine looked at the work, said I was overcharged, and pointed out a few sloppy places. Now I’m not sure I want to use this guy again, but also not sure if my friend is just blowing smoke.

    I’d love to see a post about how to talk to a contractor about the work he’s done, from a new investors perspective. I’m sure the ‘uncomfortable’ feeling about talking about work and price is common.

    • Karen Margrave

      Nathaniel, a reputable contractor isn’t going to get upset if you ask questions. Whenever I’m dealing with something that I know nothing about, I am always honest, and say, I am not familiar with ??? can you explain it to me? I ask questions of others all the time on BP for subjects others know more about than me! If someone has a problem answering questions, or treats you like you’re stupid… don’t use them!

      Remember, not all work is going to be perfect. In order to get perfectly finished details takes a lot of time, which means more money. You want good, quality work. If you’re going to get opinions from others, make sure it’s someone that knows what they are talking about. If there is a problem with the work, bring it to the attention of the contractor, and ask them if they can fix it, most will.

      But, these are the reasons it’s important to ask for references, and to check those references. Ask if they have pictures of past jobs, etc. PLUS… you can ALWAYS come on to BP and ask for help in the forums, post pics if you need opinions, and get advise from some of us with experience. Good luck!

  2. Eric Mauricio

    Thank you for this blog! When the time comes on closing on my first flip, I’ll definitely come back to this blog as a reference. I’m completely clueless in the process and I’m glad the BP community is always here to help.

  3. Daria B.

    Karen thank you for pointing out your blog in the BP forum under Contractors. I read another blog yesterday on questions to ask contractors and added to my existing list that I use. I also looked on the internet at some very good web sites that had the same and additional information.

    While I have done a lot of due diligence, I am feeling a little shy now and apprehensive in thinking I can do this long distance. Any work that I have ever had done to my properties, I have always been there to poke my nose in to see how the job was going. I don’t have that luxury with this since I live in FL and the property is in MD.

    While I did plan on making trips up over periodic times during the phase of remodel, I am still trying to figure out how I am going to handle this, it’s still in the 1st phase of trying to find someone to do the job.

    Good information in this blog post on some things that I can add to my list of searching. I love the gov county/city web sites when they are put together with useful information. Some I have found don’t have the available information as others do and are a bit lacking in good navigation.

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