One of the most important and difficult parts of home ownership or investing in real estate is finding a great contractor. Contractors can be hard to find, very expensive, take a long time to finish a job or even quit on you. If you can find a good contractor with clear and detailed bids, great communication skills, and a great work ethic it is awesome. I own 16 rental properties and complete 10-20 fix and flips a year and contractors are vitally important to me. It costs a lot of money to buy a house and it can cost even more to repair it. If you don’t have a great contractor to fix your homes, costs can skyrocket due to long timelines and increased repair costs.
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Why do I buy properties that need repairs and a contractor?
I would love to buy only properties that do not need any work and can be rented or sold right away. In order to get a great deal, most of the properties I buy need repairs. Usually the more repairs a property needs, the bigger discount I can get. A key point to my investing strategy is buying properties below market value. I must have a great contractor to get my rental properties and fix and flips repaired quickly without spending too much money.
Even if I buy homes that need no work at all, at some point things will break. My rentals are remodeled before I rent them, but they still need occasionally work because they are not new homes. Anyone who owns a home will need a great contractor at some point, unless they are capable of doing all repairs themselves. Even if you can make all the repairs yourself, it may not be worth your time to do it.
What is the easiest way to find a great contractor?
Finding a great contractor is not always easy and can take a lot of trial and error. My advice is to ask your friends, family and co-workers for references of great contractors before you try any other resource. When you get a recommendation it does not guarantee that contractor is good or great, but it gives you a place to start. Recommendations are usually a better sign of how good a contractor is than any advertising they can do. A few people who may know a great contractor are real estate agents, property managers or builders.
Anyone who owns a home may have used a great contractor at some point, so don’t be afraid to ask your friends or family. You will still have to keep on that contractor to make sure they are doing what they promised. One of the easiest ways to let a rehab project get out of control is little or no oversight from the property owner when using a new contractor.
A good recommendation does not mean a contractor will be good
I used a new contractor two years ago when I had a lot of projects and my current contractors could not keep up. I got a recommendation from my broker and a couple of other agents in my office for a great contractor. The contractor was a builder and seemed to know what he was talking about and gave great detailed bids. I put him to work on two projects at once because I had a couple of properties sitting waiting for work to be started. He told me he had a great crew and could handle as much work as I could give him. He ended up finishing one project on budget (always get a bid first), but the second project was not even started for two months!
I had assumed everything was going well since that was what he had told me, but the property was 40 minutes away and I had not physically seen the work start yet. This was completely my fault for not properly overseeing the job and visiting the job site. I was in for a big surprise when I went to visit the property which I thought was almost done and no work had been started! I called the contractor and he gave me a story about too many jobs, and his workers getting sick. He had been telling me everything was going great and the work was almost done before I visited the site. Either he had not been overseeing his workers properly or he had lied to me. That job was eventually finished about 4 months after it was started and three months after it was supposed to be done. I never used that contractor again, not because it took so long to finish the job, but because he lied to me about the work being done or had not visited the site for months.
How can you keep an eye on your contractor?
It is always best to keep an eye on your contractors work and schedule, whether it is the first time you have used the contractor or the 20th. In my experience the more communication and oversight you provide on your properties the better job the contractor will do. I have had contractors I have worked with on 20 jobs and if I don’t keep on them they will get very slow. If a contractor does a great job once, it does not mean they will always do a great job.
I had to fire a contractor this year who had worked on many properties for me and done a great job. He stopped visiting his work sites and started telling me jobs were done when they were not. His prices went up and the time he took to finish jobs increased because he was never at the site and did not keep track of his workers.
Here are a few tip on how to make sure your contractor is doing a great job.
- Constant communication
- Visit the property often
- Always get a written bid first
- Get a written estimate for when the work will be finished
- Don’t prepay for any work that is not done (This is not always possible. Some contractors require a deposit upfront for material cost, but do not pay for the entire job)
- Help pick out materials and paint colors
How do you first meet a contractor and tell if they may be good?
I always talk to a contractor on the phone before I meet them in person. I want to make sure they know what they are talking about and I want to get an idea of what they charge. A contractor should tell you his hourly rate, how many people he has on his crew and how long it takes them to do an average job. I also want to know how busy they are and how many other people they are working with.
If I like what I hear on the phone I will set up a meeting at one of my houses. I will go over what I want done and have them write up a bid for me. If you are new to real estate and finding contractors, always get multiple bids so you know you are not getting ripped off. Try to talk to the contractor as much as possible and learn about his family and what kind of jobs he normally does. In my experience contractors like to talk a lot and if you get them started talking they may tell you some things that will help you make a decision. I had one contractor I interviewed mention he had two recent DUIs including one while he was on the job!
After I meet with the contractor, I will ask them to write up a bid and email it to me or call me when it is done. This is another test to see how quickly they get me a bid and if they get back to me. Two contractors I recently talked to never got me a bid, emailed or called me. It was easy to eliminate them since if they can’t send me a bid they probably can’t do the job.
How can you find a great contractor through large box stores?
Home Depot offers a rehab program that will actually handle every repair on a project. Home Depot is going to be more expensive doing a large job then if you hired a local contractor yourself. I talked to Home Depot to price out their contractor program and they were very honest and said it would be cheaper for me to use my own contractors. They did mention a few names of contractors who frequent the store often and have been around for years. This was not a recommendation from them in any way, but it gave me a lead on a great contractor who I am going to start using. At least, I hope he is great!
Another way to meet great contractors at large stores is to visit the store early in the morning and see who is buying large amounts of supplies. The people buying materials are probably contractors and they may be looking for more work. You know they have at least one job going now since they are buying materials.
How to find a great contractor through Craigslist
I have hired many contractors through Craigslist, but you have to be careful. It is free for contractors to post on Craigslist so you can get a wide range of people to interview. We often find affordable contractors on Craigslist because it is free. They cannot afford to advertise on the more expensive sites like AngiesList, Thumbtack or HomeAdvisor. You have to take your time talking to contractors from Craigslist and making sure they are legit before you hire them or give them any money.
Find a great contractor on the Internet or Yellow Pages
There are many advertisements for contractors on the Internet as well. Again you have to check references thoroughly when using these resources. Yelp will give reviews on contractors if they have done enough work and that can help you decide who to talk to.
How to find a great nationwide contractor
Home Depot offers contractor services no matter where you are in the country. Even though they are more expensive than a local contractor may be, they offer standard work and stand behind their work. There are a couple of other companies I am aware of that offer regional or nationwide contracting services as well. These companies may not work with an investor that has only one small job, but if you can offer them consistent work in one area they may be a great choice.
- Vineyard Services offer contracting services in most states across the country. They have been around for years and do property maintenance on many REO properties.
- Asons offers property preservation and construction.
How to find a great contractor with Angie’s List
I use Angie’s List and it has provided a lot of great information. It was only $7.99 for the entire year and I have no idea why I waited this long to use it. They list contractors in my area, their area of expertise and detailed reviews from people who have used them. So far I have found multiple prospects that I am going to meet at my properties from Angie’s List. You can use Angie’s List for many other services besides contractors.
How do contractors vary with investors and home owners?
There is a huge variance in the amount of money different contractors charge. Some contractors will charge $40 an hour and others will charge $100. The $100 an hour contractors may do amazing work, but most home owners and investors will not need that expensive of a contractor. Most investors who are flipping or buying rentals will not be able to afford a contractor who charges that much. Many contractors do not like working with investors because they know investors won’t pay as much as home owners.
A lot of home owners have no idea how much repairs should cost, so they hire a contractor and pay whatever the bill is. Most investors have a good idea what the repairs should cost and more savvy when it comes to dealing with contractors. If you are remodeling your kitchen in a $200,000 house, it should not cost $50,000! It should cost less than $20,000 or even less than $10,000 depending on how fancy it is.
Finding a great contractor can be the most difficult part of real estate investing, but it may also be the most important part. It is vitally important that you take your time when choosing a contractor, interview multiple contractors and keep a close eye on any contractor you hire. It usually does not make sense to try to do the work yourself so hiring the right contractor is extremely important.