Contractor Questions for Beginners

[Sam Gleadle]

Hey guys,

Myself and two friends are getting into real estate investing together and have found a property that we believe to be a good starting property. It needs a little bit of TLC, so we are beginning our search for a contractor. 

I was wondering if there were any questions one must ask. One that you have found, through your experience in investing, has popped up a few times, or that is just important in general. 

We have some general questions, but figured this was the place to ask for the big ones!

Thanks guys 

[Trent Stone]

I cannot recommend J Scott's book on estimating rehab costs or on flipping houses high enough. He teaches you everything you need to know and look out for when choosing a contractor. The biggest thing I would look for is referrals. Talk to uninterested 3rd parties who have used them before. Ask for samples of his work and check the county to make sure that HE is the one who actually pulled the permits for the work, not a sub. Also, Be VERY careful about when you pay him. DO NOT give him all the money up front. Maybe pay for half the labor, then split the draw for materials into 30/30/30 then 10 when he is COMPLETELY finished with everything, just as an example. I also love the idea of offering incentives to finish and penalties for finishing late. Like up to $1,000 for finishing a week early and $1,000 penalty for every week he is late. A lot of contractors will get just about everything done then leave a bunch of the tiny finishing stuff because they will make more money spending their time on other projects, since they already got just about all your money. You gotta leave a carrot out there to get them to completely finish the job and finish it well. Structuring your contractors in this way also provides you the benefit to fire your contractor halfway through the job if they are not on schedule or if their work sucks. My parents paid a contractor up front for a HUGE job which he said would take 6 weeks, it took him 18 months!! Had they put him on a draw schedule and not paid him all the labor they could've fired him after 8 weeks and got someone else to finish the job. Good luck!!