How do you select a contractor?

Question

We've purchased our first property with 3 different units. (We have previously had a SFH for rent, but had a close friend who did most of the work on it. The wasn't any rehab needed on it.)

A large 4bd/3ba SFH in good condition, a 1000 ft² 2bd/1ba (that definitely needs a fair amount of TLC and updating), and a 3rd unit that was used as a kindergarten that we'd like to turn into a 1bath studio (possibly for STVR).

We need a contractor, but aren't super familiar with the area.

I was curious how others vetted their contractors and if you could share tips for what you are looking for and who to avoid.

Thanks!

James

(Super excited and appreciative to this community.)

Charles Carillo · Answer

@Turo Tales

The best way I have found for locating good vendors and contractors is by referral from investors who are working with similar properties. Try connecting with local investors and see who they are using. Also ask your agent but speaking to an investor is best.

Filipe Pereira · Answer

@Turo Tales, I agree with @Charles Carillo. Referrals are the number one way to get a quality contractor.

In addition:

Did you have a home inspection as a part of your purchasing process? If so, your inspector likely knows a few good contractors, and that's where I would personally start.

The next best thing you can do beyond networking and local real estate groups is to search your local Facebook groups. Every day somebody's asking for a plumber, electrician, Etc. These groups have been vital for us to expand our contractor list as a property management company.

That brings me to my next point, a local property manager.  Call up a few of them and see if they are willing to share their list of vetted subs.  We have a tab right on our website where people can view who we recommend and use.

Best of luck!

Drew Sygit · Answer

You have to be careful, even with referred contractors. If the referral source is a "slumlord", what type of contractor do you think they'll refer?

It helps to better understand the different "classes" of contractors. Our opinion from our website:

Type 1 (High Quality, High Price)They can do new construction, additions, full remodeling, but maintenance work is too small for them.

• Typically pay for advertising, have sales staff, separate bid preparers, inhouse designers, full office support.
• Equates to a lot of overhead, leading to markups of 50%+.
• Bids: Usually have a dedicated salesman that does their bids, so able to supply quality bids.

Comment: Usually have the highest prices & quality, and so these are the contractors you’d hire to work on your own home. Too expensive to work on rental properties.

Type 2 (High Quality, Average Price)

• They rarely do new construction (except for garages), focus on additions & remodeling, no maintenance work.
• Often online advertising, may have one-person sales/bid staff, outsources design, office support typically consists of secretary and bookkeeper.
• Equates to a decent amount of overhead, leading to markups of 35%+.
• Bids:  May take a while to get a bid from them because they don’t have dedicated sales staff. Often depends on how busy they are.

Comment: Contractors to work on your own home, flips, high-end rental properties. Usually too expensive to work on average rental properties.

Type 3 (Average Quality, Average Price)

• May build an occasional garage or addition, typically focused on remodeling and maintenance work.
• No advertising, the contractor is the sales/bid staff, no design services, office support is typically wife/girlfriend/mother.
• Low overhead leads to markups of only 25%+.
• Bids: Difficult to get a professional-looking bid from them because they would rather be making money working, instead of spending their time doing bids for free.

Comment: Contractors that are perfect for medium/low-end flips & rental properties. Because they don’t advertise, difficult to find.

Type 4 (Low Quality, Low Price)

• Not able to do any new construction or additions, rarely licensed, focused on low-end remodeling & maintenance work.
• Just one or two-person operation with no support staff.
• Very low overhead, markups seem low, but they often end up higher due to issues they didn’t price.
• Bids: Almost impossible to get a reliable written bid from them because they don’t have the knowledge to prepare proper pricing. So, they usually only give verbal pricing – that often changes once they start.

Comment: Contractors to avoid as they are unreliable in every way possible, including showing up. 2-day jobs turn into 2-week jobs, or worse. Forget trying to get them to return and fix poor work. They always want to be paid in cash as soon as they are done. We cannot hire these types as owners & tenants will not be happy with timing or quality of work.

Turo Tales · Answer

Thanks Charles. I suppose the best way to find other local investors is BP? Any other ways?

How do you select a contractor?

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