I can't tell you how many horror stories I've heard from folks about their GCs totally messing up their investment properties in one of a variety of ways. We allow our borrowers to choose their GC but prefer that they've had experience with them and warn them about the importance that they trust them. Even still, we'll vet them. We also have some GCs we will recommend out but that list is made up of those with whom we have lots of experience and it all started with a deep vetting process. A GC can absolutely turn an outstanding opportunity into a loss if they aren't up to snuff.

Sometimes people want to "manage" or "coach" a bad contractor but you just can't. It doesn't work. In some cases you have time early in the project to cut bait and find another one before it is too late. If you wait to long, you might have missed a small window to salvage the project.

Here are some red flags for bad contractors courtesy of the Asset Based Lending Blog (abl1.net)

They don’t want to sign an independent contractor agreement.
They resist getting specific with milestones and deadlines.
They resist giving you referrals or allowing you to visit a current work site.
They may hedge on pricing and estimates. While it’s true that every project’s cost will “depend,” a good contractor won’t hesitate to provide an estimate and include variables.
They do provide an estimate, but it’s far lower than others. Beware an estimate that seems too good to be true, and/or one that lacks detail.

Here are some things we have found helpful...

*Make your scope of work as detailed as possible. Be as clear with your GC as you can be about what and where and how, etc. When you think you're overdoing it with the detail and the specificity, keep on doing it a bit more and then you're probably fine.

*One of the things we advise our borrowers is to not overpay the contractor so as to keep the carrot in front of them. I know we all like to get payments out of the way when possible but don't overdo it for them to lose some edge.

*The aforementioned ABL blog makes a great point about writing in deductions into contracts, if possible, for tardiness. It is important to know, as the blog indicates, what is and isn't a legit excuse. Extreme weather or the uncovering of more problems is fair, whereas lack of organization and communication certainly is not. Subs being busy is not a good excuse.

Dallas, Texas

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