How to Choose the Right General Contractor

Introduction: 

This article originated from our internal process for selecting contractors for our own projects. With our experience in this space, Nworie Capital is uniquely positioned to help you secure the right contractor for your project.

Some of the ways that Nworie Capital can help you include interviewing the principals and reviewing their past project portfolio to provide independent opinions on the quality of their work. We can help with collecting licenses and insurance verification, including worker’s compensation. We can even help with drafting work agreements with the contractor which you can customize to meet your specific needs. Regardless of whether you want to buy your own materials or if you prefer a full-service option where the contractor manages all aspects of the work, we can help you identify the right contractor for your project.

This is important because one of the most critical aspects of successful real estate investing is selecting the right contractor to partner with. Whether it's a light renovation project, a ground up construction deal, or just regular maintenance for your rental, finding reliable and competent help is pivotal to the success of your investment property. Often times, investor profitability hinges on the expertise and efficiency of the General Contractor (GC) chosen to lead the project. Selecting the right GC is a critical decision that can directly impact your return on investment. The process of choosing the right GC involves thorough research, assessment, and consideration of various factors. This article will provide some important points to consider in order to make the right choice.

1. Define Your Project Needs and Goals:

• First understand the specific skills and expertise required for the job.
• Outline the scope of work, timeline, and budget for your project.
• Will the project involve work that requires a license, like foundation, roofing, plumbing, or electrical?

2. Seek Recommendations, Referrals, and Reviews:

• Reach out to fellow investors, real estate agents, or local property associations for contractor recommendations.
• Online platforms and review sites can provide insights into contractors' reputations and work quality.
• Investigate the contractor's reputation by checking various online reviews and ratings on different platforms.

3. Verify Licenses, Insurance, and Credentials:

• We cannot emphasize this one enough - Ensure the contractor holds the necessary licenses and certifications required by local authorities.
• Verify that they have liability insurance and workers' compensation coverage.
• If your proposed contractor does not have a valid license (in their personal name or their company name) and/or they do not have valid insurance, move on to another contractor.
• Some of the risks that go along with unlicensed contract work include not being able to sell or refinance the property. This can be devastating.
• There are only a few things that are certain in this business. If you choose a contractor who is not licensed for a project that requires a license, you can be certain that you will regret it.

4. Evaluate Experience and Track Record:

• Assess the contractor's experience in handling similar projects. The more similar their experience, the better.
• Ask for references and portfolios with before and after pictures of past projects that they have completed.
• It is important to get an understanding of the quality of their past work and how their past clients felt about working with them before you hire them.

5. Conduct Interviews and Ask Pertinent Questions:

• Arrange meetings with potential contractors to discuss your project.
• Inquire about their approach, timelines, subcontractors, and how they handle unforeseen challenges.
• Schedule a call with your lender to speak with your contractor to ensure the draws can be done according to a draw schedule that works for everyone.

6. Double-Check References and Reviews:

• Contact references provided by the contractor to gain insights into their work ethic, timeliness, quality of work, communication, and professionalism.
• When reading reviews, don’t just look at the star rating, pay attention to “why”. Sometimes a complaint could arise from something the customer did or didn’t do and may not necessarily be a negative reflection on the contractor or there could have been a delay at the county that was outside of the contractor’s control. It’s important to understand the why behind both good and bad reviews.

7. Obtain Detailed Bids and Review the Work Agreement Contract Carefully:

• Request detailed bids from multiple contractors outlining costs, materials, labor, and project timeline.
• Ensure contracts are comprehensive, covering all aspects of the project, including payment terms and warranties.
• Be on the lookout for loopholes within the work agreement contract that may not be favorable to you.
• Be sure to establish who will be paying for materials. Sometimes, it may be in your best interest to purchase your own materials and just pay for labor/installation.
• You should never pay in full until the work is completed in full. It is often quite challenging to get contractors to come back to complete a project if they have already been paid in full.

8. Communication and Compatibility:

• Assess the contractor's communication style and responsiveness.
• Choose a contractor with whom you feel comfortable communicating and who understands your vision for the project.
• Be aware of any language barriers. If you do not have a consistent means of translation, consider instead a contractor who speaks your language.

9. Monitor Red Flags and Gut Instincts:

• Pay attention to warning signs such as unusually low bids, lack of transparency, or poor communication.
• Trust your instincts; if something feels off, it might be a reason to reconsider.
• How well does the contractor pay attention to details? It may seem like a small thing, but it matters.

10. Start with a Small Project as a Trial:

• Consider starting with a smaller project to evaluate the contractor's performance before committing to larger endeavors.

Conclusion:

Selecting the right contractor for your investment real estate projects is a crucial decision that requires careful consideration. By defining project needs, seeking recommendations, verifying credentials, evaluating experience, conducting interviews, checking reputations, obtaining detailed bids and contracts, emphasizing communication, and trusting your instincts, you can significantly increase the chances of hiring a contractor who meets your expectations and delivers quality work within the specified timeframe and budget. Investing time and effort upfront to choose the right contractor can save you from potential headaches, delays, and cost overruns down the line, ultimately contributing to the success and profitability of your real estate investment endeavors.