7 Things I Learned About Contractors (My First Flip)

Well, I dove in and did my first flip!  We just entered contract and while we're not out of the wood yet, I can see the light at the end of the tunnel.

   Over budget and behind schedule, my family and I begrudgingly trudged through one of the more painful and stressful experiences in my life, and I proceeded to make just about every avoidable mistake that you can make on a flip. I'll write about the whole thing in another post, but here are some of those little tidbits that no one tells you about when you set out to conquer a project like this.  In the span of my flip, I made many mistakes, but hopefully I was able to learn from them.  In total, I hired 20 different contractors for various tasks, and received quotes from many more.  Ouch.

1) You're not their friend, you run a business.

It may be tempting to become buddies with your contractor who seems like a cool guy, but you have to remain in a position of where you can point out his mistakes and not worry about hurting his feelings.  Be professional. Simple touches like how you answer the phone or outlining the processes you follow will make a huge difference.  Make it simple, and explain that work must be completed as described.  As long as you are prompt in inspection and payment, they will respect you for the professionalism and you'll be smooth sailing.

2) They don't read minds.  Tell them what you want, make it easy for them.

Tons of simple tasks became extraordinarily complicated because clear expectations weren't laid out.  Write everything you want done down, itemize it so that he can check it off his list of things "to do" and he'll never forget.  It is incredibly easy to forget things, and you should assume that your contractor did not get enough sleep the night before. 

3) Get your paperwork straight.

Create a checklist, work through your checklist, stick to your checklist.  Don't budge.  Be clear in what you need, and ensure they know your requirements BEFORE THE WORK STARTS. If you need insurance directly from their provider, and they e-mail it themselves, politely remind them your requirements and don't proceed until you get it.  If they need to provide you with photos of completed work, W9, final invoice, and warrantee info before you pay them, then give them plenty of notice, and stick to your guns.  A checklist also lets you know what you need to do next, such as coordinate access to the home, address a payment schedule, or address what tools you think they will need (professionals will show up without the right tools, wasting an entire day in your schedule).  A checklist also makes you predictable.  Send it to them.  They will appreciate your thoroughness and you become an easy customer.  Easy customers with clear expectations get preferential treatment, your contractors don't like to argue either.

4) They don't always know what they are doing.  Don't bear the costs of their education.

Seems like a no brainer, yet it happened enough that I feel obligated to say it - get a contractor that is knowledgeable in the task you are about to pay him for.  On a singular stair transition trim piece, I went through 4 (four!!!!) contractors.  It was a simple job, but had some details in installation that weren't apparent.  Each of them simply assured me they knew how to do it, even acted offended that I questioned their ability, and then proceeded to mess it up in new and interesting way.  I finally went to a flooring expert, and they finished in 30 minutes for half the price.  Get proof that they know what they are down, through references or photos of similar work.

5) If you don't bring it up, they won't.

My roofing contractor put on a new roof, and told me he'd take care of all the permitting process.  After he was finished, I paid him. I never verified that he properly filed the permit.  8 months later, I found out during escrow that the final inspection by the county was never performed, AND that he had filed the permit under the wrong address!  So I hadto track him down, get him to resubmit the permit, and pray that we pass inspection.  Luckily, my GC lit a fire under this guy, and he was prompt.  But what if he had gone out of business?  What if he refused to address the problem and I had to take him to court?  I don't have the time or the money for a costly legal litigation, especially while I have a buyer waiting on it!  It's hard to know all the right questions to ask, but its important require proof prior to final payment

6) Don't pay until you're ready to say goodbye.

Most contractors are honest people, but there is something about paying them before the job is done that makes you drop to the bottom of their priority list.  I created a "company policy" that a contractor would only be paid in full once work is completed.  We require the contractor to itemize the tasks and assigned costs to each one (ie, paint = 3500, flooring, 2500).  If they wanted to be paid before work was complete, I would only pay a contractor 1) the tasks he has completed according to the itemized invoice or 2) costs or materials that they could show for (with receipts).  And never pay more than 50% of the remaining work.  Some didn't like this, but they worked like hell to get that paycheck.  If they give you hard time, tell them that the money comes from businessmen who have strict requirements on payment schedules, and that you are subject to audit at any time, your hands are tied.  It's not untrue, even if that businessman if yourself, but you can now give your contractor these requirements up front.  Again, clear expectations are the key here. 

7) Pay the premium to hire 1 guy, hold him accountable. 

I made the mistake of directly hiring out too many individual tasks.  I wasted a ton of time meeting countless contractors and doing all the things that I could have paid the GC to do, and he was already on site.  My time is worth more than that, and a good GC is your expert.  He will help you see around corners and perform all the finishings that you forgot to account for.  After all, its his job to bring up things that he can be paid for, and you just make the decision to fix or not.  You don't have to stress about finding an expert for each task, writing every check, tracking 100 different tasks, with 100 different personality styles.  Hire that one guy, pay him well.  After all, he's probably better at being a GC than you are.  Do you want to be paid to be a GC and manage a project, or do you want to make money as an investor?  Let someone else have that headache for you.

I learned a lot.  I'm ready to do it again, armed with my new knowledge and processes that will hopefully lower the headache out of the whole experience.  My goal is to be able to flip homes without ever seeing it, so in my opinion an airtight process is everything!  Hopefully you're able to pull something out that can help you in your endeavors.  Happy investing!