Knowing how to choose a contractor for investment property is one of the most critical operational skills in real estate investing because the difference between a reliable contractor and an unreliable one can mean the difference between a profitable flip that closes on schedule and a costly project that runs over budget, over time, and potentially into legal disputes.
How to Choose a Contractor to remodel your kitchen or add a family room is harder than it sounds. You want someone who is honest, reliable, and delivers quality work on time and on-budget.
How do you find such a building saint? And when you do locate one, what questions should you ask?
Ask for referrals
The best way how to choose a contractor is to survey friends and family who have hired a good contractor in the last two years.
- Ask:
- Were they happy with the work?
- Did the contractor show up on time?
- Was he easy to talk to? Did he complete the project when promised and for the amount proposed?
- Also, ask open-ended questions like:
- How did the contractor respond to mid-project changes?
- How long did it take for the contractor to return your calls?
- What problems did the contractor face, and how did he solve them?
- Project descriptions including what will be demolished.
- Materials and specific products that will go into the job.
- Price, including a timetable for payments. Don’t give more than 10% upfront; and hold at least $10% of the project cost until the final punch list is completed.
- Timeframe for the work. You might want to include an incentive for early completion and penalty for late completion.
- Permits required.
Pay particular attention to hesitations and qualifications, like, “My contractor was pretty good at communicating.” A world of important information hides behind qualifying words like “pretty,” “somewhat,” and “most of the time.” When you hear these terms, dig deeper.
Research online recommendations
Sites like Angie’s List and Yelp contain contractor recommendations and reviews. They’re good starting places to find local contractors and start the interviewing process.
But beware: Some sites are really just advertising vehicles for contractors or receive money each time your click on one of their recommendations.
Such sites are supposed to disclose financial relationships they maintain with businesses they write about. Search the site to information about “affiliates” or “valued partners” – euphemisms for businesses that maintain a financial relationship with the sites.
Make sure the contractor is licensed
Many states and municipalities require that contractors hold a license or certification that meets certain educational and experience criteria.
The problem is that every state is different. Most states regulate some types of repair or remodeling contractor; but some don’t.
You can find a state licensing agency through the National Association of State Contractors Licensing Agencies.
If your state requires a license, ask the contractor you interview to produce his.
Make sure your contractor is insured
Most states require that contractors hold liability and worker’s compensation insurance, just in case something goes horribly wrong on the job.
If your state doesn’t require a contractor to be ensured, you’ll be smart to make sure the contractor you want demonstrates proof of insurance. Insist on seeing a current Certificate of Insurance, then call the insurance company to make sure the coverage is sufficient and current.
Checking on insurance takes a little time, but it will save you big headaches if someone is injured on the job.
Require a contract
Legitimate contractors will spell out in a contract the scope of work, cost and time frame for a project. If one won’t offer a contract, keep looking for one who will.
- Contracts should include:
Don’t be afraid to negotiate some contract items, like price or fees for change orders.
Establish lines of communication
There’s nothing more frustrating for a homeowner or contractor than making calls or sending emails that aren’t returned. The lag between asking a question and receiving an answer will add time and, likely, cost to your project.
Before you pick a contractor, ask how he wants to be contacted – Text? Email? Telephone? – and how long it will take to return communications. You want someone who will contact you within 24 hours.
One way to quicken communications is to place a white board on the job where you or the contractor can write questions and answers.
How does the contractor handle changes?
Changes are bound to happen during construction projects. Maybe you want that kitchen island bigger/smaller than it looked on the plans. Perhaps the paint you selected looks way darker on the walls than it did on the paint chip.
Ask a prospective contractor how he handles changes? Does he want a “change order” in writing? What fee will he charge for changes?
It’s always best to detail any changes in writing, so everyone is accountable for the new construction detail. Beware that changes will add cost and time to your construction job. Sometimes, that can’t be helped. But the more research you do before the job begins, the fewer changes you’ll make mid-stream.
Ask about pulling permits
Unless you’re just pulling and replacing items like appliances or countertops, most municipalities require a homeowner to pull a building permit, which starts an inspection process that makes sure work is completed according to local building codes.
These permits can cost hundreds of dollars, and some contractors will suggest skipping the permit process, which saves him time and lowers his job bid.
Avoid these contractors. Not only can your project be shut down if it doesn’t have the required permits, but without the proper inspections, you won’t know if the completed work meets acceptable standards.
Find a personality mesh
You’ll be spending a lot of time with a contractor – weeks, maybe months. That’s why it’s important that your personalities mesh.
Pay special attention to how a contractor answers questions during your initial interview, the time when he’s courting your business. You want someone who answers questions thoroughly and completely, without making you feel like an idiot. If you can’t tell who’s lying or look past the rudeness, you will never figure out how to choose a contractor.
If you get an uh-oh feeling during that first meet-and-greet, listen to your gut and keep searching for a contractor whose personality meshes with yours.
Get three bids
It’s tempting to hire the first contractor who fits the bill. But force yourself to interview at least three contractors and receive three bids for the job.
If this is your first renovation or remodel, each interview will teach you something about the proposed job. Contractors want you understand what repairs and remodels entail. And each professional will probably tell you something new about your project.
The accepted wisdom how to choose a contractor is to get three bids, and chose the contractor who isn’t the most or least expensive, but is somewhere in the middle. That way, you have less chance of being overcharged (no one wants to be a sucker) or undercharged with an unrealistically low bid that’s bound to rise as the work progresses.
Hopefull after going through the processes above, you will have some good skills when looking for a home renovation. Learning how to choose a contractor is a skill that is invaluable for both your personal and professional life if you are in the Real Estate trade.
Key Criteria When You How To Choose A Contractor For Investment Property
License and insurance verification are the non-negotiable starting points when you how to choose a contractor for investment property in Florida. The Florida Department of Business and Professional Regulation maintains a public database where you can verify a contractor’s current license status before signing any agreement. Hiring an unlicensed contractor exposes you to significant liability, potentially voids your property insurance coverage for work-related incidents, and gives you no recourse through the contractor licensing board if the work is substandard.
References from other real estate investors are among the most valuable inputs when you how to choose a contractor for investment property for an investment property specifically. Contractors who work regularly with investors understand that timeline matters as much as craftsmanship, that scope creep must be managed with formal change orders, and that a property needs to meet investor-grade quality standards rather than the higher-cost standards expected in an owner-occupied renovation. When you how to choose a contractor for investment property based on investor referrals, you are far more likely to get a contractor who understands the specific demands of the investment property market.
The written scope of work is the document that most clearly separates a good how to choose a contractor for investment property outcome from a bad one. Before signing any contract, a clearly written scope with line-item costs, material specifications, payment milestones, and completion dates gives you the contractual framework needed to hold the contractor accountable and prevents the open-ended cost creep that destroys margins on renovation projects. Investors who how to choose a contractor for investment property without a detailed written scope consistently report worse outcomes than those who invest the time upfront to document every aspect of the project in writing.
Payment structure is another critical factor when you how to choose a contractor for investment property for any significant renovation. Never pay a large upfront deposit before any work begins. A reasonable structure when you how to choose a contractor for investment property for a major project is ten percent at signing, payments tied to completion of clearly defined milestones, and ten percent held back until final walkthrough sign-off. Contractors who insist on large upfront payments before delivering any work are a significant red flag regardless of how impressive their portfolio looks in initial meetings.
Key Criteria When You this approach
Investors who acquire properties at florida foreclosure auctions almost always need to this approach for post-auction renovations, and the quality of that contractor selection often determines whether the acquisition becomes a profitable flip or an expensive learning experience.
After you this approach and complete a renovation, running the final numbers through the cap rate real estate formula confirms whether your renovation budget was managed tightly enough to meet your original return requirements on the completed project.
The due diligence real estate framework helps investors assess the scope of work needed before they this approach by identifying property conditions, structural issues, and system deficiencies during the pre-auction research phase rather than discovering them after winning the bid.
Understanding florida foreclosure laws helps investors who need to this approach for occupied properties they acquire at auction navigate the legal steps required before renovation can begin, since beginning construction while a former occupant is still legally in possession creates significant liability exposure.
Investors who plan to hold renovated properties as rentals should use the cash flow real estate investing analysis to confirm their renovation budget and projected rent levels produce the target cash-on-cash return before committing to a renovation scope, which helps define how much you can afford to spend when you this approach for each project.
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