Contractor Perspectives – Part 3: Working with Your Contractor
Once you’ve found a pool of high-quality contractors worthy of carrying out your real estate project for you, it’s vital that you conduct business with your contractors in such a way that will ensure a successful project.
First things first, you’ve got to get bids. Call or email the contractors from your list to ask if they are available to do some rehab work on your real estate investment project. If the contractor is good, they’re going to be in high demand and therefore busy. Don’t expect them to start work on the project tomorrow. A contractor with few referrals and little business might sound desperate to start the job. Avoid these ones. But see if you can have them come out to the job sight as soon as possible to bid on the work that you want done and to include in their estimate any other work they think needs to be done.
Ask For Specifics
It’s in the best interest of the contractor to be general with their bid estimates. They may give you a general quote listing a few of the big-ticket items, and a price for completing the whole job. The more general they are, the quicker it is for them to make their estimate, and the easier it is for them to scrape a little more icing off the cake.
So you have to make sure to get real specific before you move forward. Ask the contractors to send you an itemized list of all the work that needs to be done and its associated price. If a good contractor wants to do business with you and not control you, then he shouldn’t have a problem with this.
You also need to make sure to ask for a timeline for completing the work. Time is of the essence for the real estate investor to not accrue unnecessary holding expenses. If he tells you it will take 8 weeks, give him 9 weeks in case any unforeseen events transpire. Do not pay him upfront for the job, at least not in full. Incentivize them to complete your project in a timely manner and under budget. Tell him you will pay a 5% bonus if he completes it in 9 weeks, and that you will deduct 5% per week from the final payment for every week that it’s over the deadline.
Finally, make sure you are keeping up with overseeing the project while it’s underway. Maintain good lines of communication. Whether or not you’re going to be onsite, have the general contractor send you a log and daily photos of the progress made, and a plan for the next workday.