Contractor Perspectives – Part 4: Avoiding Pitfalls
Finding high-quality general contractors and building a working relationship with them can be a major asset for your real estate investment endeavors. Once you’re working with professionals you know you can trust, you’ll feel more confident in purchasing distressed properties to add value to and sell because you know you’ll be in good hands. But building solid relationships like this takes time. There are some guidelines you can follow in order to avoid common pitfalls and ensure your success.
The Cheapest Contractor is Not Always the Most Profitable Option
Common business practice suggests finding a minimum of three bidders and choosing the lowest one for the job. But there are more factors at play when selecting a general contractor. Sometimes the lowest bidder for your job is submitting a low bid to guarantee that they get the job – and this might be because their low quality work is in low-demand without any business referrals.
Or even still, they could be a solid contractor that mistakenly bid too low on the project. If that’s the case, and they start to discover that they are going to be losing money on the project, they might only do a sub-par job on it compared to some of their other simultaneous jobs where they are bringing home the bacon.
Paying Contractors Too Early Provides No Incentive
Avoid paying contractors too early for their work. As soon as they see their last paycheck, they’ve lost their motivation to do quality work on the job, and they may just disappear completely. Pay some upfront, and pay some when the job is completed. But if you want to play it really safe and avoid the possibility of a contractor taking some of your money upfront and running off with it, ask if they’d be willing to do the first week of work before you make the deposit payment.
Have a Network of Contractors to Work With
Sometimes, a healthy relationship with a contractor begins and everything is going so smooth, and then after a few jobs, you’ve become too comfortable with each other and all of a sudden things are slipping through the cracks that wouldn’t have before.
For this reason, it’s a great idea to have a handful of trustworthy contractors in your network that you can work with and keep them competing for your business. The last thing you want is for someone to get complacent in the business relationship and for things to go sour.