The concept of contractor management is often an afterthought in the minds of eager real estate investors. To that end, it is quite common for inexperienced investors to get caught up in the moment and focus their attention on the more glamorous aspects of a flip. Nonetheless, few components of a rehab deal have more influence over the outcome of a project than the pace and quality in which a contractor works. The craftsmanship and punctuality exercised by a contractor is instrumental in executing the perfect deal. Therefore, it is of the utmost importance that you not only know how to manage a contractor, but how to hire the right one, too.
What Is Contractor Management?
Contractor management is the act of supervising a licensed contractor over the course of a rehab deal. As its name suggests, contractor management will literally witness rehabbers manage the contractors they have decided to align themselves with. It is worth noting, however, that the act of managing a contractor isn’t simply another task to be carried out by a rehabber: it’s nothing short of instrumental in determining the success or failure of a respective project.
Managing a contractor properly is perhaps one of the best ways to tip the scales in your favor. A good, dependable contractor, for that matter, will have a significant impact on the outcome of your rehab project. Of course, before you can even think about managing a contractor, you will need to hire the right one for the job. If you know how to hire a general contractor, and the qualities to look for, it’s entirely possible to increase your likelihood of realizing success.
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How To Hire A Contractor: Asking The Important Questions
The more you are able to vet a contractor, the better. However, there’s a point where your efforts may become counterproductive. Time is money, after all. In order not to waste anyone’s time, including your own, there are at least seven questions you should ask every contractor:
- How many years of experience do they have?
- Do they own their own tools?
- How big is their team?
- Do they have the appropriate licenses and permits?
- Are they insured?
- Do they use sub-contractors?
- Do they have referrals from past clients?
What Makes A Great Contractor?
On the surface, a great contractor exhibits five distinct characteristics: they are professional, licensed, competent, insured, and capable of working synergistically with clientele. Of course, each of these characteristics is met with an inherent degree of subjectivity. More importantly, what one rehabber may deem as acceptable, others may disregard as inadequate. In all honesty, what makes a great contractor isn’t exactly objective.
There are certain characteristics and qualifications today’s best contractors tend to exhibit. While there are certainly exceptions, the majority of today’s best contractors will––at the very least––exhibit all of the following:
- Experience: A contractor’s equivalent to a resume, experience is one of the most important things a rehabber should be on the lookout for. Experience is, after all, the single greatest indicator of a contractor’s abilities. Therefore, I recommend looking for contractors with at least three to five years of experience under their belt; that way, you can rest assured they are competent at their job. Contracting is not easy, and anyone that has managed to do it professionally for an extended period of time certainly has an advantage.
- Equipment: Good contractors tend to have their own equipment, as opposed to renting it. Of course, there are exceptions, but I usually recommend working with contractors that don’t have to rely on third-party sources for the tools they will be using on a daily basis.
- Employee/Job Ratio: It is entirely possible for a good contractor to stretch themselves too thin over several jobs. Therefore, it’s important to find a contractor that has a large enough team to work on each project they currently have lined up. The last thing you want is to find a good contractor that is preoccupied by too many other jobs.
- Licensure: Under no circumstances should you work with an unlicensed contractor. Make sure the contractor you intend to work with not only has the appropriate licenses, but also that they are current and up to date.
- Insurance: A good contractor will always have the proper insurance, both liability and workers compensation.
- Transparency: In order to even consider working with a contractor, they must exercise transparency. There’s no reason they shouldn’t disclose everything up front, including whether or not they work with sub-contractors.
- Referrals: Today’s best contractors are more than aware of public perception. More importantly, they know a job well done may result in referrals. It is fair to assume a truly great contractor will have referrals from their clients. What better proof of a contractor’s competency is there than the accolades of previous clients?
That’s not to say you won’t be able to find a great contractor lacking in any of these areas, but rather that these characteristics have become synonymous with today’s best contractors. Try to check off each of these boxes when it becomes time for you to hire a contractor.
6 Places To Find Quality Contractors
Perfectly executed rehabs are primarily founded on two fundamental principles: having a sound system in place, and finding a contractor that is comfortable working within said system. Most rehabs are only as good as the contractor assigned to the job. The quality of the final product is directly correlated to the individual in charge of doing the work. As a result, it’s in your best interest to mind due diligence when locating a contractor. Instead of relegating your search to the Yellow Pages, you are going to need to need to think like a contractor. Start looking where contractors tend to congregate, as to form a more accurate opinion of who you might want to work with.
Here are some of the places I would recommend looking for your next contractor:
- Websites: There are a number of websites dedicated to collecting and organizing contractor information, many of which will vet their clients thoroughly. Angie’s List, for example, awards visitors the ability to search for accredited investors and contractors in a given area.
- Supply Houses: Otherwise known as department stores, supply houses like Home Depot and Lowe’s represent a great opportunity to find and meet contractors face-to-face. In addition to asking the Pro Desk, try striking up a conversation with contractors buying supplies. You may be surprised who you run into, and how eager they may be for an additional job.
- Municipal Building Departments: Local building departments tasked with issuing permits tend to see a lot of contractors come through their doors, and are inherently great places to find responsible contractors. Perhaps even more importantly, the contractors at building departments are already familiar with pulling permits and may have valuable contacts.
- Job Sites: Often overlooked, current job sites are a great place to both find a contractor and evaluate their work. Simply keep an eye out for jobs that are currently in progress and pay a visit. Don’t simply barge into a sight unannounced, of course, but ask politely to speak with the contractor in charge and you may find yourself with a new partner.
- Real Estate Investment Associations: Networking is just as valuable to contractors as it is to real estate investors. Therefore, it’s not uncommon to find contractors looking for work at real estate investment associations. More importantly, their presence means they may be on the lookout for a job. Better yet, they may already have ample rehab experience.
- Contractor Referrals: Who knows contractors better than other contractors? Simply ask other contractors if they have any recommendations, and you may find yourself with plenty of candidates.
Contractor Management Summary
There is absolutely no doubt about it: contractor management plays a pivotal role in every single rehab deal. That said, contract management is rendered moot in the face of poor hiring practices. Regardless of how good your management skills are, success will be a lot harder to come by if you hire the wrong person for the job. Get ahead of the curve––and stay there––by aligning yourself with the right professional.
- Contractor management means nothing if you don’t hire the right person for the job.
- Managing a contractor can ultimately be the most important thing you do on a respective rehab deal.
- Before you hire a contractor, be sure to vet them accordingly and take all of the appropriate steps.