Many new investors think that investing is an individual sport. However, behind most good investors you will find a strong team. Each member of their team has a job and knows how to carry it out to a “T.” Your realtor will scout the best properties for your style and budget. Your attorney knows how to negotiate the deal and save you money on the contract. Your mortgage broker knows the best loan programs for your situation. If you are rehabbing, your contractor should know exactly what you are looking to do, how much you are willing to spend and how quickly you are looking to get in and out.
Building a relationship with your contractor takes time, but there are some things you need to discuss, whether you are working on deal one or deal 100. The first is your budget. You need to be able to trust that the numbers they give you are firm and you will not have to dig in your pocket for large unexpected items. Obviously things can come up on every deal, but if the basic items are constantly over or under estimated, you need to look for a new contractor.
In addition to your budget, you need to plan the type of work you are going to do. You never want to cut corners on work, but on some properties you can get away with less extravagant upgrades. On the flip-side, some properties need to be perfect, with the highest quality work in order to sell for top dollar. Let your contractor know the difference.
Lastly, you need to stress the urgency of making a schedule and being able to stick to it. You want to get in and out of every rehab project because every day delayed is money lost. If your contractor is pushed back, it will cause a domino effect that could affect everyone else that works on the house. If you can’t trust that your contractor will be where they say and when they say, how can you trust them with everything else on the property?
Working with your contractor is not a one way street. You need to hold up your end of the bargain as well. This starts with having a clear vision and being realistic in your time-frames and budgets. You can only stretch your dollar so far on certain projects and you have to know where to pick and choose your battles. If you nickel and dime your contractor over every fee and every item, sooner or later they will stop doing you favors or rush jobs. You may want everything done yesterday, but you need to remember that they have to schedule jobs out after your property is done. If you work with your contractor, they will want to work with you again.
The final item is to pay your contractors on time, every time. You don’t want to have them chasing you for a check after they finish their work. Contractors will talk and you will get a reputation as someone who is difficult to work for. Not only will the best contractors not want to work for you, but if they do, they won’t put their best work in because they are worried about not getting paid on time.
Your contractor holds the key to your profit with your rehabs. You need to work together to build a relationship to make more money on every deal. As an investor, you are only as good as your team and your contractor is a huge part of that.