As a real estate investor, hiring a contractor to help you with your rehab project can be a daunting task. Making sure you have someone you can trust to get the job done can be quite difficult. You’ve heard all the stories of those investors like you who have major problems and lost thousands of dollars due to their builder.
How can you know that the contractor you choose will do the job as you wish and at the price agreed? How can you be sure that you have a solid, reliable builder? Pre-screening is a major part of ensuring the contractor you work with is going to do as he says he will. Here are a few tips in pre-screening your builder to make sure you don’t get taken.
Don’t be afraid to ask questions. Find out how long they have been in business. Typically those who have been in the business for at least five years have a good firm foundation. You want to work with those who have seen and done just about anything that could come up in your project. Those who have experience can accuratley estimate what a project will cost you. Those who do not have as much experience tend to underestimate which can cost both of you in the end.
It is imperative that your contractor provides workman’s comp insurance for all his employees on the job. This is to be in place before they ever start working on your job site. Why? Well, if an employee is injured on your home site and does not have this coverage, you could be sued for compensation.
You also want a copy of their license and check to make sure that it has not be suspended. You can check this with your county and see if there are any complaints as well.
You want to get a couple type of references. First, you want to hear from those who have worked with the contractor before. Ask for several references of past clients to hear how the process worked from their side. Your potential contractor should not have a problem sending you the references you’ve asked for.
Also ask for financial references in the process. Financial references such as suppliers can tell you how they handle their finances for projects. If they are behind on paying their supplier they may use the money you pay for your job to pay the bill. Then what are they going to buy the supplies for your job with? It is very important that they have good, solid financial references as well. This leads to another important point. Always have your contractor buy the supplies. As a real estate investor, you do not want to spend your valuable time chasing down parts needed for the job. You should spend your time on other investment opportunities.
As a homeowner or investor, you should not be responsible for pulling permits. A dependable contractor will have this on their to-do list already. They should be the one responsible for pulling any permits needed for the building and also for following up with inspections. They also should be the ones responsible for getting the CO, certificate of occupancy, when the time to move in comes.
Most legitimate builders will agree to a warranty of six months to a year on the work they have done. This is an important aspect of hiring your contractor that you need to consider. Be sure to talk with them up front on what their warranty terms are and what you should expect once the work is complete. A clear red flag to you would be if they do not stand behind their work or offer the warranty. If they do not agree to this option, walk away!
Be sure that every piece of equipment, agreed amount of money, etc. is all in writing for both of you to have. You do not want to leave anything to chance or have the possibility of disagreement in the future. Make sure you have everything in writing before moving on with your selected contractor. Don’t be afraid to ask questions, ask for references, and research them before moving forward. You can save yourself a lot of time and hassles in the end if you do these simple things.
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