The Golden Rules to Hiring a Contractor for Your House Flipping Business
Your contractor can have a profound impact on almost every aspect of your real estate flip: Deadlines. Quality of work. Budget. Return on investment. And whether or not the overall experience is energizing or draining.
Whether you’re funding a flip or using a hard money lender, it’s important to keep your flip on schedule and on budget. Time is money. Not all contractors understand or care about that. Follow these steps and you’ll be able to find good contractors and build lasting relationships with the ones who come through for you.
1. Gather Names
Any sizeable job should be bid out to a few contractors. Until you build a pool of trusted “go-to” contractors, you’ll have to use other sources for leads. Your best prospects include:
- Get referrals from friends who’ve had major work done
- Ask around at the contractor desk of your local Home Depot or Lowes
- Consult a specialize resource like Angie’s List
- Search online through Google, Craigslist, Service Magic, Yelp and other sites
- Drive the neighborhood and look for jobsites with contractor trucks onsite
2. Make Sure They Are Credentialed
Each state has their own state contractors licensing board, with their own requirements for licensing, bonding, and insurance. It’s worth taking the time to check credentials. Angie’s List has an online License Check page that lets you know what licenses are required in your state.
3. Narrow Down to Three
As you gather names, make sure they can handle the scope of work you need. There are too many contractors who will claim to know how to do jobs they’ve never done. Don’t ask if they can do the type of work you need. Ask if they have done the type of work you need. If they say yes, ask for 3-5 references from clients who hired them for a project of similar size or scope.
4. Ask Intelligent Questions
When the contractors come to the site to prepare a bid, ask questions that will give you a clearer idea of how they think and communicate, and how experienced they are. Examples:
- Do you know what permits are required and how long they take?
- What types of materials would you recommend for this (specific area)?
- I’m thinking of doing ____. Can you think of a better or more affordable solution?
- Do you think this part of the project needs to be done, or is it okay as is?
Maybe you already know the answer. Ask anyway. Listen to how the contractor thinks and responds.
5. Evaluate the Bids
Assuming their references check out, ask for bids. Then, make your decision. But don’t base it just on the numbers. Take a look at how they handled the bid process. Consider this scenario:
- Contractor A answered all your texts and calls within the hour, showed up exactly on time, communicated very clearly, and asked intelligent questions that helped you clarify the project scope.
- Contractor B showed up two hours late, didn’t return calls until the following day, and didn’t ask any substantive questions about the details of the job. But his bid came in $800 less.
Trust your instincts. If it feels like Contractor B is going to be a headache, factor that into your decision.
6. Get it in Writing
Get a written bid and write down the deadlines, payment schedule, and any contingencies if the job lingers on too long. In flipping, time is money. Some investors ask contractors to take $50-$100 off the final bill for each day they go over deadline. Conversely, if it’s worth it to you, you can add a bonus incentive for each day they finish ahead of schedule.
7. Keep Your Cool
If you’ve found a contractor that you want to keep for future jobs, keep your cool when frustrations arise. Understand that materials, weather, sick workers and unforeseen property issues can cause temporary glitches. Roll with them.
8. Show Appreciation
If your contractor really comes through for you, do the same for them. Write positive online reviews. Give them a written letter of recommendation. Let them give your number to people who want references. Do what you can to build a lasting, mutually rewarding relationship, and you’ll have a contractor who makes you a top priority.
Finding and keeping a good contractor takes work — but your efforts will pay off with each project as time goes on.
Ready For Your Next Flip?
We hope you can use this information to make your flip an even bigger success. If you’re contemplating another flip, it’s never too soon to prepare. Visit us here and update your Residential Capital Partners application today.