If you’re a homeowner, 9 times out of 10 you’ve heard about someone having a bad experience with a contractor. Whether if it was poor quality work, performance issues, or jetting off as soon as they received the cash, we’ve all heard about or experienced an issue with a home contractor.
Having an idea of what steps to take before choosing the right contractor can save you the headache.
As a property investor, you have to take an approach that requires a higher level of due diligence. If they know that the place is not your place of residence and you won’t be paying close attention to there work habits they tend to take advantage of the situation.
That’s why I created a system to follow when hiring home contractors, it’ll help prevent those costly mistakes.
1. Learn From The Experience of Others
Only a fool learns from his own mistakes. The wise man learns from the mistakes of others. Otto Von Bismarckthis
This quote can be applied to life also but in this case will direct it towards real-estate. If you currently own a home or have in the past then you know that maintenance and repair is something that comes with the territory.
However, applying that philosophy to your strategy gives the novice investors a superior advantage, because now we can leverage off of the experiences of others. So while you in the beginning stages of your project, ask family and friends, and see what steps they took during there renovation project.
There may be some success stories in there along with some problems people encountered, and those are the golden nuggets. Understanding the mistakes another person made could help you prevent making those mistakes.
My first major project with a contractor didn’t go as smoothly as I thought it would. The first property I acquired was a duplex and I needed a fresh coat of paint. Being a young investor, I was naive when it came to hiring home contractors, I trusted everyone, and didn’t do an ounce of research to verify there work credibility.
I had always heard a rule of thumb of getting three price quotes from contractors and choosing the one in the middle. Among those three quotes, I had a referral from a good friend that swore his buddy’s work was phenomenal at a reasonable price.
Because of our relationship, I disregarded the other painter quotes; and that was the first mistake. I was under the assumption that he was a licensed contractor, and he wasn’t. After he began working I’d realized that hiring him was a mistake. Not only was his skill level below par, but there were also promises to make certain repairs in addition to the painting: repairing of a metal exterior gate, and the patching of holes in the exterior stucco.
After the job was completed and he received the final payment he promised to return and perform the remaining work needed to finish the project. But since that day he’s stopped answering his phone and I haven’t heard from him since. Although that experience was frustrating, to say the least, it taught me a few things to look out for the next time around:
- Make sure the company is licensed and bonded
- Verify the company’s work history and credibility
- Always write-up a contract
- Perform due diligence even if it’s a referral
- Set up a payment schedule that motivates the contractor.
2. Create a Renovation Plan, and Have a Budget In Mind For Your Project
The first step involved in starting a business is creating a business plan, which is a detailed map that helps you achieve your renovation goal. Your renovation plan doesn’t have to be as detailed but it should contain some key points.
Work to be done
Knowing exactly what work you would like to be completed will save you and your contractor time during your first appointment. Sometimes contractors may sway you to do additional unnecessary work but having an idea of what you want to be renovated helps you stay focused on the task at hand.
Time frame
Have an idea of how long you expect the project to take, and when you decide on the contractor discuss this point with him/her as well. Bringing this up, in the beginning, eliminates any room for unclarity, both people will be on the same page.
Know your colors and patterns
Let’s say you want your floors in the living room done and a new fresh coat of paint as well. The first question they’ll ask you is what type of floors, tile, hardwood, laminate if so what pattern? When you have an idea of what work your planning on doing, be very thorough with the color choice and materials you’d like to use.
Create a budget for the project
Having a budget in mind is important for both the contractor and yourself. It gives them an idea of the amount of work they can fit within your price range.
And it can be seen as a guide that you can use to gauge the amount of work you’ll be able to have completed. Ask yourself these questions to better assist you with your budget.
- Is there anything that I can do myself, DIY
- Is it a rental property …. renovation may differ
- Are the kitchen and bathroom components be salvageable
- Are you willing to spend more on higher cost materials
Going through these questions may cut your cost significantly; once you create a budget, stick to it and always look for ways to cut cost not quality.
3.Begin Researching Contractors In Your Area
After going through a list of contractors and narrowing it down to a select few, this is the part where the due diligence takes place. There are certain requirements the contractor should meet before you hire him such as:
- Licensing & bonding
- Past work history
- Reviews from previous homeowners
- Pictures of completed work
- Trust and Credibility
Licensing and Bonding
If a job’s total price exceeds $500, then a contractor’s license is required to perform the work. Make sure the contractor is licensed when performing big jobs because if there not, it puts you at risk if someone is injured on the job amongst other things.
This information can be found on cslb.ca.gov, if you know the contractor’s license # you can input the information in the license check tab. If the information is unknown you can search using the company’s name as well.
Remember it’s ok to trust the information given, but it’s important that you verify the info as well.
Past work experience
Always perform the adequate due diligence, look at the previous work, call the customers for there opinions, and you can even go as far as visiting previous work cites, but going that step further can ensure that you make the right decision.
In addition to the good review you’d want to search for the bad ones as well, it doesn’t matter how good of a business you run there will always be some bad reviews.
For instance, if the company is called Abc Construction inc, then google search the company name following, scam, rip off, bad reviews and so on, this will help to make your decision non-based.
Calling previous customers will give you an idea of how they work in terms of punctuality, results, cleanliness, and professionalism. It gives you insight into their credibility as a person and the overall company.
Interested in going into depth on your research?
- Reviewing the business name Make sure the business name matches all of the other info you’ve been given, such as website, brochures, contracts, and business cards.
- Company in operation Review the company’s issue date re-issue date, and expiration date, to determine if you’re comfortable with the length of time they’ve been in business.
- License Status This section is actually called license status, you’re looking to see if it’s current and active, if not you have to determine if you want to continue with this contractor
- Classification Every contractor has a specific license, issued to perform specific trades ie: electrical, framing, plumbing, etc. If you reviewing the classifications and you a “B” general contractor, there licensed for all trades. Therefore make sure the contractor is licensed to perform his specific trade.
4. Meet In-person
It’s always best to meet the team in person; it can give you an idea of how the company conducts business. You can tell a lot about a company by shaking hands, and feeling out whether or not your vision aligns with the organization. Keep these questions in mind during your meeting:
- Were they professional
- Were they on time
- Did they offer any suggestions for your home project
- Were they pressuring you to begin work or willing to adjust to your time schedule
5. Always Write-Up A Contract
Having a contract in place for your contractor is important for both parties involved. It protects both parties involved and holds everyone who signed accountable for the stipulations agreed upon. Most contractors will have a contract available for you to sign.
It’s your job to verify that all of the details meet your needs.
Even if both parties trust each other, always have a written contract in place for a home renovation project. It simply provides a clear map of how the work will be one, payment structure amongst other things. The absence of the written agreement can be fatal to a project it prevents each party from having false assumptions of what the agreement is or how certain problems can be resolved.
Oral agreement
If there was only an oral agreement if a dispute were to arise, there weren’t any written terms so they would have to rely solely on what was said, and words can oftentimes be misinterpreted. The biggest drawback is that both parties are relying on their memories; and during a high tension dispute involving large sums of money, people tend to be dishonest.
Litigation
Lastly, if it comes to a point where the dispute goes to litigation, then it’s much easier to fight your point when it’s detailed within your written agreement.
6. Monitor The Work Progress
One of the major benefits of investing in real estate is the ability to generate passive income. However, when you have a renovation project under-way, and the contractors realize your not their full time, they may try and take advantage of the situation.
That’s why it’s always best to show your face periodically throughout the week ask questions and get involved. It lets the contractors know that your a hand’s on the landlord, and the job needs to be performed according to what was agreed upon.
The reason your presence is needed is to prevent the contractor from cutting corners and using cheaper materials.
This Purely anecdotal evidence but a friend of mine purchased his first quad-plex at a steal because it was in need of some repair. The unit he was living in was vacant during the remodel. The oral agreement was to install dry-wall and installation in the entire home. Half of the money was paid up-front and the other half would be paid when the job was completed.
My buddy wasn’t planning on checking the work progress; he just randomly happened to show up to talk to the tenants and decided to take a peek. He was disgusted with the work he had seen, not only were there huge gaps between the drywall, but there was no installation placed in-between the drywall and exterior wall.
Luckily he caught the contractor before he buttoned everything back-up. Disappointed with the job, he decided to stop the project and pay the gentlemen for the work he’d done, and take it as a loss.
Although we shouldn’t have to check on the individuals performing the task, considering them being professionals. Your presence speaks volume, signifying that your investment in your property.
7. Write a Review
Writing a review is a way for you to pay it forward, it helps others get a better overall feel of the company. Good bad or indifferent, express your experience with the company.
Who knows you might be that lucky person that receives a call from a stranger asking how your renovation process went. These simple phone calls can make a world of a difference, making and breaking a customers final decision.
Therefore if you genuinely felt that the company did an outstanding job, write a review, it a makes a difference.
Final Word
We’ve heard countless horror stories of bad contractors, but there are those good ones mixed into the bunch as well. You can’t solely rely on trust that the contractor you hire will perform the job.
Implementing the steps above will not only help you find a reliable person to complete the task, but it also helps you identify a person that you can call for a job time and time again, as well as refer to others. So next time your looking to renovate, remember to trust but verify the credentials and do your due diligence.