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5 Tips for Finding and Screening Contractors

System - Tuesday, March 5, 2019

Depending on what type of real estate investor you are, there’s a good chance you’ve had to deal with finding and screening contractors to perform work on your properties. If you haven’t yet, then you probably will in the future. In fact, even if you plan to outsource the screening to your Fort Lauderdale Property Management company, it’s a good idea to go through the process once or twice by yourself. That way, when you do outsource the work, you’ll be able to know if your property manager is doing his job well and you’ll have a whole new appreciation for the effort involved with finding and screening contractors. 

1. Start with who you know

If you’ve been in the business any amount of time, you probably know at least one or two people who could point you in the direction of a decent contractor. A lot of contractors today are super busy with multiple projects, so it can be difficult to get their attention if you don’t have an inside line to them. If you’re referred by someone who’s already bringing the contractor a lot of business, you’re a lot more likely to get a positive response from the contractor. If you’re especially lucky, you might even be able to negotiate a discount. 

2. Never go with the first contractor you meet

If there’s one thing you should NEVER do, it’s agree to work with the very first contractor you meet. At least not before you’ve interview at least two other contractors for the same job. No matter how good you feel about the meeting, don’t do it. This is especially important if you’re relatively new to the world of real estate investing and don’t have a whole lot of experience working with contractors. Contractors can sense when they’re talking to someone without experience, and if they think they can charge you more because you don’t know what you’re doing, some will do just that. It’s also a good idea not to show up to your first meeting in a red Ferrari. If you give the impression you’ve got a lot of money to spend, you can bet your bottom dollar the contractor’s going to ask for a lot of money for the work. Bottom line, when you invite multiple contractors to bid on your project, not only do you learn new things from each one, you also end up with multiple bids to compare against one another.

3. Verify your contractor’s license information

Never hire a contractor without a license or insurance. Ask for both up front and then verify the information with the jurisdiction in which they’re licensed. Red flags to look for include out-of-date licenses, complaints, pending legal claims, or judgments. Also check for consistently bad reviews or horror stories on Google, Yelp, and other review websites. If there are only one or two negative reviews and the majority are positive, you might consider asking the contractor for his side of the story in relation to the negative reviews.

4. Communication is king

Communicate often and in writing. Make sure the contractor knows exactly what you want done, how you want it down, and when you want it done. You might not know exactly how you want it done, so invite the contractor to make some recommendations. You should do this with every contractor who bids on the project, and then you can start seeing patterns. If three contractors are all recommending the same approach, then that’s probably the way you should do it. If everyone tells you something different, it might be time to do some more independent research. 

The quality of communication can also be a good indicator of the contractor’s future performance. If he takes three days to respond to your phone calls before he’s won your business, you can be sure he won’t be any more efficient after he’s won your business. Likewise, if he doesn’t communicate in terms you can understand, then you might want to consider working with someone else. It is critical that you both have a shared understanding of what exactly the scope of work entails. If you do encounter a problem mid-project, it’s a lot easier to work through it with a contractor who communicates well. 

In addition to getting everything in writing, it’s advisable to have an attorney review the paperwork for your first few projects, especially for larger scale projects. 

5. Don’t pay for everything up front

Don’t make the mistake of paying for the full cost of the project before the work begins. As a best practice, you should set up a payment schedule with no more than 10-30% paid up front. If a contractor says he needs more money up front to cover the cost of materials, then that should be a red flag. If you pay him 10-30% and he still doesn’t have enough money to cover materials, then he can’t have had much money in his account to begin with—this is a sign of a contractor who isn’t doing much business, and there might be a reason for that. Remaining payments can be made as certain milestones are reached, or in the case of smaller projects, upon completion of the project. Finally, don’t forget to have the contractor sign a lien release when the work is complete. 

Ultimately, you might decide that dealing with contractors is more hassle than it’s worth. If this is the case, but you still want to enjoy the benefits of real estate investing, it might be time to talk to a Fort Lauderdale property management company. If that sounds like you, we’d love to hear from you!