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Investing Strategies

Need A Good Contractor? Follow THIS Advice... Part 1

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contractorHey Moguls, Steve Cook here…

Let’s talk about contractors, shall we? ‘Cause we all know that there are good ones and then there are not so good ones…

A good contractor will do quality work and complete a job according to schedule at a reasonable price. They will show up on time and finish the job rather than leaving it 90% done.

Keep in mind, however, that just because a contractor is good at one thing, doesn’t mean he is good at all things. In fact, be wary of those contractors who say they can “do it all.” Some can, but many cannot. Some contractors prefer to do just one thing since that is what they do best. In any case, I highly recommend that you check referrals of contractors. You’ll likely be sorry if you don’t. 

Building a list of reliable contractors is essential.

In addition to performing work for you, they can help you determine your repair costs, and you can refer them to other investors. The more you can help other investors, the more likely they are to help you.

For instance, if you find someone who is installing carpet and padding for $8 per yard, you'd better get their name and pass it along to all of your investor friends. They will save a few hundred dollars on every investment property and thank you for it. Or, say that you sell a home that needs a furnace, but the buyer doesn’t know who to call. You are doing them a favor by providing them with the name of a good heating contractor.

Always be on the lookout for quality, professional contractors. Chances are high that someone you know will be able to use them. 

Your Contractor = Your New Best Friend 

My contractor is my best friend... literally. This is a good thing since I am having him handle all of my rehabs. He knows the way I like my homes to be renovated right down to the color of carpeting, the types of kitchen cabinets, etc., so I don’t have to get involved with making any decisions regarding quality or color of materials used.

pickOnce we decide how to tackle the layout of a particular property, he hires all the subcontractors, negotiates the best deals for me and frees me to do what I do best… find cheap homes in good neighborhoods. Our relationship works very well. I can’t do his job and he can’t do mine, but together we make beautiful homes. (Cue the harp music now…)

Upon entering the business of rehabbing, you can choose to work with a general contractor, as I have, or you can be the general contractor yourself. Acting as the general contractor yourself can save you money since you won’t be paying someone else to manage the project, but it can also cost you money if you make mistakes due to your inexperience.

For example, if you close in a wall before having the plumbing fixed, then you will waste money tearing it back out to fix the plumbing and rebuilding the wall a second time. This may seem like common sense, but it’s only one of a hundred different things to consider when redoing a home.

Contractors who have been through the process before don’t typically make these kinds of mistakes. They are good at what they do and think ahead – fixing or building things when it’s most cost-efficient.

Now, this is not to say that it’s impossible to be your own general contractor. Just be prepared to take some lumps as you learn. 

Your Contractor = Mr. or Mrs. V.I.P. 

Though I don’t want to lessen the importance of any of your other team members, a good contractor is probably your most important team member. As a rehabber, you have nothing until your homes are completed… and completed properly.

Many contractors can get 95% of a job done, but the last 5% - the little things that make the biggest difference – seem to be impossible for them to complete.

As investors, we tend to hang on to these guys. Once they start a job, it’s often easier to just let them finish, even though it takes months for them to complete the last 5%. This delay can cost you much of your profit, so again, I highly recommend that you spend some time locating a good contractor and holding onto them once you do. 

But how do you find them?

contractorFinding and Qualifying a Good Contractor 

Contractors can be found in many different ways…

You can open up the yellow pages (yes, they do still exist), check classified ads, look for business cards at building supply stores, ask for referrals, stop by other jobs, take phone numbers off of trucks, etc. No one method of finding contractors is better or worse than another.

However, I would recommend staying away from the BIG ads in the yellow pages. These contractors typically charge the most. Not that price should be your number one criteria for qualifying contractors. Oftentimes, it pays to spend a little more (within reason).

In fact, though I try to get the best deal, I tend to stay away from the lowest quotes that I receive. My reasoning is that these quotes are usually much lower than everyone else, and I don’t feel that the job can be done effectively for the price I was quoted. In most cases, by not taking the lowest quote, I’m saving myself and the contractor some heartache. If I awarded the lowest-quoting contractor the job, he wouldn’t make any money, and chances are that I would have to spend more money paying someone else to finish their work.

Any of you who have ever had to pay someone else to finish another person’s work can attest that the overall job winds up costing a lot more than if you had just dealt with even, perhaps, the most expensive contractor from the start. 

Other factors to consider when qualifying a contractor include the following:

  • How long have they been in business? The more experience, the better.
  • Do they have their own truck and their own tools?
  • Do they have their own lines of credit or working capital to buy materials? If not, you’ll find yourself running back and forth to Lowe’s or Home Depot just to pay for materials.
  • How well can you communicate with them? Find someone who sees eye to eye with you and understands what you are trying to accomplish.
  • Do they want a long-term relationship? Some contractors are just “working for the weekend.”
  • How are their current jobs coming along? Visit the job sites and talk to the owners.
  • And finally, do they have any references? Check out the names that they give you, bearing in mind that they should be investors who have had some experience in dealing with contractors and have thereby formed a basis for comparison. Find out if these former clients were satisfied with the quality of the work as well as the time it took to complete the job. Ask if they would use them again. 

Is There Such a Thing as a “Good” Contractor? 

Yes! Despite what you may have heard, just like there are good Realtors and bad Realtors or good investors and bad investors, there are good contractors and bad contractors.

failHowever, most everyone is good for something and someone. Part of your job as an investor is to coordinate the efforts of your team members, find their strong points and their weak points, and determine who is good for what.

If you identify a weak spot in one of your team members, it is your responsibility to teach them how to do it, if possible, or find someone else to do that job. A lazy investor should get along well with a lazy contractor… someone who hates their job but tolerates it because it pays the bills and they may decide to take a week or so off if they make really good money for a few days.

In contrast, a hardworking investor will never get along well with a lazy contractor. They will never see eye to eye and would rather deal with a contractor who treats what they do as a business and carries themselves more professionally.

Stay Tuned

Okay, friends, we have covered a lot of useful information about contractors – good vs. bad, how to find them, questions to ask, what to expect and then some.

But – there’s even more to discuss when it comes to this very important and valuable team member.

So, next time in Part 2, we’ll cover payment schedules, contracts, insurance and the release of liens. Only then will you have the full picture – everything you need to know about contractors. See ya then.

Need to Know?

Is there something about today’s lesson, Part 1, that you’d like to know more about? Ask in the comments section below.


Do It To It! Immediate Action Steps

Decide whether you’re skilled enough to be your own contractor or whether you need to hire one.

Use referrals from investors and people you trust to find a good contractor.

Vet contractors – always check references.

Know the right questions to ask contractors before you hire them.

Refer your good contractor to other investors – everyone wins.

Make your contractor your BFF, when you find a good one.

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