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The best advice we've seen on selecting contractors | By: Robyn Thompson

If we had a dollar for every time a REIA member came to us asking how to find a decent contractor, or, worse yet, asking how to fix a situation where a contract stole money or didn't finish a job or just flat disappeared, you wouldn't have to pay dues because of all the dollar we'd be rolling in.

As with every other skill in real estate, the right way to do this is to find out what successful people are doing, and just do that.

One of the most successful people in the whole rehab business is Robyn Thompson, who's the guest speaker at our February 1st REIA meeting. She's going to talk about how to find, finance, fix, and flip houses in the inventory-tight (but incredibly profitable) market of 2018.

Get the details and RSVP at www.CincinnatiREIA.com 

She was also nice enough to create this guide for us about how to avoid contractor rip-offs and find the right grownup people to fix your houses for you.

The Fine Art of Finding the Right Contractor             By Robyn Thompson, “The Queen of Rehab”

Many real estate investors shy away from houses that need rehabbed because they fear hiring contractors. We have all heard the horror stories of rehabbers who’ve lost their shirts due to crooked contractors

I am here to tell you that contractors can be your worst enemy or your best friend, depending if you hire a good one or a bad one. So how can the beginning novice real estate investor get the job done on time, on budget, and at a high standard of quality?   The answer is by following all eight of the critical prescreening steps below.

  1. Ask the contractor you are interviewing, how long have they been in the business? I prefer at least five years of experience in the trades. I want a contractor who has seen and repaired every strange, odd, and crazy thing that could be wrong with a house. Experienced contractors know how to estimate all tough projects, and experienced professionals can give an accurate price to fix any problem.

Inexperienced contractors, on the other hand, underestimate repairs to get the business, and then they try to push their mistake onto you by upping the price halfway through construction.  The investor needs to say NO. NO is the most powerful word in the dictionary, and you need to use this tool.  If a contractor did not have the knowledge to make a good estimate, it is their problem, not yours. They need to do the job for the price they gave you.

  1. Ask for three references from the last three major projects that the contractor has recently completed. And make sure you call to verify the references and the quality of the workmanship performed. The quality of work should be satisfactory to the homeowner and should have been completed in a timely manner.

If any of the references don’t check out, do not hire this contractor.  If they gave you false information up front, you know they cannot be trusted.  Move on to the NEXT quote.

  1. Ask for a copy of the contractor’s license (if required in your state), and for a copy of their Worker’s Comp insurance. Once you receive a copy of their license, make sure to check that they are not suspended. Also check to see if any complaints have been filed against the contractor with the Better Business Bureau.

It is absolutely mandatory that a contractor prove that he, or she, has Worker’s Comp for all the employees that will be working on the job site, before they start renovations. If one of the workers has an accident, you do not want to be sued as a potential employer.

 Make the contractor pull all necessary permits required by your local building department. The homeowner should NEVER pull the permits. The contractor should also be responsible to pass all necessary inspections required throughout the construction process.

 Make it mandatory for all contractors to buy all necessary materials to do the renovations. It’s a waste of your valuable time to buy materials, and it’s possible that if you do, the IRS might reclassify your contractor as an employee. If your potential contractor can’t buy materials, himself, move on.

 Always demand a six month to one year warranty of all parts, labor, workmanship, and materials provided by the contractor. This warranty should be in writing. WARNING: If a contractor will not provide a warranty and stand behind the quality of his or her workmanship- DO NOT hire them!

  1. Never agree to pay any contractor by the hour. You pay a fixed price for the complete job. Never pay the final payment in your independent contractor agreement until the project is 100% complete.
  2. Ask for financial references (ex: where the contractor purchases materials). I will contact the supply houses to make sure the contractor is not behind on paying for materials because I do not want to give the contractor a check to payoff an old bill and they have no money for the materials they need to buy for my job.

 The last words of advice that I can give to anyone beginning a renovation project is to make sure every agreement with a contractor is detailed in writing with an independent contractor agreement. A detailed list of materials required should be listed in the comprehensive scope of work.  The documents should have work completion time frames, penalty clauses for finishing late, require all permits be pulled, and inspections completed before final payments are released.

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