Your contractor is a crucial member of your team—contractors can make or break a project.
But it’s still your team, so there’s plenty you can do to make sure your contractor is helping you make money and finish on time. And it starts with hiring the right contractor to begin with.
So how do you know which contractor is the best fit? Let’s break down the interview and figure out how to find the red flags and the green lights.
FINDING CONTRACTORS
You can find lists of local contractors on sites like Craigslist, Angle’s List, and HomeAdvisor. You can also ask other real estate investors, plus your friends and family, for referrals.
However you find those potential contractors, your interview process is still the same. Make sure you’re interviewing at least three contractors for a rehab job, especially if you’re just starting out as an investor.
STEP 1: PHONE INTERVIEW
In most cases, start your interview process with a phone interview. This is an opportunity to see if you might be a good fit in general—does this contractor have the experience and the resources to do the kinds of jobs you need done?
The most important thing to consider is whether the person you’re interviewing is honest. If your relationship is going to work, you need to know you can trust your contractor.
You’re not going to be able to tell immediately whether this person is honest, but gauge their answers, and if you realize they’re not being honest about something that’s a major red flag.
Ask them the following questions:
- Do they have a specialty (drywall, concrete, framing, pools)? What are they good at or not good at?
- You don’t necessarily need to hire someone who can do everything, but they should be able to do most things you need done or have someone on their team who is an expert at doing those things.
- How long have they been in business? Are they bonded, licensed, and insured?
- Make sure the contractor complies with state laws about licensing and insurance. If the contractor is bonded, that means it’s going to be much easier for you to get your money back if they take your money and run—so make sure they’re bonded too.
- How many employees do they have? How many subs do they have? Do they only have one sub for each trade that they keep using over and over?
- You want to have some options for specialties like plumbing. Make sure the contractor isn’t expecting to have total control over his subs. He should be able to give you a few options to choose from.
- Do they have references, a portfolio, and before/after photos?
- Major red flag if you can’t get any of these things. And make sure you follow up and call references. This is a good opportunity to find out if the contractor is honest. If he says a certain job went really smoothly and turned out great but his reference says it was a disaster, you’re looking at more than one potential issue with that contractor.
- Do they know the difference between a rehab and a remodel? Can they handle a large rehab job for an entire house?
- You should be working with people who have the manpower and mindset to rehab an entire house, not just remodel a single bathroom or kitchen.
- How are you used to being paid?
- Make sure the contractor isn’t expecting to be paid everything up front. Most contractors are happy with a payment schedule, and you should agree to pay no more than 1/3 of the price at the beginning of the project.
STEP 2: MEET AT A POTENTIAL JOB SITE
After you’ve interviewed the potential contractor over the phone, if you saw nothing but green lights, have the contractor meet you at a job site. This is usually a specific interview to see if they could work with you on a specific project.
Use this as a final opportunity to see if the contractor understands how your business works. Talk to the contractor about what you’re planning to do to improve the property. Ask for their opinion. Be on the lookout here for contractors who tend to over-improve the property. If code is to use 2x4s and the contractor says he would use 2x8s, that’s an unnecessary expense—and a red flag that this might not be a great fit.
But if the contractor seems to understand your business model and your vision for the project, talk specifics. Ask:
- How do you handle being behind schedule?
- How do you handle being over budget?
- How do you handle change orders?
If the in-person interview goes well, get a quote for the job and see how the contractor’s quote stacks up to other quotes you received. If a quote is much lower or much higher than the others, that’s your final red flag.
Bids that are too low are usually a sign that the contractor doesn’t understand the project or is desperate for your business. You probably won’t be happy with the outcome. And if the bid is too high, you might be asking the contractor to do the wrong type of work. Some contractors do high-end work, which costs a high-end price.
If you’re happy with the numbers you got back, set up a contract and a scope of work. And remember, you’re hiring this contractor to be part of your team—hopefully for years to come. If you’re both happy with the arrangements and with the outcome, you might never need to do another contractor interview again.
Be Daring,
Josh
