There is no question.
If you aren’t leading your contractors, they are going to “lead” you. The #1 snag investors experience with house flipping has to do with contractors in one way or another. And though I’ve discussed it at length on the Lee Arnold System Blog, it’s worth another lesson.
If you invest in a property that needs work, you are likely going to be involved with a contractor in one or more of the following areas:
The relationships between investor and contractor is vital to the success of any project, but can become trying when any of the following problems creep in:
- Lack of communication
- Poor communication
- No communication
- Misunderstood communication
- Conveniently “forgotten” communication.
(Notice a trend?)
You must to be in continual and efficient communication with your contractors. No news is bad news.
Key #1 – Communicate with Your Contractor.
You need to know what is happening, when it’s happening, what the costs and projections are, what the deadlines are, how closely the schedule is being adhered to, etc. If you don’t know, they don’t know, so start the conversation.
Key #2 – Be Seen by Your Contractor.
Be a constant face on the job site. Show the contractor that you are hands on, that you will be there when you say you will and pop in unannounced to keep them on the job.
Key #3 – Don’t Bulldoze.
If you don’t want to get bulldozed by a contractor, return the favor and maintain a professional relationship. You can assert your stance as a professional AND be flexible to their advice regarding the project. That doesn’t mean you take every suggestion they make, but you should’ve accounted for appropriate changes in the budget and schedule when applicable.
Key #4 – Be Honest.
This is especially necessary to set up at the beginning! For instance, if you’re going to use a draw schedule, make sure your contractor understands up front how it’s going to work, when they will receive draws, how much, and what you are expecting. Then, don’t deviate from your word once the work begins. Don’t promise to give more than you can, and don’t give less unjustifiably. Remember, this relationship goes both ways.
Key #5 – Make Sure They Complete the Job!
There is little you can do to persuade a crooked contractor to finish a job—and you probably don’t want them to! If you’ve had a contractor abandon a job, your best move is to hire someone reliable to finish the job.
But, that’s not what I’m talking about. I’ve seen people make the mistake of paying the contractors when they’re “done” without doing a final punch list.
This is your job.
Do a final walkthrough with a roll of blue tape and a notepad. Mark up things like chipped paint, unhung towel bars, poorly done calking, or missing trim. Even the best contractors miss things, so get in there, create a punch list, and get the items knocked out as quickly as possible. Don’t pay the contractor’s final payment until this is all done!
Key #6 – Incentivize.
Time is money. You know this. I know this. Contractors know this. If you want a job done on or ahead of schedule, offer them an incentive.
It is possible to build lasting, cooperative, mutually beneficial relationships with contractors that last for the duration of your investing career. Don’t get discouraged if you find a dud. Network with other investors and with multiple contractors. Connect with a mentor or coach when things get sticky. And, most importantly, keep going!
To Your Success;
Lee A. Arnold
The Lee Arnold System of Real Estate Investing
If you want to learn more about working with contractors, finding the right deal, writing offers, and so much more, join me for a FUNDING TOUR. Not only are these 3 day events chock full of user-ready information, but if you book now, your $497 ticket will be paid for by one of the hedge funds I manage.
If you’re interested in learning more about the education you can receive with the Lee Arnold System of Real Estate, call us at 800-533-1622. If you have a deal and would like to get a quote from a private money, visit cogocapital.com