Assembling Your Property Investment Team – The Contractor, Part 1

An essential team member…

Most contractors will agree that their greatest asset is their reputation. Any contractor who’s been around awhile has that all-important reputation to protect.

In selecting the right contractor, check out all references your potential contractor supplies you with. Make sure your questions to his previous customers deal with the quality of the work performed, and whether past projects were completed in a timely fashion, and on budget. Any payment problems or cost overruns the prior customer may have incurred with a particular contractor should be discussed to see if they were reasonable cost overruns.

It’s also a good idea to visit some of the houses your potential contractor has renovated as well, to check out first-hand the quality of construction. And you may want to check with some other sources, too.

Your local building department as well as the Better Business Bureau are good places to start to see what sort of track record a particular contractor has had. You’ll be looking for any financial or legal problems they may have encountered in the past.

Fully licensed?

In addition, you’ll want to make sure your contractor is not only fully licensed with your local county, thus ensuring his reputability, but you’ll also want to make sure he carries his own workers compensation insurance for himself and his own workers.

For small projects, you’ll want to be sure your contractor is a good “fit” for your personality. You’ll be working with him extensively on a daily basis, so you must be able to communicate ideas well with him. Make sure he’s a good listener, and understands the scope of renovations you’d like to accomplish within a set budget. Also check to see that he’s being proactively creative – coming up with his own ideas that you hadn’t thought of that will either save you money, or increase the desirability of your house.

Contracts

When your property investment renovation is going to be a large one, make sure everything is in writing. A contract is only as good as the contractor. Any renovation project must be implemented in the spirit in which it was negotiated.

Contracts for extensive renovations should contain detailed specs and drawings on a room by room basis, including the exact materials to be used. (With major rehab projects, it’s the architect’s responsibility to come up with the specs so that there’s little open to interpretation.)  A contract should also be very specific as to how to deal with any changes an investor would want during the renovation.

Change orders…

Customarily these “change orders” should be acknowledged and signed for by the purchaser at the time of the change in plans or materials. In order to avoid problems during rehab, there must be a symbiotic relationship between the contractor and the investor.

The contractor has his job to do, and any reputable one will follow the contract explicitly – including finishing the project in a timely fashion. And contractors expect to be in constant contact with investors through the entire renovation process.

Renovating investment property is a two-way street, and contractors should not be abused by investors either. As long as the project is progressing on time as per the contract, investors should refrain from overusing that well-known quote from “The Agony and The Ecstasy,” “when will you make an end?”

photos courtesy of  local.ctpost.com, make-my-own-house.com, local.yahoo.com