Other criteria to consider…
In selecting a contractor as part of your investment property team, there are a number of other criteria to keep in mind besides price alone. Though price certainly is a key criterion.
As mentioned before, you’ll want to be as specific as possible about your renovation needs when comparing contractors. For example, if you plan on rehabbing a kitchen, drawing a layout would be a big plus. You should include all necessary dimensions and existing layout changes , as well as an exact materials list for the new kitchen.
Some major chain remodeling box stores (for example, Home Depot and Lowes) provide layout assistance for free as well. Use them. The key ingredient here is to ensure that all contractors bidding on your project are quoting prices based on exactly the same design layout and materials.
Otherwise, you can’t properly compare pricing from one contractor to another.
At the very least, you’ll want to obtain at least three licensed contractor bids on the proposed project. However, you don’t necessarily want to take the lowest bid.
Too good to be true?
If a low bid seems too good to be true, and is way out of line with other bids, it should raise a red flag that you’ll need to investigate further with that contractor.
You should also carefully check all references supplied by each contractor. Keep in mind that references will usually be glowing, so your questions to them should be pointed and deal with the quality of work and whether the project was completed on time or not. You should discuss any payment problems or cost overruns the reference might have incurred with a particular contractor.
Checking with impartial sources
As a reminder, it’s always a good idea to check with more impartial sources as well. Your local building department as well as the Better Business Bureau are good places to start to see what sort of track record each bidder has had. Look for any financial or legal problems they may have had in the past as well. You’ll certainly want to also confirm that each contractor is fully licensed within your municipality too.
Besides price, part of your negotiation with any contractor should be some form of “pay as you go” payment schedule.
In this way your payments can never get too far behind the actual construction work that has progressed. You don’t want to find yourself a quarter of the way into a project that you’ve already paid two-thirds for already – especially if the contractor you so meticulously hired runs into financial problems during construction. If he is starting to run substantially behind schedule, you’ll have the leverage to delay your next payment until he’s back on schedule.
Of course, the greater the amount you can withhold until successful completion of your investment property project, the greater your protection will be.
photos courtesy of kitchen-ideas-for.com, loyallabor.net, buildingguide.co.nz