Letting someone else handle your investment properties is usually an uncomfortable thought. How could they possibly know better than you?
However, sometimes you just don’t have the time to micromanage every little task. New investors and seasoned real estate veterans can both run into situations where outsourcing is called for. Repairs, renovations, and other maintenance duties, including some emergencies, are an inevitable and recurring part of the job.
To make your role a bit more hands-off, knowing how to deal with vendors, contractors, and subcontractors is a must. Some of them can be a pain to deal with. Others will prove to be a blessing, and you can make fruitful long-term arrangements with the right contractors. But it’s still always your job to understand how to manage contractors. This helps you ensure every project and duty is completed properly and on time.
When you start dealing with contractors, vendors, and subcontractors, keep these important tips in mind.
1. Don’t Make The Final Payment Until The Job Is Done Right
Most contractors will be competent and will not rip you off. But when you’re left with less money and a project that never even really started, you probably paid for everything upfront.
It’s a common story: you paid the total amount due, and the contractor simply vanished. All too often, contractors will disappear after they receive the final check due to them, even when there’s still work to do.
It’s important that you work with a fair arrangement for both parties. You can’t reasonably offer to pay for everything only once the entire project is completed. Likewise, it isn’t fair that you pay everything before the project is over.
Break payments down into a suitable arrangement. If the last 10% of a project takes 50% of the time, something is wrong. But if a significant portion of the payment is left for the project’s completion, you and your contractor should both be fine.
On the payment note, professional contracting businesses will always be transparent about their rates. The invoices they provide should include:
- Contractor name
- Contact information
- Date of invoice
- Completion date
- Description of work performed
- Address of property where the work was completed
- Cost of materials
- Grand total
- Warranty information, if applicable
This transparency is beneficial to both parties. Contracting work is a detailed process, and honest work comes with transparent pricing and invoices.
2. Look Over Their Documents
Legitimate contractors are required to have a series of documents. They are expected to be able to provide copies of:
- Their contractor license
- Business license
- Contact information
- Insurance policy with you listed as insured
- W-9 when you have to file a 1099
As a bonus, the best contractors will normally provide references for completed work.
Proper License & Insurance
It’s easy to check if your contractor is an established business that is insured, licensed, and bonded. Each state has an online directory where you can verify a contractor’s license and insurance.
Remember, working with contractors who work “under the table” can be risky. Many are fully competent and will do a great job for a fair rate. But if they’re avoiding taxation, insurance, and licensing, they might be avoiding other key details required for their job. It’s also harder to vet them and if something goes wrong, your recourse options may be more limited.
3. Get A Few Bids
This doesn’t mean you should just go for the cheapest deal you can find. But in combination with these other tips, you should look at all your options
Looking at all the bids available will help you gauge the market. When you need a contractor or vendor’s services, compare any reviews you can find with the rates they offer. The best bids are those that offer the best balance between affordability and the competence you need to make sure the job is done well.
If you find two bids that are about the same, you can bring that up in your initial conversations. In some cases, you may be able to get a discount.
4. Discuss Expectations Beforehand
Many things can happen during a project. So, it’s important to discuss your expectations ahead of time. Here are a few ideas to help you avoid an unpleasant situation.
- Discuss the payment schedule ahead of time
- Talk to them and set definitive deadlines together before getting started
- Make sure they understand not to damage anything inside the residence
- Let them feel comfortable sharing any discoveries of deficiencies or other problems found during their project
- Ask them not to comment on the quality of another contractor’s work in front of tenants
- Establish a reliable communication channel
It’s important that you and any contractors you work with maintain a professional demeanor. You and them should feel comfortable interacting from the start. After all, you’ll have to deal with each other several times during the project. If things are uncomfortable or tense from the start, try to work it out. If it seems like more trouble than it’s worth, part ways.
5. Pay Attention To The Contract
Lastly, pay attention to the contract you’re signing. Many of the worst problems you could face can be avoided through the vetting steps we’ve covered. But beyond that, having a fair and well-written contract is your best form of insurance for larger jobs.
If you’re working with a trusted vendor, verbal contracts can work well for smaller projects. They can also be a good sign in a long-term relationship. But high-stakes projects, especially with less well-known contractors, usually deserve a well-written and elaborate contract.
The contract should be clear and thorough, representing both sides’ interests. That means the contract should be even more detailed than the invoice. It should include all the work the contractor will complete down to the last detail. But it also includes the tools and materials you will cover.
Your contract can (and often should) cover details like tile and paint colors. The point is not to leave anything important open to interpretation. That can often leave you with a result that’s different than what you were looking for. Details like who supplies the tools and materials can never be overlooked.
Hiring the right contractor is a detailed process. Skipping important vetting steps can be costly. Even small issues such as making sure you get along can help ensure a more rewarding partnership.
Take the time to make sure you’re working with established and/or reputable contractors and vendors. Equally importantly, try to get a feel for how well you will get along with them. Communication is key, so it is always better to deal with people with who you can get along with.
Hi, I’m just an inspired recent real estate beginner investor named Miguel Rivera from a modest town neighborhood called Pigeon Hill in Aurora, Illinois, the City of Lights! I have 3 years in so far investing in real estate and excited to continue to walk my chosen path to reach my ultimate financial goal of living off my rental income before I reach 35 years old! Driven by infinite growth potential and guided by my mentor, I managed to get started and make it work with just a modest salary, practically no education in the field, learning and applying some key habits. This website is a collection of all things that I have learned so far that I wish can help other recent real estate investors! Click here to view more about my story.