In our last blog, we covered being a better landlord on your buy and holds. Here we’ll discuss a few tips to make working with contractors a little easier, whether on a flip or rental.

First, set a plan before starting, and stick to it! The plan should have a good, clear outline of how you want the project to finish. This includes materials and a budget. Many newer investors either don’t set a budget or blow past it. This is a recipe for disaster.

Second, contact your entire list of possible contractors and get bids. Many investors, to save time, may only talk to one contractor or sub. Take the time to really explain what you’re looking for, provide the plan & budget you’ve set, and get several bids. It’s worth your time.

Third, take the time to compare and contrast the different bids. Make sure you are comparing apples to apples. You’ll need to understand how and where the contractor is making money. Is there a line-item fee? Is the contractor “padding” materials or labor? Does the contractor include labor & materials in one line-item? You may need to go back and get more specific information from the contractor. Take the time to do this.

Fourth, ask and learn how the contractor handles changes, whether those come from you or them. This seems to be one of the biggest areas for problems. On any change, make sure you are clear as to what is being changed and how much it’s going to cost. Then put it in writing. I know, I know. That takes time and your contractor may push back. But this is how things go south, and fast!

Fifth, make sure you have a signed bid or contractor agreement! Many contractors try to avoid this because they know it will hold them accountable. Make sure you get one! That agreement should have time frames with penalties for exceeding deadlines.

Sixth, make sure you understand how subs are paid. Does your contractor pay the sub? Or do you make payments directly to the sub? It’s major problem when a sub comes to you and says they were never paid. You need something in writing that obligates either you or your contractor to pay them.

Finally, get a lien release upon making your final payment. You shouldn’t make the final payment until you are completely satisfied with the work. If you are, then you can get a lien release that proves the contractor has been paid in full. This can be very helpful is there is a lien placed on your property.

Jeffrey S. Breglio, Esq.
Breglio Law Office and REI Mastery U
www.reimasteryu.com
jeff@bregliolaw.com
(801) 560-2180