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5 Vital Rules For Working With Contractors on Investment Properties

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As I get older, I want to believe that I get smarter. I learn from my mistakes. I learn from the mistakes of others. As we get older, our business has become easier, but there are still areas of business that seem to be struggling. I’ve talked to many other investors, but they seem to be struggling too hard in this area: contractors. A terrifying contractor.

To be clear, my business has come a long way from the beginning. I am no longer a person working in the field or being electrocuted. (My partner no longer makes me work in the field.) My biggest challenge in my business is finding and maintaining quality contractors.

As I said before, I learned from my mistakes and others. Every time I make a mistake, I’m thinking about how to organize it so that I don’t repeat it again. I wonder if the pendulum is swinging too much or if the rules are set too much and it is difficult to maintain the contractor. I would like to share the rules we have set with you to see if you should keep them or relax.

Related: How to choose the best contractor possible for your next refurbishment

All of these rules have been established as I have burned contractors in the past.

Five Key Rules for Working with Contractors on Investment Real Estate

Rule 1: Do not give the contractor more money than the work completed.

If you are working with a new contractor, you will need to ask the contractor for a week of work before the draw. We have been burned many times by our contractors and we don’t want to take any more risks. They say they are going to work and disappear. Most recently, another investor I know was torn by a contractor with a five-digit number. The contractor bid on his job, reduced fees, received deposits, and split them. We have experienced it in the past, and we do not give deposits until a relationship is established.

Rule 2: Do not make a final payment to the contractor until the work is fully completed.

In many cases, the contractor will disappear after the final check, even if there is still work to be done. For some strange reason I don’t understand yet, the last 10% will take 25% of the time. I don’t know why I don’t rename it to “last 25%”.

Rule 3: Understand the contractor’s cash position.

If they can’t get over the week and pay them with cash on hand, project delays can threaten whether they can complete the project. I’ve seen many times that everything works until something goes wrong and the contractor doesn’t draw. His workers will disappear because they are not paid and the project will stop unless you carry his salary.

Rule 4: Manage all materials.

The contractor will provide you with three separate listings of materials. During the project, we will deliver three deliveries: rough, between rough and finish, and finish material. These three orders cover 85% of all required material. There are two reasons to do this. One is to manage costs. There are preferred vendors that get preferred prices. Second, after auditing the project, I found that the contractor seemed to buy too much material when he was in charge of the material. For some reason, those materials do not reach the next site.

House flipping

Rule 5: Do not give new jobs to contractors who are unable to complete one project on time.

Often there are contractors who look at the amount of work we do and want a consistent job. They keep pushing and say they need / want more work. If one project is delayed by two weeks, the delay will be multiplied by the amount of projects in progress. And eventually they’re in a cash crisis and all your projects are shut down. It’s easier to find one contractor to pick up one project fragment than to pick up multiple project fragments.

Related: How to find and manage top contractors in your project

All of these rules have been created over the last 12 years to help you avoid getting into trouble, but they have been costing contractors for many years. It also makes it difficult to find a good contractor to handle this.

Are we overkill to protect ourselves?

I would like to hear some opinions.

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