It’s easy to find contractors. Contractors are everywhere.
But finding good contractors, who will get the job done quickly and honestly, who show up when they say they will, understand the needs of investors, and don’t inflate their prices… well, that can be a bit tricky.
Building long-term relationships with rock-solid contractors is key to your success as a house flipper. You need to be able to count on your contractors to compete every project on time and on budget, or you’ll find yourself losing money very quickly.
So how can you find, hire, and manage good contractors? Is there a trick to it?
I asked 18 successful investors to share their #1 tip for working with contractors… and here’s their advice…
My number one tip for finding and working with contractors is to hire slow and fire fast. When you have good contractors, this business is as awesome as many make it out to be. When you have bad contractors, this business can be miserable and you’ll wish for you old job back in the cubicle in no time.
To elaborate on hiring slow, you should take your time to find the right fit for you and your needs as a real estate investor. Please do not just get online and hire the biggest company in town to do your rehabs. You’ll likely have a guy in a Hummer roll up and give you an estimate that doubles or triples what you’ve estimated for the job.
Drive for dollars. Yes, not only is it good for finding deals, it’s great for finding contractors. When you see a house being rehabbed (usually a roll-off dumpster in the front yard gives it away), stop and talk to the guys working on the house. Take the time to see if they are keeping the jobsite clean. Are they respectful? See if they are cutting corners or are doing sloppy work. If they are doing all the right things, get their business card (if they don’t have one, you might want to reconsider).
Some sage advice I’ve learned over the years:
- If a contractor talks your ear off and goes on and on about how good he is… he’s probably not.
- If a contractor smells like alcohol at 7:30 in the morning, he’s probably an alcoholic.
- If a contractor complains about other investors he’s worked with, walk away.
- Don’t just assume a contractor’s first bid for a job is set in stone.
- Make sure you’re scope of work AND materials are clearly specified down to the smallest detail.
- Make sure the contractor’s bids include labor and material (DO NOT WASTE TIME PICKING UP MATERIALS FOR THEM. Are you worth $20 per hour, or $1,000 per hour?)
Danny Johnson has flipped hundreds of houses over the last 12 years in San Antonio, TX. He blogs about flipping houses at FlippingJunkie.com and has a best-selling book on Amazon entitled Flipping Houses Exposed: 34 Weeks in the Life of a Successful House Flipper. He also provides real estate investor websites at LeadPropeller.com. And he’s Justin’s bestest friend in the whole world. (Ha ha, Danny wrote this bio himself… thanks Danny! Love ya, man! – Justin)
The best way to find a contractor is by asking for referrals from other investors. Ask for contractor referrals at your local real estate investment club or meetup. Also, you can look for them on jobs and ask if they are looking for more work. We’ve gotten contractors by looking for trucks on the street belonging to contractors in the neighborhood where we’re flipping.
Look for a contractor who has worked for investors and understands the goals of an investor. Your goals should be to maximize beauty and minimize costs. Personally we choose to do things right and not cut corners. We also stand behind our work and have paid many thousands of dollars after a closing when something went wrong with a buyer’s plumbing or other systems unexpectedly. We believe it’s not worth tarnishing our reputation to increase our profit.
Holly McKhann is a full-time real estate investor and works with her husband Scott, having done over 200 fix and flips together in Southern California over the past seven years. Holly began her career as a CPA, working for Ernst & Young. She also earned an MBA in finance. Scott is a registered civil engineer with a decade of experience at public home builders. Their blend of expertise and experience has attracted multiple investors, allowing them to expand their business. You can check out everything they’re up to at HouseFlipMasters.com!
Holly and Scott love working from home and enjoying their freedom as entrepreneurs. They have been married 24 years and have 4 children ages 13, 15, 18 and 21. They live in Dana Point, CA and flip homes all throughout Southern California. Holly is a member of the House Flipping Formula coaching program.
In the beginning we would drive the neighborhoods we were rehabbing in and stop and get business cards from contractors working in the area. We would also go to the corner store and nearest Home Depot and get cards from contractors that stopped by. Today we get a lot of our contractors from referrals.
Different trades know others in the trades. The best way in the beginning is to find contractors at Home Depot or contractors working in the area. Have them give you a bid. We purchase all materials or reimburse contractors based upon receipts they turn in. We have the contractors bid labor only. Since we are paying for materials they don’t need to collect a large upfront down payment. We normally do two draws… one upon 50% completion and one at the end of the job once they’ve completed our punch list.
Shawn Wolfswinkel has 15 years of experience in Real Estate. He purchased his first investment property at the age of 19. Since then he has bought and sold over 700 properties. He has continued his training every year, attending numerous seminars and educational functions to strengthen his expertise in Real Estate. He has been educated on wholesaling property, pre-foreclosures, rehabilitation and contracting, leasing and management, owner financing, Commercial real estate, financing, contracts, and state laws. He currently owns 28 personal rental properties, buys and sells 100 homes a year through his Turnkey Company, TexasTurnkeyProperties.com, and manages 700 properties through his Management companies, Real Property Management Preferred located in Houston, TX and Real Property Management Albuquerque located in Albuquerque, NM.
Be determined and never stop recruiting more contractors. You have to be willing to engage contractors at every opportunity and onboard multiple contractors and teams. You cannot be satisfied with just finding or using one person. Network with: title companies; realtors; church or civic organizations; Home Depot and Lowe’s pro-desks; local hardware or supply houses; crews on jobs sites you come across; etc. Have your interview questions memorized so you can quickly and thoroughly qualify contractors at a moment’s notice. If they qualify, ask for samples of their work and contact their references.
Randy Lawrence is an indomitable entrepreneur with over 24 years of experience and four successful real estate investment companies. He is also a pastor and founder of multiple life changing ministries and in the last 15 years has impacted over 40,000 people. He has been featured in the St. Petersburg Times, Tampa Tribune, and seen on CBN, NBC and CTN as the “Transformation Expert” focused on transforming lives. Randy is also the host of the Real Estate Preacher Podcast.
Ask around for referrals, check references, and hire a good general contractor that can manage your projects.
Kristi Cirtwill is an active real estate investor who has purchased over 125 properties in the southern California area to flip and hold since 2008. She lives in Cerritos and hosts food nights and plays music in her spare time. To connect with Kristi and check out some of the incredible rehabs she’s done, head over to Cirtwill Investments Inc! Kristi is a member of the House Flipping Formula coaching program.
Get referrals from other investors. Inspect what you expect.
Andy McFarland is a self-made real estate entrepreneur who started with nothing and currently makes seven figures a year in his real estate business.
After getting fired from his last W-2 job in 2004, Andy went into real estate full time and has never looked back. Andy currently focuses on wholesaling properties in three different states; Utah, New Mexico, and Indiana. In 2015 alone, Andy did over 150 wholesale deals. You can follow Andy on his real estate journey by going to his website: www.iloverealestatestories.com or on his YouTube channel by searching for I Love Real Estate Stories. Andy is a coach along with Justin Williams in the House Flipping Formula and 7 Figure Flipping programs.
Get the scope of work in writing at the beginning and keep it close by, because you’ll need to pull it out many times to reference.
From being the youngest vice president of a New York City ad agency to creating a company that in 6 months controlled over $7,000,000 of property, Joe Fairless lives up to his Fearless Fairless nickname. He’s the host of the popular podcast, Best Real Estate Investing Advice Ever show where he’s interviewed Barbara Corcoran and Robert Kiyosaki.
He currently controls over $21,000,000 in real estate and consults investors who want to raise money and buy apartment buildings. Go to www.joefairless.com to get your free real estate investing crash course!
Wherever you are, and whenever you can, always ask for referrals. Even if you don’t need a contractor, always keep asking for referrals and building the pipeline, because you never know when you’re going to need someone. Maybe one month you buy a lot more projects than you anticipate and you don’t want to rely just on your main crew to do it. Maybe one month your crew gets sick, or, God forbid, they get into an accident, or whatever the case may be. So always constantly ask for referrals.
When you do get referrals, what we typically do is, we don’t just throw someone into the fire. We go through an interview process and make sure they answer all the questions the way we like. Then, if they pass the interview process, we’ll send them to do a really small job. For example, I’ll have my main guy doing the rehab, but I’ll tell the new contractor, “Hey, go paint this driveway for me.” This lets me see if they have any resistance to signing our contracts, see how fast they respond, see if they’re on time, see if they accomplish what they say they’re going to do by when, and so on.
If they do that small job well, then when another project comes along, I’ll say, “Hey, go re-tile this bathroom for me.” And just like that, little by little, incrementally, I increase their responsibilities as they perform. But during those small tasks, if you see that they tell you they’re going to be there at a certain time on certain day and they don’t show up, or they have excuses as to why the job’s not done, or they start just showing signs of incompetence or signs that they’re just not the right guy, then I just don’t call them anymore. And that’s it… that’s my number one tip.
Gabriel lives in Miramar, FL, and invests in Miami Dade, Broward, and West Palm Beach counties. He’s been investing since 2012, and is currently focused on rehabs and wholesales. He finished off 2015 with about 50 completed transactions and is aiming to double that in 2016. Check out Gabriel’s website, FloridaCashHomeBuyers.com, or connect with him directly on Facebook!
Place ads on craigslist. At the end of your ad, instruct the person to put “Go *your favorite sports team*” in the subject line. This way you only deal with people who you know read the entire ad and they know how to follow basic instructions. Also, if you have an office, have the contractor drop off a resume at your office at a specific time and see if they show up on time. Also don’t be afraid to ask for pictures and references.
Dave Payerchin is co-founding partner of Columbus Turnkey Houses and a Licensed Realtor with Shoreway Realty group in Ohio. His specialties are networking, raising capital, system automation, and developing/maintaining relationships. Dave has formal training in several facets of real estate investing and has been successfully closing real estate transactions in several states (including Ohio) since 2005. Prior to joining Columbus Turn Key Houses Dave worked as a real estate trainer and professional speaker. His hobbies include rooting for the Cleveland Browns & Cavs, rooting for The Ohio State Buckeyes, spending time with his parents and his 7 nieces and nephews.
I start with Angies List. I let them know that’s how I found them and that “we always leave great feedback for a job well done.” It keeps them on their toes. If they aren’t available, they usually refer you to good people.
William has been investing in RE since 2003 and has performed 11 rehabs, 5 wholesales, and 2 buy and hold deals. He lives and invests on the Central Coast of California, in San Luis Obispo County and the surrounding areas, where home prices range between $400k to 600k or more. Properties vary widely from upscale coastal areas, horse county, wine country and rural. His primary focus is rehabs. Check out his site, http://www.williambuyshouses.com/. William is a member of the House Flipping Formula coaching program.
I had good luck getting referrals from other rehabbers. Working for investors is different than working with consumers. When contractors have a proven track record of working well with other estate investors, I found that you generally have fewer problems.
Sharon Vornholt is the owner of Innovative Property Solutions in Louisville, KY. She has been investing in real estate since 1998 and has been a full time wholesaler since 2008.
Sharon is the creator of the Louisville Gals Real Estate Louisville Gals Real Estate Blog and the popular podcast “Let’s Talk Real Estate Investing”. She is also mentor and a coach who loves teaching others how to succeed in this business. You can find out more about her at LouisvilleGalsRealEstateBlog.com.
Doug and Andrea Van Soest
Ask other investors for referrals. Find 3 or 4 that are good, and then make sure you don’t give one of them more work than they can handle.
Doug is a former appraiser and his wife Andrea is an interior designer and licensed realtor. They began flipping houses in the Inland Empire area of Southern California in late 2008. They quickly transitioned to flipping houses full-time and have been fix-n-flipping, wholesaling, and buying rentals all over Southern California ever since. They are currently doing about 5-6 deals per month and just started a podcast called Spouses Flipping Houses.
Don’t be afraid to get multiple bids for contractors. I’ve been very happy with 2 separate contractors I use currently depending on the project, but that can always change. Never be complacent with one person since things can always change or they can always jack up their price.
Alex Bejenaru is a lifelong Southern California resident living in Yorba Linda, CA, with his wife and 2 kids. He started his flipping business in February 2014 as Premier Pacific Properties, LLC (webuysocalhomes.com), and in 2015, he quit his full time gig as a residential loan officer to be a flipper full time. In 2014 he bought 2 flips and is finishing up 2015 with an additional 9 flips completed and 2 properties wholesaled.
I have found all of my contractors through networking with other investors and attending REIA meetings. Many contractors will sponsor REIA events looking to attract business. This doesn’t mean they will be great contractors but you at least know that they are wanting to work with investors rather than owner occupants.
When working with contractors, my number one rule is to get everything in writing up front, and set a draw schedule for how your contractor will get paid. Make sure you are not paying for work that has not been completed yet… this is the easiest way to lose money to a contractor when he mysteriously disappears after you pay him 50% up front (yes, I learned the hard way).
Andrew Herrig lives in Dallas, TX along with his wife and daughter. He has been investing in the DFW market since 2013 when he bought his first rental property. Andrew is primarily focused on his wholesaling business, but also flips and has a growing portfolio of rental properties. He has done 11 deals in the past two years, and is looking forward to scaling his business in 2016 and beyond! Check out his website at http://www.andrewbuyshousesdfw.com. Andrew is a member of the House Flipping Formula coaching program.
Always have agreements and contracts in place. Don’t let a crew start without setting up your standards and rules.
RJ is an experienced real estate investor who has closed over 150 real estate transactions and co-founder of Columbus Turnkey Houses. He is an expert in the Columbus market. He has had formal training in deal structuring, creative financing, and other residential real estate areas. He received his BA in Marketing Management from Youngstown State University in 2005. RJ attended Youngstown State University on a full ride tennis scholarship where he played #1 Singles and Doubles all 4 years. His hobbies include tennis, photography, Cross-fit workouts, and guitar.
Get referrals, and have them start with a small job. If they do that well, give them a larger job. Also, be prepared for contractors to only last 10 months to 1.5 years before you have to find a new one. For whatever reason they get greedy after a while and start charging more. For that same reason, never show them the house you live in yourself (if it is a nice house) because rates will jump right after they see it.
Jack Bosch is one of the Country’s foremost experts in Tax Delinquent Property Investing and more recently an educator in Real Estate Investing. Since 2002, Jack has been buying and selling mainly unimproved land and has completed more than 3,203 land deals. Learn more at JackBosch.com.
Have a specific scope of work with SKU numbers. Tell the contractor you want to establish a long term relationship.
Tom has been investing in real estate for 13 years. A former Catholic priest, he is married with 2 teenage sons and flips houses in the Chicagoland area. Tom is a member of the House Flipping Formula coaching program.
There are 3 rules… vet, vet, VET!!! Seriously, though… here are my 3 rules for working with contractors:
- Always stay on the search for a good contractor. Don’t wait to find a contractor when you need one.
- Get it in writing. As much as vetting to make sure a contractor can do exactly what they say they can do, it is just as important to be ultra clear on what you want, what you expect, and what you will need to assist them with getting what you need from them in return.
- Mix it up. Don’t let the contractor know that you’re always going to use them. Remind them that they are competing for your business and that you’re not just going to give it to them. Remember, they are contractors, not employees or partners… the more you depend and rely on them, the higher their prices get and the lower their quality and efficiency becomes.
Delon Hall is a fix-and-flipper in Atlanta, who in 2016 will attempt to take on Chicago and Orlando as well. A wholesaler since 2008, Delon is also a buy and hold investor with 3 properties in NW Indiana, 2 in Chicago, and a package deal in the works in SW Atlanta. He is also a licensed agent with a team of 2 staff and 3 agents. Delon is a member of the House Flipping Formula coaching program.