Dealing with a bad contractor can be one of the most frustrating parts of real estate investing. However, they aren't all bad and finding a great contractor can make all the difference in the world. I'm going to share with you how to find great contractors, as well as how to work with them in a way that benefits you both. There's so much more to hiring a great contractor than simply finding one.
If You Want the Best, You Need to be the Best
The first step to finding a good contractor is being the right customer. Great contractors are in the minority and they can choose who they want to work with. They don't put up with people that are going to be a pain and they want to work on the jobs that fit their skillset. If you want the best, you need to be the best.
4 Ways You Can Be the Best So You Can Attract Great Contractors:
1. Know the Job
Each different kind of contractor has their own set of skills. You need to understand what the job entails so you can tailor the right contractor to the job. Otherwise, you either have someone not qualified for the job or someone who's overqualified.
Plumbing is a simple example. If you have a clog in a drainpipe, you may not need a licensed plumber that does big commercial jobs. Someone who's not even a licensed plumber can clear out that drain. On the other hand, you need a specialized licensed plumber for the job if you want to put in a new plumbing system.
This can be tricky to navigate if you're just getting started in real estate. As a mentor, I teach others with the intention of equipping them to make good decisions so that they get the best deals, hire the best contractors, and do this business right and make good money.
What are Great Contractors?
It’s important to note that when I refer to finding “great” contractors, I’m not necessarily suggesting a big or small company. A great contractor is fitting the right company to the job and finding someone who's good at their role. Great is relative to the task. I personally prefer working with smaller outfits where the owner is doing some of the work and overseeing the project. The key is knowing your job, that way you can fit the right company into that project.
It’s okay if you know the problem, but don't really know how to solve it. Solving the problem can be their role. At least you know what the problem is because they don't want to deal with confusion. They want to work with clear, concise people that have their act together.
2. Communicate Clearly
One of the key ways to hiring a great contractor is clearly communicating expectations from the beginning until the very end of the job. Nobody likes to work with a boss that is confused, because then they don't know what a good job looks like. Great contractors take pride in their work and they want to do it right. You need to clearly communicate what your expectations are so that they either meet the expectations or exceed them.
If you don’t clearly communicate what needs to be accomplished, they won’t know what that is, and you’ll have a problem hiring great people. What contractors will do is price of job higher because they think you're going to be a person who is going to change their mind three times and complain all the time.
Take responsibility when you screw up or miscommunicate. When you ask them to do something that ends up being incorrect or looking stupid, take responsibility and apologize. When you do that, they'll do the same thing back and take responsibility when they drop the ball. Whereas they're not going to act that way if you blame them for your mistakes. You need to be clear on what your expectations are and when there are changes, you need to be clear on what those are so that there is no confusion.
Give Your Best and You Will Get the Best
This is all about being a good boss, a good manager, and a good businessperson. It’s about being a good customer too, and that means being clear in your communications. There are misunderstandings and mistakes. Sometimes I buy the wrong materials. I still make those mistakes, but I take responsibility and offer to pay a little more for the extra work they end up doing.
Great people want to work with other great people. Give your best and you will get the best from the best people. If you don't do this right, you might get the first job with that great contractor, but you'll never get a second one.
3. Fair Pricing
Since this is a relationship, you need to be clear and fair with pricing. I tell contractors I’m getting a few more bids, but that I'm not going to simply take the lowest priced one. I'm going to take the best contractor for the job.
Contractors need to be profitable for several reasons. First, it’s important to our economy. Secondly, if they don’t make money, they’re not going to work with you anymore. I have a great video Why Profit is Good and Why That Matters to You. Also, you're never going to gouge a contractor because they'll always get you back by not finishing the job on time. In the long run they're going to make their profit no matter what. So instead, be fair with the pricing.
Pricing is Not Always Correlated With Quality
Now, surprisingly, the lowest price doesn't mean the lowest quality if you're working with great ones. I had a recent $36,000 concrete job. I went looking for some new contractors and the one that I liked the best, that had the best reputation, best reviews, and that concrete suppliers recommended, ended up coming in with the lowest bid. I was thrilled and he was hired. He was so low that he could have raised his prices and still won the bid, and I told him as much.
However, you do need to be suspicious if their price is way too low. What you're looking for in three bids is all of them to be relatively close together, within 5 to 15% of each other. If somebody's drastically too low, then there could be a real problem there. To check the quality of their work you can look at some of their other jobs and talk to previous customers.
Pricing Changes Based on the Economy
If things are booming and they have lots of work, they raise the price on a new job because it has to be a more profitable than the one they have lined up. If the economy is in a downturn and things are slow in that area, they'll drop their price dramatically just to get the job, even if they're great.
4. Pay Quickly
Fast pay makes for good friends. When you pay quickly, you build a good reputation, creating opportunities to work with all kinds of great contractors.
Tips for paying contractors:
- You need to have the money. Don’t hire a contractor you can’t pay. Don't buy the property if you don't have enough money to pay the contractors necessary to get the job done right. Do it right or don't do it at all.
- When you do get the invoice, pay quickly. Structure your contracts to make sure you're paying at the right time of the job and you're not paying too ahead of time, but when you do get the invoice, pay it immediately.
- Pay cash, or by check or wire instead of with credit cards. Contractors appreciate the extra 3%. I do use credit cards when buying from suppliers, like Home Depot, but not when paying contractors.
Recently I had a job I wanted to get started on and my people were still working on a previous project. When I asked one of my guys if he could recommend someone for some electrical work, he was quick to direct me to a close friend that had recently struck out on his own. He recommended me to his friend because I always pay his invoice on the day he sends it. He told me he’s never seen anything like it his entire business life. When you pay fast, you make contractors happy.
5 Tips for Finding Great Contractors
You need to get a least 3 bids for a job, but how do you find the great contractors? Here are places where you have the highest probability of connecting with someone who will be a great contractor:
1. Angie's List and HomeAdvisor:
The reviews on Angie's List and HomeAdvisor are helpful, however, sometimes they have bad reviews and the problems were due to the customers not the contractor. Not all great contractors are on these lists. There are some great ones out there that are too busy doing jobs to be in the world of marketing. But it's a good place to start especially when dealing with specific trades like electrician, plumber, HVAC, and roofing.
2. Recommendations from Other Great Contractors:
Birds of a feather flock together, and great contractors know other great contractors. They've been on the job site together and seen each other work. They've seen the speed at which they work, the way they operate, the way they deal with their employees, and how they deal with other great contractors.
If you are calling up some contractors on Angie's List and they are booked up, you can ask for a recommendation from them. Tell them what the job is and ask if they know anyone suitable for the job. Remember, know what your job is and communicate it clearly.
3. Recommendations from Suppliers:
Another way to find great contractors is getting recommendations from suppliers. This can be anywhere from your Sherwin-Williams, your Ferguson plumbing fixtures, all the way to even Home Depot or Lowe's. In fact, I’ve told some people to literally camp out in front of the contractor services desk at Home Depot for a day and talk to every contractor that comes through. You can also ask the employees at Home Depot who they liked the most. They will know who they like working with. This can be a great place to get names.
4. Poaching from Other Job Sites:
If you know an area is getting a lot of rehab work, you could drive around and look for any houses that have work going on and check it out. Maybe go talk to the contractor or workers who are at the site.
My favorite time to go is a Friday at about 5pm. If they're still on the job site at that time, they're already way up in my book. Usually most lazy contractors quit around 1pm, but the good ones are still there trying to finish some stuff up, so they have the whole weekend to themselves.
Another little tip on driving around, especially if you know you're poaching, send a woman to go say hello. If you walk up as a dude, they're going to be a little bit more standoffish. They will be more open with a woman.
5. Recommendations from Real Estate Professionals:
Investors usually don't want to share their good people, so real estate agents are better source for recommendations because they may not be as tied to the outcome. The problem with this is, this is kind of the blind leading the blind. Sometimes people think they have a good person on their hands and they really don't.
Review: How to Find Great Contractors
Hopefully one of the main points you’ve learned is that finding great contractors starts with you being great yourself.
- Know Your Job
- Communicate Clearly
- Price Fairly
- Pay Quickly
Then you can attract the kind of people that you really want to work with and that are going to do the best job. Even if you're working with a great contractor, you still want to follow the rules in my video 7 Things You Should Never Say to a Contractor.