Are you looking for a contractor to work with on your next fix-and-flip project? I’ve identified five key characteristics that you should look for when you’re making your choice.
- Reasonable pricing (for both sides!). This doesn’t necessarily mean the lowest-priced contractor you can find, and if you come across someone offering rates far below their competition it should certainly give you a reason to start asking questions. Similarly, if a candidate for your next job comes in with an estimate much higher than the others you’ll want to find out exactly what you’d be paying for to justify the extra expense. What you want is to work out a deal with a contractor which will keep your own costs reasonable but be profitable enough for the contractor to ensure that they’ll show up and do a good job. In this way you’ll also form a good working relationship with you so that you can rely on them for more jobs down the road.
- Find a contractor who has specific experience working with fix-and-flip investors. This is helpful because they’ll have a solid idea of what your real goals for the project are and how to help you achieve them without cutting corners.
- An often-overlooked characteristic of good contractors for fix-and-flips is this: Does the contractor have money in the bank? In other words, can the contractor purchase materials and pay their workers without an up-front payment? If they can this means they can be paid after the successful sale of the property and this greatly increases your flexibility for taking on new projects. It also removes a substantial risk: If you pay a contractor a substantial deposit before the work is started, there is a chance that they’ll never show up for the job and you’ll lose the money. A contractor that is awaiting payment will be more motivated to finish the job on your desired timelines.
- It cannot be stressed enough that any contractor you hire has adequate insurance. They need to have a general liability policy and a workman’s comp policy. They must be willing to sign a hold harmless agreement to protect you from being part of a litigation if one of their employees suffers an injury on the job. And they must list you as an additional insured across all their policies while they’re working on your project.
- Capacity is an important characteristic of a contractor you want to work with. More so than even competitive pricing, what you need the most is someone who will complete your job on time, and what this means is you need a contractor who has the capacity to take on your job at the time you hire them for it. They need to have a reliable network of subcontractors and a stable of employees to make sure that work on your project moves forward in a timely manner and without labor-related delays and do the job to a high standard.
Keeping these criteria in mind, you can find a contractor who will be suitable for your next house-flip. If you have a mentor in the real estate investing business, you can also consider consulting them to see if they recommend anyone to work with – knowing someone’s first-hand experience with a given contractor can take a lot of the guesswork out of making your choice.