As someone who has been through many renovations, I am asked many questions about the process, my experience, and tips for success. One of the most common questions is how to work with contractors.
I have heard the comments, so I know contractors can get a bad rap. Thankfully, this doesn’t have to be your experience. I work with exceptional contractors and have devised seven proven ways to simplify working with contractors.
These tips for working with contractors can be applied wherever you work with contractors, not just house flipping. If you’re fixing up the home you’re living in, improving rental properties, or investing in real estate, you’re likely to need contractors. Plus, I created these tips to use as needed, regardless of your relationship with them. Let’s get into my seven tips!
Number one: Pay for the Big Materials
When I was first getting started, one of my biggest fears was that a contractor was going to take off with money that I had given them. For that reason, I was intentional about not giving them a lot of money, which was my way of protecting myself.
This tip is especially important when you’re new to the industry, have limited connections to contractors, and are unsure about costs.
This simplified working with the contractor by easing my worries and taking control in an important area. It played out this way: When a contractor would say we needed to order shingles, I was either there to buy with them or ordered them on my own. I did this with just about every single big purchase.
By paying for the big materials, there were a couple of benefits. First, I made sure I was paying for the materials and they were getting ordered (I knew where my money was going for sure). Another benefit is I was able to choose how I paid for it. If I used a store credit card with deferred interest, I might not have to pay interest. Also, by taking control of these purchases, I had more interest in finding the best deal, so I shopped around.
I also want to mention that it’s up to you what you choose to purchase, but I don’t recommend the smaller things. If it’s more trouble than it’s worth, skip it. You also don’t want to make too long of a list, especially if you have other obligations.
Number two: Structure Payments Wisely
The next way I simplify working with contractors is by structuring payments. I structure payments to be dispersed throughout the project, with a large portion at the end. With the contractors I have used for the last eight years, we have built trust so I do 25% throughout, note that even though there is trust, I still follow this rule!
For those I haven’t worked with before, I do not do more than 20% to start, 20% in the middle, 20% at the end, and 40% at the back end. I make that backend payment larger when I don’t have experience working with them.
I highly recommend this structure for a few reasons. First, it’s not a crazy idea… It makes sense to get paid when work is completed (I’m not)! So if you’re giving a decent portion of money at the beginning, you’re more likely to get “ghosted” by your contractor. When we stagger our payments, we do it by milestone. The project needs to progress to a specific point to get each payment.
Number three: Visit the Job Site Randomly
Another way to simplify working with contractors is similar to the second tip. To assure peace of mind and keep your contractors on task, it’s a good idea to regularly and randomly visit the job site. I recommend showing up once a week and documenting progress with photos and videos.
I often like to do that with people I haven’t worked with before to get a sense of their timelines. They might have somebody who is one person there working for three days, and then all of a sudden, four more people come and they knock out a few more things. Take note, and be sure that things are moving along.
Keep in mind depending on where in the project they are, it may appear to be at a standstill. For example, during the framing, plumbing, HVAC, and electrical phase. With that said, you should look to see what is happening and what is missing, for example, you would be able to see the electrical put in or if there is a plumber on site.
Number four: Stick to the timeline
Next, I recommend checking progress against the job calendar to ensure the project is on track. While you’re doing your regular check-ins, turn to your calendar and make sure the project is proceeding in line with the plan.
This tip might seem basic, but it’s extremely important. Your calendar and timeline should be well thought out and complete, so when you’re checking in with it throughout the project, you have an idea of what needs to be done and when to avoid delays.
One example where the timeline is crucial is if you know you will be getting the hardwood floor installation next week, and the prep needs to be done the week prior. You’ll throw off the whole schedule if that’s not getting done.
Additional items on your calendar should be when inspections are, what teams or workers will be there and when (and if they can or cannot overlap).
Number five: Be clear
Your house flip is your project. It’s your money, it’s your purchase and your future sale. It’s your reputation! That’s why it’s critical to be extremely clear with your contractor(s) about your vision for the project. This helps you know you can be on the right schedule, within budget, and have confidence in the contractor to do the work you expect.
This tip has come in handy for me more than once, but here’s a great example. I was contacted by a contractor who was impressed by our work and he reached out about bidding on our next job. I had an idea of who he was and what his team did, and I wasn’t completely sold on their abilities or interest. I brought him through my most recent project, and it paid off. He said it was completely different from what he usually does. Boom! We knew we weren’t a good fit instead of going off of a list of experience and references.
I bring every contractor through a project I have recently completed and ask: Do you have crews that can do this kind of work? Right then and there, I’ll get my answer.
Number six: Have more than one Subcontractor Bidding
Have more than one subcontractor bid and hire for projects, even if you’re starting out. There’s a difference between contractor and subcontractor. Contractors tend to be a jack of all trades, whereas subcontractors are specialized in one area of a flip or renovation. Some examples are HVAC people, plumbers, electricians, and the like.
When you hire a general contractor, there are a couple of ways to do it. You can hire somebody who is your overall GC, who is in charge of everything, including getting bids. Or, you can have a general contractor who does everything your specialized contractors don’t do. In the latter, you’ll want a project manager who is a liaison between both and oversees everything.
I like the idea of having more than one subcontractor because no matter which model you’re using, you’re likely to come across a situation where somebody you’ve used in the past or want to use isn’t available. For dozens of reasons, having more than one subcontractor is important.
I had an experience that proved this point. I was getting bids for furnace and AC installation almost a decade ago. One subcontractor bid $20,000, while another bid $8,000! Our general contractor was going through his contact list to get a rough idea, so he didn’t mean to get this high of a bid, but it was eye-opening. If you only have one bid, you don’t really know.
Number seven: Be prepared to end a contractor relationship
While these are all essential tips, I find this one to be the most important. This can mean anytime during the relationship, too. Not only at the end of the project but also at the beginning if it doesn’t feel right.
Once, I had somebody whose bids were consistently getting higher and higher. I took notice, thought about it, and decided to bring in a different electrician. I took a 30% less bid from this contractor for electrical and brought him in immediately. It turns out it wasn’t a good fit. He required payment at the beginning of the project, which isn’t how I work. What we can learn from this is to ask the questions upfront to avoid these setbacks.
Remember, the people you bring onto your job site are doing work for you, but the project has your name on it. Think of these contractors as your partners, and confirm they will be accountable for their work.
Successful Contractor Relationships
These are my most important seven tips and they affect your project. By keeping these in practice, you’ll succeed more in keeping on timeline and budget!
Ready to get started in flipping (or refine your existing flip business)?
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