Mistakes to Avoid When Hiring A Contractor

When you've purchased an investment property that needs some updates or repairs, the first thing you will need to do is find a good contractor. Unfortunately, this is easier said than done. Most people will turn to family and friends for a reference.

While getting a referral is a good idea, it doesn't guarantee that the contractor will actually deliver what you want. I learned early on in my investing career that not getting control of the contractor in the beginning of a project, can be a very costly mistake. To help you avoid these headaches, I'd like to share with you the top two mistakes that real estate investors make when they hire a contractor. These two tips alone will save you from massive frustration and help you keep more money in your pocket.

Mistake #1: Not providing the contractor with a written plan. Most investors will walk a contractor through a property and tell them what they want to have done. You tell the contractor you'd like to repair a broken window, he writes down "replace window". Not the same is it? Imagine that this kind of misinterpretation is going on the entire time that you're meeting with him, and guess what? You'll never know it. He'll just give you one big number, that will cost you thousands more than it should. It's important that you be very specific when communicating with a contractor. The best way to do that is to put your requests in writing. This way, there can be no misunderstanding.

Mistake #2: Paying too much upfront. This is by far one of the biggest mistakes that a lot of beginning and some experienced investors make when hiring a contractor. Most contractors will tell you that they need 50% down and the rest when the job is complete. With 50% payment upfront, how do you know that Mr. Bad Guy Contractor won't just disappear with your money? Unfortunately, you don't, and 50% of any amount is a lot of temptation for an unscrupulous contractor. Payments should be decided based on your timeline for the project and when certain milestones have been achieved. The payment schedule should be discussed and agreed upon with the contractor before any work begins. Always make sure that there's more work completed, than money paid out.

Avoid these mistakes when you hire a contractor, and you will be well on your way to saving frustration, time, and money on your next project.

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