Probably one of the most important steps and pieces of information is finding the right contractor for getting some or all of the job done.
I know many of you are handymen and would prefer to do it yourself but you must remember that you're not going to be able to do everything. Try not to waste time, money and resources on getting things done (like plumbing or electrical work for example) that you know you cant do.
This is how I personally conduct business with contractors. I always bring multiple contractors and get multiple bids for the work to be done on the property. I hire a general contractor that hires all the sub contractors and gets permits on his own. The benefit is that I can spend more time going to other properties and getting other work done with out having to be at the job site each and every hour. On the down side, I'll probably be losing a bit of margin and some profit that I could of possibly made. However, if you've done your homework right, having a general contractor should enable you to get the job done sooner, more efficiently and done right the first time which will in the long haul save you more money.
Even if you have a best friend that is a contractor make sure you still interview multiple contractors and get multiple bids. This is a business transaction with several thousands of dollars going back and forth so you definitely want to make business worthy decisions. Plus, you always have to keep the flame under your main guy just to make sure he does not slack off or get too comfortable. Contractors have a tendency to do that once they see the business coming in.
Always sign an agreement and a sworn construction statement. A verbal agreement is just asking for a disaster. The agreement will specify exactly what work will be done for what price. It should have a detailed list of the changes to be made, the updates that will be completed and the length of time it will take to finish the project. The sworn construction statement will have a break down of costs showing you where all the money is going from your rehab loan (or cash if you choose that method).
You hear it all the time that contractors ran with the money and never shown up again. If you're paying cash make sure you never pay all the money upfront.
If you're getting a rehab loan through a bank, they will disburse the money in three currencies (depending on the bank). They require the contractor to finish each phase before he gets paid. Then they ask you or a representative from their bank to check the work and finally allow the disbursement of funds.
To find good contractors ask friends and family that have experience or have had someone do a job for them. Ill repeat this again, make sure you tell each contractor that there will be multiple bids on the property. Quality of work is important so find a reputable company. Reputable not as in high price heavy duty guys, but someone that you can rely on that will be at the job site every day. Make sure the general contractor will be at the job site or will have a supervisor overlooking the procedure of the work. Get references and contact them if you have to and due your homework!
I've seen many times that a contractor will easily go over the time allotted to them to finish the property. There are special situations when this occurs like finding additional items that need to be taken care of or waiting for permits. But primarily its because the supervisor or the manager was not on site and the workers just are not working and getting paid by the hour. So now I add a clause to my contract that has the contractor pay for every day they're late on finishing the property. I have it set to where they at least make the daily interest payment for the mortgage that way I avoid having to cough up more money for a mortgage payment and the contractor has some sense of urgency in getting the job.
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