5 Steps to Hire the Best Out-Of-State Contractor
Many investors find profitable properties outside of their own state. This is actually a good thing for a number of reasons:
- You won’t have to take time out of your busy schedule to make multiple trips out to the rehab site.
- Your finding pool becomes potentially much wider than it would be investing in your own state.
- You have flexibility to find deals in states which the best hard money lenders can fund directly.
Just as you would investing in your own state, you need to build a strong REI team when you invest out-of-state. It becomes even more important to surround yourself with the best realtors, lawyers, lenders, project managers and, of course, contractors. Since you can’t visit the property frequently (if at all), you must hire a team you can trust. Never fear! Do Hard Money is here to bring you 5 steps you can follow to hire the best out-of-state contractor for your investment deal. You will want to cast a wide net at first and then narrow the prospects down through each step until you finally find that golden contractor for your property.
1. Start with an Excellent Referral
If you’re looking to hire a contractor with whom you’ve never worked before, the best place to start is referrals. Though you want to make sure the work is completed on time and for a competitive price, the most important factor overall is the quality of the work. Therefore, you will want to only accept bids from contractors with solid reputations for excellent work. Many of these contractors are found through referrals.
You can obtain referrals in the following ways:
- From a good real estate agent – Real estate agents know everything about the market in which you’re investing, including the best areas and the best contractors. We recommend asking your real estate agent if they know 4-5 contractors in the area who’ve done great work for clients in the past. You can get a ton of referrals that way.
- From other investors – Check out local investment groups online (Facebook, BiggerPockets, etc.) and ask around for good contractor referrals. Seasoned investors will definitely know which contractors are the best to work with and which to avoid like the plague.
- From online research/reviews – This is a great way to start your initial search for contractors. Check out the online reviews for contractors in the area. Yelp is particularly helpful to see what others have to say about a certain contractor.
2. Collect Bids from Each Contractor
Once you’ve compiled a list of potential contractors, it’s time to start the narrowing down process. First, contact each contractor on your list and ask their availability for a rehab project in which you’re investing. Give them the property address, tell them what work you want bids on and ask them to include prices on any other work they think needs to be done on the property. Make sure they know you’re only interested in work done to make the home resell quickly.
As you collect the bids, keep track of the contractors who replied to your inquiry in the timeliest manner. You will want to do business with these contractors who value your time and actually want your business. The contractors who get back to you will most likely respond with pretty general numbers and quotes. That’s when you’ll start the next step of the elimination process: fighting for specifics.
3. Fight for Specifics
After you receive bids from contractors, be sure to reply back thanking them for their bid. Let them know your interest in hiring them, but that you and your partners need to see an itemized list of the work that will be done and how much they’ll charge for the work. Insist on specifics. This is a very important part of the narrowing down process because many of the contractors who aren’t up to your standard won’t respond. At that point, they’ll have done the hard work for you and eliminated themselves.
The good contractors will reply with an itemized list. Now you can compare contractors to see who charges better prices. You can also get a good grasp of what’s worth spending your money on with the rehab work. For example, if a contractor can install granite counter tops in the kitchen for $3,000, it makes sense to do it. Whereas, if the cheapest bid you get for granite counter tops is $16,000, it may not be worth the investment.
4. Ask for the Labor Cost
This step serves as the final gateway before you choose your contractor. Ask them to remove the cost of materials from their bids and only include the price of labor. Now you can discern which contractors are honest and which are padding the bill for extra profit. When they remove the material cost from their bid, you’ll see exactly what they’ll make from the job. You can compare these totals and see which contractors really want to earn your business and which would be the most cost-effective.
Full transparency in a contractor is an excellent sign of an honest, dependable, hard-working individual. Once you see which ones are giving you the best prices, you can then research their reputations online and narrow down your search further to the one perfect contractor.
5. Set up Contract Terms
Now that you’ve found your ideal contractor to suit the needs of your investment deal, it’s time to draw up a contract. It’s never a good idea to pay your contractor up front, as it takes the pressure off of them to get the job done in a timely fashion. It also gives them an opportunity to take the money and run. Fortunately, Do Hard Money’s policies prevent that from happening. We break up the loan into draw amounts dispersed throughout the rehab process.
You will want to be just as specific in your contract as you were receiving bids from contractors. Outline a schedule and deadline with expectations clearly stated. Include a payment plan. Also, some of the best things you can include in your contract are bonus and reduction incentives. For example, if a contractor completes the work faster than outlined in the contract, they can receive a reward of a 5% bonus. Likewise, if the work is not completed on-time, a 5% reduction in price can occur.
We hope this helps you feel much more confident in taking your investments to the next level! Did you know that Do Hard Money provides a personal project manager for every deal? We do so in order to ensure your rehab work stays on-schedule and on-budget. We also take the pressure off of you having to worry about dealing with contractors as the work progresses.
Now that you know how to hire the best contractor, let’s put your knowledge to the test! Start your next real estate investment deal by clicking on this link to schedule an appointment with our investment associates. We can discuss your financial goals with you and outline a plan to help you achieve those goals.
If you have a property in mind, that’s fantastic! We would love to help fund your deal! Just click on the yellow ‘GET PRE-QUALIFIED’ box on the right and fill in the fields to get pre-qualified for your hard money loan today.
You can also give us a call at 801.948.9774 to get in touch with us right away. It’s time to start applying what you know and start your next profitable REI deal with Do Hard Money. Schedule your appointment today!