How to Find a Good Contractor for Fix & Flips in 2021

One issue that many new investors, or people who aren’t in the fix & flip world at all, don’t even have a clue that we deal with is how to find a contractor!

Contractors are vitally important to making your deal happen—after all, they’re the ones literally doing the work of upgrading the house so that you can sell it!

And of course, they’re doing a big project for you, there are lots of moving parts, and lots of money involved. In other words, there are plenty of places for things to go wrong.

Unfortunately with contractors, you can run into a host of problems, such as:

  • They don’t show up
  • They nickel and dime you for little projects
  • Don’t care about your time frame (they work too slowly and you miss your loan deadlines)
  • Do shoddy work!

So having a good contractor in your back pocket is one of the most important parts of being a successful fix & flipper! And since you’re probably not in this to do just one flip, you’re looking for someone who can help you out with project after project after project.

And a quick note…I don’t mean to denigrate ALL contractors—many are awesome people! But in the industry, you’re almost certainly going to run into a few here or there that don’t quite do the job to your expectations.

So let’s talk about how to find a great contractor!

Get a Recommendation

If you’re looking for a movie recommendation, which source do you trust…

An interview with the main actor on a late-night show, or your best friend?

You’re not going to trust the actor…it’s literally in their contract to market the movie! Not to mention the better the movie does, the more likely they are to get hired for other roles and/or get paid more per movie.

But your friend?

They have no conflict of interest. In fact, they’ll hedge towards being more brutally honest because you’re their friend and they’ll either want to save you from a bad movie or ensure you get out to see a good one!

Do you see how that could be the same thing with a contractor?

Reading three reviews online (which could be friends of the contractor) and seeing what they have to say on their site might not always be trustworthy sources.

However, if you have a friend or family member who built a house or did a major home renovation project, they’ll obviously have worked with a contractor. Then they can recommend them…or not.

Of course I wouldn’t pick a contractor solely on what a friend says. After all, they might’ve been doing a much smaller project than what you’re looking to do, or they’re not used to working under a fix & flippers deadline, or a million other reasons they worked for your friend but not for you.

But it’s a place to start!

Online Recommendations

Of course there are a million different places that you can look online to try to find reviews as well for a contractor. Like I mentioned in the previous section, you don’t want to rely on one that only has a couple of reviews. Find one with dozens or even hundreds.

A few places to look would be:

  • Angie’s List – Perhaps the premier site for finding professionals for your project. Their website boasts over 12 million reviews. Not bad.
  • Craigslist – Well, not my favorite, but it’s another place to look to corroborate info you get somewhere else.
  • Thumbtack – Similar to Angie’s list
  • HomeAdvisor – Basically another search site. If you can find a contractor listed on Angie’s List, Thumbtack, and HomeAdvisor with positive reviews in each place, you’re probably doing alright.

Facebook Marketplace

I know…Facebook for a contractor? If you haven’t been on Marketplace, it’s actually grown into a pretty robust place to buy & sell used items (I do it all the time) and also to find professionals. Since Facebook is great for conversations and to see what others are posting, it’s easy to join or start a conversation with people to find a good contractor.

Real Estate Group

This might be my favorite idea on this list!

What better way to find a good contractor than to talk to others who are doing exactly what you’re doing! They can know if the contractor is fast, reliable, trustworthy, and works well with fix & flippers. 

This is just one of the million reasons I say that you need to always be networking. You’ll be surprised at the never ending partnerships, strategies, and business opportunities that arise from just knowing other people interested in fix & flips.

Home Depot

Did you know that Home Depot has what’s called Installation Service Providers? They have licensed, local contractors vetted by them to carry out projects!

Pros: you get the trusted brand name of Home Depot to be fairly sure that you’ve got a contractor who knows their stuff. It’s a great way to find one.

Cons: more expensive. I probably wouldn’t go this route unless you’re having a really hard time finding a contractor or you’ve been burned by one before and aren’t willing to roll the dice. Although hiring a Home Depot contractor still isn’t a guaranteed win for you, it’s better than doing the research yourself and hoping you’ve found a good one.

General Contractor vs Subcontractor

Before I dive into hiring your contractor, there’s another option to consider.

A general contractor is someone who manages every detail of the rehab. They have a team that does a lot of the work themselves, and if a specialist (or subcontractor) needs to come in to do a project—like plumbing, electric, or roofing—they manage that as well.

That’s option one…hiring a contractor.

The second option is that you hire subcontractors for each individual project. The reason you would do this is that you’re effectively cutting out the middleman and you can save money that way. Another reason is that often a general contractor will have his team working on one or two projects on a time, while you can hire 3-4 subcontractors to come in at once and knock out a bunch of work at the same time. Theoretically, you can save some time (and therefore money) with this strategy.

However, I don’t recommend this. Instead of trying to figure out a single person to hire, and doing interviews, negotiating costs and all that, you now have to manage a dozen. You have to coordinate how to pay them, what you want from each project, and how they’re going to get into the property…and you have to do that with each one.

This is too hands-on, especially if you’re not an expert in rehab work. You’re much better leaving it to the expert. In fact, with our borrowers, we require they get multiple general contractor bids on the project. Only hiring subcontractors isn’t an option.

What If I’m a Contractor?

This is the third option—do the rehab work yourself!

It’s definitely a viable option and not a bad one to consider. In fact, you may want to do a deal or two just so you can get a sense for how it works with a fix & flip (although you may have already rehabbed fix & flips, just for other people).

Certainly you get to save money, have more control, and stick to your own timelines.

However, I usually recommend against people doing their own contractor work, even if they’re more than qualified to do it! The reason is simple:

Do you want to be a general contractor or a fix & flip real estate investor? You’re now a real estate investor, and you can make a lot more money in the long run outsourcing the rehab to someone else while you go find more properties to flip. It’s that simple.

It’s a lot like how I always hire real estate agents to sell my properties even though I spent a few highly successful years as a real estate agent. My wife is even a real estate agent…yet we don’t sell our own deals.

Picking Your Contractor

Okay. You’ve done some preliminary research, and you think you’ve got a good contractor that you might like to hire. At this point, you still shouldn’t just hire the contractor because you’ve done a bit of research!

This project you’re doing is expensive. It’s a lot of work. You’re on the hook for a lot of money with your hard money lender or partner who gave you the money. If things go poorly, you could lose bundles of money on the deal!

Plus, many people who have poor experiences with contractors—which is unfortunately a higher percentage than you’d hope—get turned off from doing fix & flips forever. Doing the rehab is definitely a hassle, which is why having a general contractor to handle this entire process is like having the world’s best security blanket. It makes everything feel safer and more secure. 

Interview Process

First, you’re going to do a basic interview with them. I recommend asking for a resume, or basically a portfolio of examples of some work they’ve done, how many projects do they do per year, and how long it usually takes them. Some contractors won’t be willing to do this…so don’t go with them. There are plenty of contractors out there.

Talk on the Phone

So the first thing you’re actually going to do is talk on the phone with them. Have you ever applied for a job, but they did a pre-interview first? One over the phone, usually by someone other than the person you’d actually be working for?

Those are mostly to make sure you sound like you can put a sentence together and that you’re not out of their price range.

Similar thing here. If the contractor isn’t nice to you and barely answers your questions, than you can know from the start that you may want to pass. You can also get a few tidbits from their answers at this stage, like if they tell you they’re so good that they’re incredibly busy—might be a red flag because you need someone who can get to your project on time.

But most of this is just common sense. When you talk to someone, you can just sort of feel it, right? You don’t have to best friends, but you can tell right off (generally) if this is someone you like and think you can trust.

Meet for Lunch

Some of you investors reading this might think this step is a tad overboard…not so! You’re looking for someone to take on a massive project for you that can result in tens of thousands in profit…or tens of thousands of lost money. You need to be as sure as you can be that you’ve got someone here that you can work with. This is a great time to mention to them what you do for a living and that you’re potentially looking for someone to partner with and bring lots of work to. More on this later.

Get a Bid

And then of course getting the bid!

In a minute, I’m going to show you my process of getting an exact, iron-clad bid with my contractors. If they’re not willing to play ball with your process, then you can know right now they’re not for you. Also, I’d definitely do this process with two contractors. Then you can decide about price vs trust factor vs just how much you like them. Often, price wins out, but perhaps it shouldn’t.

How to Work With Your Contractor

Let me start with a funny story (well at least its funny now…).

When I first got started in real estate investing, I didn’t have a clue how to work with a contractor. That’s how it is with pretty much anyone starting out.

I joke that I used to get a “napkin bid” which was that I would show the contractor what I needed done on the property, and he’d pull out any scrap piece of paper and write down a single figure and hand it to me. No context, no promises…nothing. I’m being facetious about the napkin, but that’s basically what was happening.

Of course the real problems came later when it came time for me to check on the work. I’m not kidding you that I walked into “finished” bathrooms that didn’t have mirrors or toilet paper holders. When I asked him about those things, he says “Oh, those are extra.” 

Right. Because anyone with half a brain would think that those are standard features of a bathroom! So anyway at that point I’m stuck paying for these things.

This happened to me a few different times with different parts of the house. Almost every time the contractor would find a way to get hundreds or even a few extra thousand dollars out of me to complete work that I thought was already completed!

I realized that I was the one making the mistake here. I needed a better system and I needed to hold them accountable.

So I started walking around with a tape recorder, a pen, and paper. When we’d walk through the property, I’d record the entire conversation. As we went, I also tried to write down every project and price. Then if I missed anything, or the contractor disputed something, I could go back to the tape recorder.

So that’s my first tip for working with contractors…

Line Item Everything

I’ve since refined my process where I now use this nifty template that I just fill out now when I go. In fact, this is what all my borrowers use nowadays.

The genius here is that everything’s in writing. There’s nothing that can change later because it’s here. You know everything that needs to be fixed, and there’s a price for each individual piece.

Keeping your contractor on target with this stuff is perhaps the most important step for working with a contractor effectively.

Draft the Scope of Work Yourself

If there’s one thing I’ve discovered working with contractors, it’s that they HATE paperwork. They’d rather be out there swinging a hammer and managing projects so they get done on time and with high quality.

After you’ve gone through the property with the contractor, you’ll know just as well as the contractor what needs to be done. You’ll make his day if you draft the scope of work yourself and give it to him to sign. Gives you more control over the process, and you’re not waiting for him to create the bid himself.

Give Bonuses and Deduct Pay

So I love this strategy and have been using it forever, but it takes some guts to do it…because you’re going to propose potentially cutting their pay.

Having your rehab work go over the allotted time gets expensive fast. For example, average holding costs on the property come out to around $50 per day. These are loan fees (especially the high interest charged with a hard money loan), utilities, insurance, and any other costs associated with owning the property.

So I offer the contractor a bonus.

Every day he finishes early, I give him a $25 bonus…

But every day he finishes late, I deduct $50!

The contractors I’ve worked with have jumped at the idea. They all think that they’ll get the bonus. If they have multiple jobs, they know they can prioritize yours and make some extra money. It may not seem like a lot…but if they’re done 2 weeks early, they’ve just made $350!

That’s pretty sweet considering they’re hoping to finish your job quickly anyway. And pretty much all my contractors have qualified for the bonus. 

You actually end up saving money as well. If you can save $50 per day, you have no problem paying $25 to get that. Plus, there’s huge value in getting out of your property faster so you can devote more time to your next deal.

This works like magic.

Check on the Property Frequently

This might seem obvious…but it’s something that investors do less often than you think! It’s also something that investors intend to do more often, but then don’t get around to it.

I’ve heard so many stories. Like someone who had a contractor tells them over the phone that the project is going well, but then they show up and no work has been done!

The more you check on the property, the more likely they are to stay on task. Plus, you can make sure they’re not going off-script and changing the job on the fly, or adding new projects to it. I’ve seen this happen.

Help Pick Materials and Colors

This is just another step of the oversight process. While your contractor is the expert, you’re still the one who hired them, and you’re the owner of the property. You have every right to be annoying 🙂

I want your contractor to feel you there, to feel a little pressure to do a good job and to stay on task. Making the expectation clear that you’re going to be involved in certain steps of the process sets the precedent from the start and they’ll give more attention to your process. 

With us at Do Hard Money, all of our borrowers are assigned a project manager with construction project management experience. They essentially do this exact process—picking materials, vetting bids, checking in frequently—which is how we know this works!

Offer to Give Them More Business

Some contractors are reluctant to work with fix & flippers because we tend to be a bit more…demanding? We have specific deadlines and profit numbers we’re trying to hit and we’re very protective. And because we’re going to line-item each cost and project, there’s less profit margin for the contractors.

Sometimes they’re reluctant, and understandably so.

One way to help that is to explain that you’re still trying to find a good contractor to partner up with on deals going forward and that you have others in the pipeline. Even if they’re not the biggest fans of working with fix & flippers, they are big fans of likely future work. They want to stay busy.

In the past I’ve had contractors working full-time just on my properties that I’m flipping. You better believe they appreciated working with me! Furthermore, once they get into your world, they’ll sometimes even bring you potential deals, or want to be a true partner with you on deals.

But Don’t Give Them Multiple Jobs at First

If you’re experienced enough to try to take on two projects at once, be sure you’re not hiring a general contractor for both properties that you’ve never used before! It makes sense to spread your risk around, just in case you’ve got a dud of a contractor working for you. I’ve used the same guy for multiple projects at once…but I had complete faith in his abilities. I’ve also been burned by using the same one for two projects.

Still Check-in Even if You’ve Used the GC Before

In my experience (and I’m sorry if you or your best friend is a GC), most contractors seem to move along slowly if they’re not being given a little friendly pressure. Perhaps it’s just that they’re busy and would rather spread around their attention, or just that shorter days are easier…I’m not sure the reason. So even if I’ve used a general contractor successfully on 10 other deals, I’m still going to check in frequently and make sure everything is going smoothly.

Get Help With Pricing

If they’re charging you a fortune, but they say the quality is good…pass. You only want quality up to the level of the neighborhood so you can flip it. If it were your dream forever home, then maybe you’d hire them. If you know another investor or contractor, perhaps they can review pricing with you. This also goes with the multiple bids idea…you can know what prices are there.

Ask Questions

Don’t be afraid to ask the important questions, whether in person (if you can) or over the phone (if you can’t get there). Ask things like “are we on time?” and “are we on budget?” This is just another way for you to show that you’ve taken an active interest and they better be reporting to you about what’s going on.

Do a Final Walkthrough

Make sure that at the very beginning they’ll agree to a final walkthrough. You’re going to look at everything with the GC right next to you. The key here is to not be afraid or intimidated to ask questions about quality and to have them fix things. If they haven’t done quality work, that’s their fault and they need to fix it ASAP. If they want to challenge you on anything they just outright didn’t finish, well you have your line-item bid ready to go to show them what they agreed to.

Conclusion

Whew! That’s a lot…but it’s essential in my opinion. The better you do this step, the more likely you are to make a profit! And then hopefully you can find someone who you can trust and can bring multiple deals to. 

Just remember the key:

It’s okay to be annoying. It’s okay to check infrequently. You’re the one paying, and it’s your project!

Good luck and I hope your next deal is a profitable one!

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