The following was written by Nick Baur, founder of the South Side Investment Club.
When I’m seeking a general contractor (GC) for real estate projects, I typically begin by contacting other investors to see if they know of any good contractors that need work.
Most investors, no matter how well you know them, will not give you their ‘go-to’ guys. They don’t want you keeping them busy or getting them used to higher pay or whatever other differences there may be. If I am keeping a general contractor busy and we have a good working relationship, I don’t want to share them either. The same goes for my realtors and the rest of my power team. This isn’t being selfish, it’s being smart.
Having said that, this works if those investors do know a GC that has done work for them but, they cannot keep busy. Sometimes investors get stuck with too many properties on the market and hesitate to buy more, at which point their contractors will be looking for work. The investor will want to help that GC by referring them to other good investors.
Other Ways to Find Contractors
Another great way to find a good contractor that knows how investors work is to keep your eyes open, look for rehabs in progress as you drive neighborhoods. When you see a pile or construction debris in the front yard, it’s a good sign some serious rehabbing is taking place. Ask to speak with the boss and ask if the house is an investment property. Pay attention to the quality of work, below is a list of questions that might help you decide if this is a contractor you would like to do business with.
Is the jobsite clean and orderly?
Is there trash all over the place or is it confined to a dumpster?
Is there drywall compound and paint on the floor, on switches and plugs (things that should have been covered first)?
Is the line between baseboard paint and wall paint clean and straight, how about at the ceiling?
Are there beer cans everywhere?
Are they smoking in the house?
Is everybody on the job site working or are they standing around talking on cell phones or texting?
You get the idea. I don’t know how many times I’ve stopped at jobsites to meet a contractor and because of some of the things I just mentioned, I will throw the contractor’s card away on the way out the door.
Another good source of contractors is your local Home Depot. Go to the contractor desk (pro desk) and ask them for referrals. Tell them you are looking for a handyman or contractor that can do everything. Contractors that are there regularly develop friendships with the people that work at the pro desk. It’s a good way to find the more friendly contractors. Ask for contractors who have a long-standing account history. You want a contractor that is either doing the work or hiring subs directly beneath them to do the work with their direct supervision.
Another great source is Craigslist. You can search by a skilled trade or real estate and then use the search tool by entering key words like (general contractor, house flipping, investor friendly contractor, etc.) In fact, it’s a great way to source a GC and I encourage you to do so by placing adds to source a good, reliable GC.
The ad should be simple, short, direct and have a call to action, i.e.; “Seasoned Real Estate Investor with several properties needing full Rehab. In search of General Contractors with fair pricing, quality work, clean job sites, licensed and insured and who work directly with their crews. Contact me directly for additional details. Ready to hire!” Something along those lines will grab the GC’s attention. Once they call you, you will need to phone screen them.
Questions to Ask a Prospective General Contractor
It is usually easier to find someone who has done work for another investor. This is mainly because they will likely understand that you are not looking for regular homeowner prices. You bring them the benefit of more jobs which means more work and more money! You help them by providing a way for them to avoid having to constantly find more work and compete for jobs.
Ask if they’ve done any work for anyone else that is flipping houses or is a real estate investor. If they have, ask how many jobs they’ve done and over what period of time. Ask for names and phone numbers that are willing to provide a reference regarding their work. Find out what they liked about working with an investor and if they’d like to work for other house flippers.
If they have worked for an investor that flips homes, ask if they have before and after pictures of the property(ies) they could share with you? Ask about the rehab budget for the property and if they would be able to share the scope of work? Explain that you ask this of all new potential GCs.
Other questions to ask:
How long have you been doing this line of work?
Do you do the work yourself with additional help, or do you sub everything out? Subbing out can be more expensive but is not necessarily something to avoid.
How many people do you have working for you? If they don’t or just have one or two guys, it may be difficult for them to handle big rehabs and definitely will be difficult if you have more than one rehab going at a time.
Is there anything you don’t do? Do they do foundation work? Do they do minor electrical or plumbing? Do they do roofing? What about framing? Some guys really only want to do minor things like drywall and painting. Ask if there is anything they don’t like to do. In this business it is best to find someone that can do it all or hire people that can fill in the gaps.
Are you currently busy with work? If so, ask when they think they might be free. You don’t want to wait three months for someone to start your job. Trust me.
What projects are you currently working on and when I could meet you to walk the job? This will help you determine if you could foresee a working relationship. We are in the real estate industry, however you need a good working relationship with your GC.
Are you licensed and insured? This one is up to you. They don’t have to be to do general contracting work and light rehabs, however I strongly encourage you to only use those who are. Some will not be licensed but will be able to have friends or associates pull permits for them when they are needed. You really should have licensed contractors for specialized work like electrical, plumbing, HVAC, roofing etc.
The insurance piece is a big deal especially when working with hard money lenders. They will want to confirm that your contractor is insured since they will have a large financial interest and want to secure that interest not only through a lien position on title but also protecting their investment.
Over the past 20 years, Nick Baur, a St. Louis native, has had a passion for real estate. He has been a party to thousands of real estate transactions and generated over 25,000 leads in his real estate businesses. He is the owner of Real Estate Rehab and the founder/CEO of the South Side Investment Club and SSIC Inner Circle, the coaching and mentoring arm of the South Side Investment Club. He is active in St. Louis real estate investing through Real Estate Rehab but truly enjoys teaching others the ins-and-outs of how to use real estate to build a lifestyle and the long-term wealth that they deserve.
Nick Baur is not an employee of Equity Trust Company. Opinions or ideas expressed are not necessarily those of Equity Trust Company nor do they reflect their views or endorsement. These materials are for informational purposes only. Equity Trust Company, and their affiliates, representatives and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal.