Finding Contractors

Finding a contractor that is honest and reliable is a tough, but crucial part of your real estate business. Here are some tips for finding that "Golden Nugget" of a contractor.

Referrals

This is the most obvious and easiest way to find contractors. Try to secure referrals from investors and friends; somebody you know and trust who has had a positive experience from this particular contractor. That is worth quite a bit. But don’t just accept an endorsement such as “He was really good, I’d use him again.” That’s basically saying, "If he was good enough for Sally, then he’s good enough for me.” There is much more to it.

What if Sally did not do her due diligence on the contractor? What if the contractor did a great job for her, but without being licensed and or insured, and thus did not pull permits where required? The answer is major-league liability for Sally, and now for you, should you hire him as well.

So, you need to ask Sally some questions when she gives you the referral:

1. Is he/she licensed and insured?
2. Did he/she pull permits where required?
3. Did they start on time?
4. Was the job completed on time?
5. Were there cost overruns?
6. Did you have to chase them at the end to clean up and do the punch list items?
7. Were there any mechanic’s or materialman’s liens attempted/placed?
8. Did he/she ever suggest a less expensive manner to complete the job?

Number 8 is a tell-tale question. Give me two apparently equal contractors, and if one has suggested a way to save Sally money on the job (known in the industry as "Value Engineering"), he has some ethics and would get my job. It also shows he is planning on working for you again, not merely looking to hit a home-run on this one job.

Drive New Construction Jobsites

I also recommend you drive by job sites where new residential construction is taking place. That’s something you may not have thought of. Understand that if a contractor already works for residential homebuilders it means they possess the two main pre- requisites you want from somebody on your rehab projects: trade-appropriate licenses and more insurance than you’ll require. Homebuilders are notorious for requiring subcontractors to carry very high policy limits so as to shield themselves from as much litigation as possible.

Note that I said “trade-appropriate” licenses. If they are a painter, cabinet guy, a flooring contractor, etc. they may not need a license for that municipality. More than likely electricians, plumbers, framers, roofers, and the general contractors will be licensed if they are working for a builder. I have yet to see an instance where new construction did not require a license for electrical and plumbing at a minimum.

And, of course, there is insurance. You want to be sure anybody you choose has the appropriate insurance coverage, specifically general liability and workers compensation. New-home builders are sticklers for verifying policies for accuracy, as well as being in force. If they’re active on the jobsite, their insurance is active too.

Homebuilders’ Association Directories

Yet another resource you might want to look at is the homebuilder’s association directories. The National Association of Homebuilders (NAHB) has state chapters; every state has one. If you go online (www.nahb.com) and do a search for your particular state you will be able to identify your state or more importantly local chapters; your county, region or even a city chapter if it is a larger metro area.

Known as HBA’s (homebuilders associations), they often maintain searchable (to the public) member directories on their websites. Why is this valuable? Most of them will allow you to search by a trade category, so if you’re specifically looking for a kitchen cabinet contractor, flooring guy or framer or whatever the case may be you will be able to come up with several names of local contractors that meet your minimum criteria. If they’re active with or seeking homebuilder business, how does this benefit you? Because they have the basics that you are looking for in a contractor! What are they again? Say it with me: “A valid license and insurance.”