Investing in real estate presents one of the most exciting assets one can add to their portfolio. With the right combination of location and demand, a rental home may drive a stream of passive income for years to come. However, not all properties are ready to move in on day one. If you decide to buy an investment house, would you know where to find contractors to help you make it ready for renters?
Before you start a journey in real estate investing, it’s important to understand not only how to find a contractor, but how to evaluate their previous work and ensure they are qualified, licensed, and bonded. Here’s everything you need to know about how to find a contractor that can add value to your real estate team.
Prepare to Find a Contractor
When it comes to real estate investing, researching how to buy a bank-owned home is one of the easier parts. After calculating the cap rate and doing your due diligence on a property, it’s time to consider the physical condition of the property. Depending on what work needs to be done, your search to find a general contractor can start in many different places.
As you prepare to find a general contractor, start by determining what needs to be done to make your rental property ready to move in. While a general contractor may be able to help you with many repairs, certain repairs may require a specialist.
For example: if the wiring is not up to code, you may want to start your search for an electrician instead of working on finding a general contractor. Should you encounter issues with water pressure or leaking pipes, you should consult a plumber. Begin your search by narrowing down the scope of work and finding specialists in those areas.
Do Your Research to Find a Reliable Contractor
Once you have determined what needs to be repaired or upgraded, it’s time to determine whether you should find a general contractor or look for a specialist in a particular trade. No matter who you decide to work with, there are several points you should check off before signing an agreement.
The first step in your search should be ensuring your contractor is licensed and bonded in your state. Most states require contractors to hold a license to work in the home improvement trades. These not only include contractors but those in the specialty trades as well. In addition, bonded contractors hold special insurance to protect customers against claims on the work, including accusations of improper or incomplete work. When considering how to find a contractor, the first place to look is with the state licensing authority to ensure they are qualified.
When considering where to find contractors, ratings websites like Angie’s List or HomeAdvisor can help you look for workers and find genuine reviews on their work as well. However, the internet is not the only source for finding contractors. Referrals from your investment partners, including real estate agents and property managers, can help you find the right person for the job.
Finally, one of the key steps in how to find a contractor is evaluating their work. Although they may be able to provide examples, there is no shame in asking for references from current or past clients. Talking to someone they previously worked for can give you insight into the quality of work, but also how they manage their projects, and if they work under deadline.
Reach Out to Contractors
Once you have made a shortlist of possible candidates to work on your investment property, it’s time to find a general contractor to work towards making your visions come to life. Working with the right partner can help you unlock additional value in your home, ultimately letting you optimize your potential returns.
Before you start reaching out, do your research to determine how much your project should cost and create an estimate in your head. As you determine how to find a contractor, reach out to at least three different ones to get competing estimates on both monetary cost and time. Requesting an itemized estimate will help you understand profit margin and how much different parts of the job might cost. An estimate with a thorough breakdown will help you determine who is the right contractor for the job, and if other workmen may be required to get everything done right.
Select a Contractor
After going through a thorough search of where to find contractors, determining which are the most qualified, and going through estimates, it’s time to select a contractor. Because this decision could ultimately determine your potential rate-of-return on your investment home, it’s not one that should be taken lightly.
When making an offer, do not settle for the lowest priced estimate out of the bunch. Instead, when determining how to find a contractor, consider the estimate that creates a balance between cost, plans, and timeline. Any outliers – high or low – between estimates could be a red flag on either charge, or per the quality of workmanship delivered.
Once you are confident that you have found a general contractor, the next steps require you to settle on a detailed contract and negotiated payment options with your partner. Although you may be asked to pay an upfront deposit towards the work, you can discuss when future payments will be due, or even tie them to checkpoints during the work. All of this should be made clear in your contract, which will govern the entire project.
Of course, once you find a general contractor, your work is not done. Throughout the project, it’s important to keep lines of communication open to ensure that the work is being done correctly and in adherence to the plan that you both set out. By keeping regular communication lines open and documenting the work as its done, you can ensure the project is completed to your demanding standards.
Although the process of finding a contractor can be an arduous and time-consuming procedure, doing the research to find the right partner can not only give you peace of mind, but help you drive an increased return-on-investment for the new addition to your portfolio. Through a combination of research and soliciting bids, you can find the right contractor to create a home that will continually attract renters and help you create passive income for years to come.