So how can real estate investors, landlords and property managers evaluate contractors and handymen, before laying out thousands of dollars for that new roof? Here are five questions that savvy investors, rehabbers, property managers and landlords should ask themselves and contractors before giving the green light to start dismantling the plumbing system.
Question 1: Do I need a permit?
Particularly in cities, larger jobs require a permit from a government bureaucracy. When in doubt about whether a job requires a permit, you can always call the local housing inspection office to ask. (While there is occasionally some gray area here, be cautious when crossing government agencies on this – permit fees are a source of income for local governments, and they take their income seriously and will not hesitate to issue fines and other penalties).
Other than paying a permit fee, what does this mean? Generally the work must be performed by a licensed contractor for the permit to be approved, which means Cousin Vito is not a viable option. Verify that a contractor is licensed before taking the trip to the local permit office.
Question 2: If I don’t need a permit, do I still want a licensed contractor?
Make no mistake: licensed contractors charge more, because their license is on the line. They also must meet certain minimum requirements, such as carrying insurance. For large, complex jobs (even ones not requiring a permit), generally investors are advised to use a licensed contractor with a full team of workers, several trucks and every power tool known to modern science.
But what about leaky faucets? Clogged drains? Paint jobs between tenancies? For simple, smaller jobs, a handyman can be quick, cheap and just as effective. When you find a good one, be sure to occasionally provide him with an extra case of beer.
Question 3: What are their recent projects?
Like everyone else, contractors specialize in certain markets and clientele (read: some work in slum neighborhoods, some service the fabulously wealthy and the others are somewhere in the middle). Property managers and landlords should get a sense for both where the contractor typically works, and what quality of work they do. This comes by (drum roll please)… actually driving around and looking at their projects! If you are not handy yourself, bring a friend who is, to look at their work sites and gauge the quality.
And remember: there is a time and place for lower-end contractors, so do not simply dismiss them; when you have lower-end properties that need work, or relatively easy projects, these are often the people to call.
Question 4: How long have they been in the trade?
A shifty contractor will lie or equivocate if asked directly, so take a side angle and ask “So, how did you get into this business?” If they are vague on dates, just find conversational ways to press them: “How’d you make it through the real estate crash? Tough time to be a contractor…” This matters, because someone who apprenticed under a master craftsman and whose entire life is based around their contracting business is a much different case than the guy who lost his job a couple years back and fell into it as a way to make a few quick bucks and make ends meet.
Question 5: What warranty can they provide on their work?
Skilled professionals, whether they are licensed or not, will generally stand by their work: “If for some reason it stops working over the next few days, just call me and I’ll come back over.” Ask for their warranty in writing, and if they do not have it, ask if they can write it on their written proposal.
A Few Last Important Points
So where do you find contractors and handymen in the first place? Ideally, from people you know and trust – ask around among other investors and even among your friends and family. Swing by a real estate investing club (see our directory of REI clubs for one in your area) meeting and ask the people you meet who they use.
When a contractor claims to be licensed, get a copy of their license (or at the least their license number, which you can call the labor and licensing department in your state or province to verify). When they provide a quote, get it in writing, including a breakdown of the work to be performed. Contractors are far less likely to change the price later if they have given you a written, detailed proposal.
Lastly, be careful not to pay too much in the form of a materials deposit. Use common sense when deciding how much to pay them up front, and when in doubt, a third of the total price should be a firm ceiling.
This handy investing article was first written for ezLandlordForms and we are happy to share it with investors on REIClub's blog.