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Is it a bad contractor or...

...would the job have gone better if we had communicated better. The problem is that we suffer from a lack of imagination when we hire a contractor. As

real estate investors, we need contractors for jobs small and large. Our imagination is focused on the outcome; not the process and THAT is the source of our pain and suffering.

Here are a few tips from the investors point of view:

  1. Estimates: Get your estimate in writing with an assurance that the estimate is the price unless something that could not be seen at the time of the estimate is discovered during construction. Once the lathe and plaster or drywall comes down a hairball is discovered that requires more time and materials, it is only fair that the contractor be compensated. On the other hand, unscrupulous contractors often play a bait and switch game giving you a low price when they look at the job only to jack up the price when it comes time to do the work.

  2. Budget: Be clear with your contractor or project manager that the budget is the budget. Any changes that result in a cost differential should require a "Change Notice" that is signed by both parties. Be sure to include a contingency in your construction loan for things that you didn't consider or changes that cost additional money. Build into your contract a clause that the project is to be performed within the budget unless formally agreed upon in writing.

  3. Supervision: You, your project manager or your general contractor need to supervise the job site every day. Direct supervision keeps your materials and your sub-contractors on your job. Be sure that your contract specifies that once the sub-contractor starts work on your job, they are to continue working on the jobsite until that phase of the project is complete. Contractors often take on more work than they can manage and try to keep several jobs inching along which serves to slow progress on your project.

  4. Scheduling: This is probably one of the most difficult challenges for you if you don't have enough volume to keep a team or several teams busy almost all the time. If you are hiring all sub-contractors for your job, you will have to estimate their start dates. Some subs will have a rough in start date and a finish start date. They should be able to commit to starting on time within a specified time frame. For example, they should be able to start within three days of their scheduled start date. This is difficult because if a previous contractor doesn't finish on time, you will have to move the scheduled start date. Keep your subs advised of date changes as soon as they arise.

  5. Payments: Most of us don't get paid in advance and neither should your contractor. You should be willing to purchase materials in advance; however, progress payments are just that...payments for progress. Be sure to hire a contractor that has sufficient financial resources to live for reasonable intervals between payments. Withhold 10% of the contractors fee until their portion of the project passes inspection. Getting a contractor to return to a jobsite once they have received 100% of their fees is near impossible.

Before I launched Abriza, an industry colleague cautioned me about the real estate/contractor world. There are a number of factors that make the environment challenging. Each project is different. When doing a rehab, you aren't duplicating plans like a contractor building tract homes. Particularly in the mid-west where many homes are close to 100 years old, the conditions and materials may be different in every home. Your best bet for having a successful project is communication - spell out everything in writing before one nail is hammered.

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