If you don’t have construction or renovation experience yourself, hiring a professional general contractor for your BRRRR projects can be a game-changer. As Peter Drucker, the legendary management consultant and educator, said in his advice to entrepreneurs, “Do what you do best and outsource the rest.” Construction and renovation are definitely things you can outsource! According to Associated General Contractors of America, an industry association for the construction industry, the industry has approximately 680,000 employers and over 7 million employees.
Now I know what you’re thinking: There are countless people with trucks and a pair of overalls that call themselves contractors…how do you find a trustworthy general contractor that can make a positive difference in your business?
This is a valid question considering that the Federal Trade Commission stated that Americans lose about $1.4 billion to contractor fraud and scams annually. Additionally, Home Advisor cited that poor workmanship is the #1 fear of those hiring general contractors. Despite these realities, doing simple, practical due diligence can often save you from the kind of nightmare experiences I had early on in my investing career.
Avoiding a horror story!
If you’re already involved in some sort of real estate investing network and interact with other real estate investors, you have probably heard horror stories of all the things that can go wrong when hiring a general contractor.
A general contractor is a person, or a business, that can oversee and manage your BRRRR renovation project for you. It can be a single person that works with subcontractors to get a renovation project done or a larger business that employs their own specialist tradespeople and use their employees to finish your project.
As a BRRRR investor, it is critical to get a general contractor that understands what BRRRR is and can work with you to finish your project on time and within budget to generate the maximum ARV on your project.
Learn to ask the right questions. Learn to ask many questions.
There is no guarantee, but by asking questions you can avoid some of the bad apples that are out there. Finding a general contractor is not just about calling up a few and getting a price quote based on your requirements!
Start with the Preliminaries.
Request their GC’s license. In every town and city, there are requirements that a general contractor needs to meet to get a GC’s license. Remember, if you choose to use an unlicensed general contractor, then you are your own general contractor. You will be responsible for any mistakes or issues that come up when the Building Inspector stops by.
Request proof that the general contractor is bonded and insured. This is usually part of the requirements for a GC’s license. Ask to see proof of insurance, typically general liability, workers’ compensation, and property damage insurances. Get copies of their Certificates of Insurance, too.
Get references! Ask to speak to at least three recent clients. Ask questions about the quality of work, communication, how were any snags in the project handled, and did the general contractor stick to their quoted price and timelines.
Questions for the general contractor.
The list below is not exhaustive but should give you an idea of what you should be asking. Questions like these will help you to get insight into what the references said, and how the general contractor works.
Initial meeting and project discussion.
How big is your company? What tradespeople do you employ directly and what parts of the project will you be subcontracting?
How many projects do you have going on at one time?
What would you add or take out of the project scope I described to you? Why?
Have I missed anything that you think is important?
Reviewing the written price quote (and yes, you must get a written quote!).
Request further breakdown of pricing or elaboration of the quote, in case anything is not clear.
If it isn’t included in the quote, request a project schedule so that you know when each part of the project is planned.
Who from your company will be at my house each day? Who is my primary point of contact and how can I contact them?
What will our contract look like? (Bonus tip: It should be a reflection of the quote and should include ALL commitments made by the general contractor during your discussions!)
How are change orders handled?
Who will supply materials? Is the cost of materials included or excluded from the quote?
The right general contractor for your business.
Signs that you have found the right general contractor for your business is a general contractor that has their paperwork in order, that gives clear, professional price quotes, and is willing to answer your questions and describe their processes. By going through the steps and questions described above, you will be well on your way!