How to Find Contractors for Flipping Houses

The modern flipper will have enough skill to put up drywall, paint and install some lighting. When they run into tasks such as electrical repair, plumbing issues or HVAC problems a licensed professional will be required to complete this work.

How do I find good contractors for flipping houses? Talk with real estate investors for their references, visit the local home improvement store in the early AM to catch a good one or use some online sources such as angieslist.com or contractorconnection.com to search. Then vet the contractor thoroughly before agreeing to hire them.

Finding a good contractor can be a complicated process and can become the number one reason why a deal fails. There are many types of people, different work ethics and just plain unscrupulous characters that can cost money and time on any project.

The smart flipper will find a good one and develop a great business relationship with them. Luckily we have some guidelines that can help weed out those troublesome contractors and highlight the all stars.

How To Find Good Contractors

The simplest method is getting a recommendation from a current real estate investor as they can vouch for the work the contractor does and projects they worked on.

The next option is searching online for contractors in your area or in the area of the property. These sites are setup for pricing at the home owner and insurance claim level so you may need to contact and clarify that this is for a fix and flip project.

The last option has been mentioned a few times in video and forum posts. This is where you go to the local home improvement store around 6am and speak with contractors that are there. They may have work trucks or vans and purchasing materials and supplies for an existing project so this would be an introduction where you can ask when they might be available.

As the deals accumulate there may be a need to move to a general contractor where you step back and have the general contractor handle the contractors. This can save time and some frustration by removing the management task from your plate.

How Do I Choose a Good Contractor?

The selection process is similar to hiring a full time employee for a desk job. The interview starts even before you first meet.

Does the individual look professional and organized or are they half dressed, half paying attention or half asleep?

Are they driving a vehicle that can support purchasing and transporting tools and equipment or did they show up in a 20 year old compact car with duct tape on the window?

Experience has shown that you will start with a group of interested contractors that will filter down to 2 or 3 gems as you ask questions. These gems are the individuals that are worth a paycheck. The following questions can help with the vetting process and filter out the obvious problems.

What Questions Should I Ask Contractors?

Do you perform the work yourself or do you have a crew you work with?
What work can you do or cannot do such as HVAC, plumbing, electrical, roofing etc.?
Are you able to sub-contract work that you are not able or interested in performing?
Do you hold any licenses for this type of work?
How long have you been doing this type of work?
How soon would you be free to take on another project?
Are you able to provide some references and what work was done for them with photos?
Are you able to provide some sample quotes?
Do you have liability insurance?

What Are the Red Flags To Look For?

The top reason to avoid a contractor would be the lack of insurance or even understanding why its needed. Trusting the right people is a large part of this business and requires feeling out the individual in regards to work ethic and reliability. You might need to trust this person with thousands of dollars in material and tool purchases. Use your gut and the following red flag’s to choose someone worthy.

No liability insurance
Does not show up on time (many investors mention this as a dis-qualifier)
A real talker, they like to tell you how great their work is and repeating this over and over. These types are usually all talk
Requesting to be paid up front, sometimes 1/2 or the full amount of the job, never pay for incomplete work.
Very low pricing, in this case they may be desperate for money, not work, as they didn’t finish the last job
The hard luck story with a wife and 10 kids to feed

The interview process should weed out some of the less desirable and avoid the problems before they are problems. The number of contractors left at this point will probably be a handful.

How Can I handle Bids, Quotes and Pricing?

Before accepting any quotes come up with a pricing sheet that has the rates you will be willing to pay. This is usually priced by sq.ft. and includes items such as painting, carpet, fixtures, cabinetry, hardwood floors and tile, bathroom work or replacing doors. As a first time flipper you may need to find some pricing online to get an idea what to expect from a contractor at a wholesale price.

Hardwood repair and refinish: $1 per sq ft.
Drywall repair: $.50 per sq ft
Painting interior: $1 per sq ft

Create a scope of work with all of the details on what you want done so you can compare contractor quotes accurately.

The few remaining contractors should be instructed to arrive at the property where you will walk through and allow them to ask questions and see where and what work needs to be done. This is an opportunity to see how the contractors can handle a schedule, arrive on time, are they prepared or just winging it and is their pricing realistic or just high because your wearing a nice suit that day.

Clarify the Work With The Contractor

It’s very important to have the scope of work prepared with details on exactly what you want done (above step). If not discussed already, explain that you are expecting wholesale pricing as opposed to homeowner or single job pricing. You will be going over the exact work to be done as well as:

The pricing per sq ft, so you can compare on the pricing sheet
When they can start and long the work will take to complete
How and when they will be payed
Penalties for missing work deadlines
How long the work will be warrantied for (1 year – 18 months)

When starting a new contractor the pay schedule will have more and smaller pay periods at each milestone. Also remember to discuss no smoking in the house when painting and that they will be responsible for locking up the property daily.

Final payment should never be made until after the final walk-through and a review of the scope of work.

Document Summary

Here is a summary of the standard documents that should be created and signed throughout this process.

Scope of Work & Deliverables

Create the scope of work defining the specific deliverables with materials required, an overview and anything else needed to complete the project.

Contractor Agreement

This document defines the rules and expectations between you and the contractor. It is a detail explanation of the roles and responsibility of each party. This document should cover materials, work and schedules, insurance and use of sub-contractors.

Insurance

Insurance was discussed earlier when asking your contractor questions and is also mentioned in the contractor agreement. This document should be signed after the contractor provides the proof of insurance, workers comp insurance and certification from their insurance company showing oyur company as an additionally insured party.

Payment Schedule

This document lays out how the contractor will be payed during the project. This is usually done using your per-defined milestones already discussed with the contractor.

W-9

The IRS requires a 1099 form to be issued if paying more than $600 in 1 year. The contractor just needs to fill out a W-9 with TID and SS# for you.

Lien Waiver

After the final walk through is complete, this is the last document to be signed agreeing that all work was completed before signing the contractors last check.