Finding Good Contractors for your Rehabs - by Becky Sanders

I find that a lot of new investors are only interested in wholesaling because they don't want to find contractors or don't know where or how to find them and it does involve more work on your part. So I'm going to share some of my experience with this and hopefully give you some ideas to make this a less painful process.

Obviously, the advantage of rehabbing houses is that your profits can be enormous for holding and rehabbing the house in a couple months versus the $5-10 wholesaling profit. I am currently rehabbing a house (which, thankfully, is almost done) that I expect to profit in the range of $40k-$50k on. By the way, I originally expected to profit $50k to $60k, but I ran a little over on the repair costs.

You'll find that the average rehab costs between $15K and $30K. Most of the work should and can be done by handymen. Where do you find handymen? You can find them in the newspaper classifieds, the yellow pages, on the Internet, or you can advertise yourself in the classifieds under help wanted. I prefer finding them in the newspaper classified ads and on the Internet. Yahoo.com (and some other large sites similar to Yahoo) have classified ad pages. Do a search for handymen or plumbers or electricians (whatever you need) and plug in the city you're looking for and you'll be surprised at how many hits you get.

Also, consider hiring laborers from temp services for things such as demolition work (if you need to gut a house) or for cleanup-type work.

Furthermore, if you know any who works in construction, ask them for referrals of workers who are interested in doing side jobs. Our painter, HVAC guy (tinner), and electrician working on our rehab are all experienced in their fields and did the work we needed over a weekend for a cost that was far less than contractor rates. A handyman can also do some of these things, but I recommend that your electrician be licensed because you absolutely want electrical work to be done properly and safely.

Sometimes you'll run across handymen who won't do some of the larger jobs. Well, keep looking, but if you're running on a strict timeline, you can use contractors, but absolutely shop around. I used a roofing contractor and a window contractor for my first rehab, and on the roof, I got estimates as high as $11,000 (that was Home Depot, by the way) and as low as $4,500 for a complete tear off (including the sheeting). On the windows, I've had some companies quote me $600 and higher per window, so be sure to ask for the contractor-grade vinyl windows, which you should be able to get for less than $300 per window installed.

Start getting your estimates as soon as you have the house under contract. Also, it is likely that you'll experience no-shows with the handymen and lower priced laborers, so don't just call one. In fact, call 5 or more. Some will stand you up, some will show up but will never follow up with a estimate of repairs for you, so count on this. Besides, you'll want several estimates so that you can price shop, so don't stop at 1 or 2 or you'll be sorry and you'll waste valuable time.

If you agree to pay your handyman or laborer by the hour, make sure you put a "not-to-exceed" price for the specific job. Put it in writing. Ron has some contracts for your contractors in your manual, so use them. If you're concerned about your timeline, offer an incentive for them to finish the job early. Make sure that you and your contractor agree as to when the job will be completed so that there are no disputes later.

When you have work done by a licensed contractor, negotiate the warranties. Also, ask that their warranty be transferrable, especially if you plan to sell the house as an exit plan.

It's important to be clearly express to your handymen, workers, or contractors, your expectations as to what work you want them to perform, when you would like for it to be completed, and how much they'll be paid, when they'll be paid, and any caps you impose for a job if they're paid hourly. If you don't put this in writing, then it essentially doesn't exist and you may end up with a job that takes forever to complete or you could end up in court. So take care of these matters up front. Besides, if you act professionally, your contractors are more likely to treat you professionally and do the job to your expectations.