How do you choose contractors and negotiate the best price?

I’m in need of contractors to help me with 2 properties. One of the properties I need to find a contractor who does tile work and the second property I’ll need several contractors to complete a variety of jobs. My question is what’s the best way of finding a reliable contractor and the best rates? I’ve had poor success in the past in trying to find contractors on my own so I’m curious how some of the seasoned investors out there go about it.

Thanks for any advice

I am a new investor so take anything I say with a grain of salt. I am in the process of evaluating contractors for the rehab work I will be undertaking in the near future. My criteria for evaluation are as follows by order of importance:

  1. Quality - Part of my strategy is to rehab homes with a minimum standard of quality for my customers (preferably end-users) so that they can be reasonably sure their purchase will require minimal maintenance in the first two to three years. My contractor will have to be able to deliver on this end as measured by the after-rehab inspection.

  2. Punctuality - Since I am planning on using HMLs for financing, it is important that the work is done within the quality requirements and in the agreed time. I need to get properties back on the market as quickly as possible so that, in this down market, they sell and the HML gets their money back. I want to minimize holding costs.

  3. Cost - I need to have the work done at a good price but not so low that quality and timeliness are sacrificed. I am considering negotiating pricing with bonus money for early delivery while meeting quality standards.

As I said, this is my plan and I am currently evaluating contractors. If anyone can comment on this and let me know where I might run into trouble or where I am totally out of my mind, I would appreciate it.

The best contractors I’ve ever used were direct recommendations from other investors in my city. On the other hand, I have had very bad success with contractor I just called and interviewed without recommendations.
Good Luck.

If you just need a tile guy, that’s work you can do yourself. At Home Depot they have workshops every week on how to install tile. It’s about an hour hands-on thing and it’s really informative. That will save you big bucks in the long run.

The best recommendation you can get for a contractor is word of mouth. When a contractor truly does a good job and is reasonably priced you want to extoll their virtues from the top of the tallest mountain you can find, because a truly great contractor is rare.

If you need a contractor check with members of your local REIA that you know or respect. Don’t let that be the last word, though. As you get recommended contractors, interview them.

Make sure they’re licensed, have references, and if possible – go to one of their jobsites and check out the quality of their work. I realize you can’t always do this, but whenever possible, do it. It will give you a good idea of the quality of their work and will also give you a glimpse into how they work.

Don’t just take their references and licensing information at face value. Contractors have been known to lie – or at least exaggerate details, so take everything they tell you with a grain of salt.

Call their references and ask lots of questions about how good a job they did in showing up when they said they would and finishing the job on time and within budget.

One last word of caution: Control your project purse strings pretty tightly. While a lot of contractors are professionals in every sense of the word, there are some prima donnas out there. If you get hooked up with one it can cause you major problems, put your project bwhind schedule, and cost you a lot of money.

Hope this helps. Good luck!

Peter Vekselman

Do you make it mandatory for all contractors you work with to have a license, insurance (including worker’s compensation insurance) and be bonded?

It would be more expensive to work with registered contractors than with folks that don’t have all those things.

However I do recognize that if they don’t have all those things it would probably be riskier for you.

What are your thoughts on this subject?

Sometimes I feel that I may be making this more complicated/expensive than it should be by planning to use only registered contractors.

Thank you.

I cant speak for all contractors but let give you my 2 pennies worth.If they are’nt legal and lets say a guy trims a tree that falls on your house,or next door would be worse.Your paying.Lets say he breaks his leg,your paying.Lets say that mirror comes out of the dry wall and falls on the new tennants child,thats right,you pay.Then you have qaulity.If the guy is so good at what he does why dont he own a business…My industry has a bad rap because of the yahoos in it and the people who hire them.In a industry that revolves around science,the most you can get out of a landscaper is a “ya I can cut the grass”.They stay around because people put to much concern on the price.You get what you pay for.If you watch those flip shows you’ll see some who keep the prices in check but only use good contractors and then those that cut here and save their.The end result is night and day.If you do this for a living I would find you a qaulity guy for every trade you need.Explain to them that if things are done well,on time,and in budget,there will be more work.Back that up by bringing them more work.When you deal with good people and treat them good,you will be very surprised at what you can get long term.I have clients that get free mulch every year,plants planted at cost,trees trimmed for free,and even one client that got there per house maintainance cost down from 30 a visit to 11 on 22 houses.I also have a lady that I have’nt even done work for yet that has sent so many people my way she’s on the verge of getting her 1500 dollar sod job for cost.They bring me money not because I give them a break,but because I wont tarnish their name because I refuse to tarnish my name.Be honest as well.If you think it should cost x then say why.If this is all you have to work with then ask for something that fits your budget.Also make sure when first meeting that your contractor stays up on their industry.If a florida landscaper does’nt know that st.augustine is being out lawed in many areas and sevearly restricted in others,then dont talk any more.Even if you dont need sod,he should know his industry.Alot of times its the low baller that cost the most because they dont know their cost.It starts out at 100 and ends at 1000…Plus you have time.A pro should not just be good but fast and able to see problems that most can not.

I’m sorry if I’m rambling and not making since but I do hope that I’ve given you something that might help.

cklandscapingorlando - thank you for the insight and comments. It does make sense. Thank you.

All of our preferred contractors have come one way, and one way only-- by word of mouth recommendations.

If we need someone new, I get on the phone and start making calls-- first our trusted GC (who we found through our real estate agent), then the RE agent, then our mortgage broker, then the cabinet guy, then our laminate guy…

We’ve tried every other way in the book and gotten burned (almost) every time. You just need to find one good contractor and they will absolutely, positively know who the other reliable contractors are in the area… guaranteed. :cool

Connie - so if the recommended contractor doesn’t have a license, insurance or bond, would you still use him/her?

Our contractors always carry their own insurance but I think that liscensing here in Texas is much different than in other states. Maybe someone else can better address that question.

  1. Try to ask your family or friends if they have worked with a reliable contractor. Your loved one’s good judgment can be the best referral for a suitable contractor.
  2. You can even search in your local yellow or white pages book. You will find many contractors listed, some even by the type of work they specialize in.

Try the above methods of searching for a good contractor who will get the job done right. Good luck. :smile