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Selecting a Contractor

This article will help you to distinguish between a con-artist corner-cutting swindler, and a competent, experienced contractor.

Author: Alan D. Kosinski

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As investors, we are always seeking competent contractors that can do a number of simple repair jobs, a complete and total renovation, or somewhere in between.

This article will help you to distinguish between a con-artist corner-cutting swindler, and a competent, experienced contractor. By asking several questions and researching the prospective contractor, you could save not only large chunks of money, but also the frustration of having to get the job done over again.

You should begin by ensuring that the contractor is actually an ‘Independent Contractor’ and not an employee. If there is any doubt that he may be considered your employee, ensure the contract specifically indicates that he is an ‘Independent Contractor’. Many times, an unlicensed contractor will have the homeowner apply for the building permit. If there is an accident or injury, or income taxes and such are not paid - the contractor may claim that he was an employee and you are responsible for payment!

Next you should ask for specific documentation:

a written contract that spells out all the details and expectations of both the contractor and you
a copy of his license
a copy of his business insurance (including liability)
a copy of his workman’s compensation insurance.

Check with the licensing authority in your state to ensure that the license is indeed valid and current. Be aware that in most states it is not difficult to get a contractors license. If your state has a contractor registration process, ensure that the contractor is listed. This registration is different than licensing and its purpose is to give you access to a special fund that the particular state has set up to reimburse you for any registered contractor whom you may have had difficulties with. Next, call the insurance company(s) that are on the insurance certificate and ensure the policies are still valid. Many unscrupulous contractors pay the first premium on a policy in order to get an insurance certificate, but then default on the rest of the payments and their insurance is cancelled.

One of the best ways to find a competent contractor is by asking around at your local Real Estate Investment or Landlord meeting. Find someone who has personal knowledge of the contractor that they are recommending.

Interview the contractors in detail. Check their credentials and insurance as mentioned above. Get references and check them. Visit past and present jobs and talk to the owners of the properties about the contractor. Compare bids of other contractors and choose one. Review the contract carefully or have an attorney check the wording, time deadlines, and penalties.

Other concerns and tips to consider are: Does he want all or most of the money up front? Does he want to be paid in CASH? Is the price only good for today? Does he brush off your questions and not answer them completely? Is he reluctant to give you his cell phone number? When calling his office, is the phone answered by his kids? Does his paperwork have a post office box address only? If you can answer "yes" to any of these questions - watch out.

I must stress again the importance of having a written contract. When is the work to be started and finished? Are there penalties to the contractor for not being timely? Who cleans up? Who pays for damage caused by heavy equipment? When and how does the contractor get paid? This is usually one third payment up front, one third when the job reaches three quarters completion, and the final third after FULL COMPLETION TO YOUR SATISFACTION! If any work required building permits, the town/city inspector MUST inspect and sign off on it before the last payment is made.

If you are in the Real Estate investment business, you will need contractors. Proper selection and qualification of contractors will ensure your Real Estate Success!

About Author

Alan is a millionaire real estate investor with over 25 years of experience. He is an author, speaker and educator specializing in creative and traditional real estate investing.

To sign up to hear Alan’s next teleseminar packed with practical know-how, visit www.hearthecall.net for free access.

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Selecting a Contractor