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INVESTORS’ CORNER: Hiring a contractor – part 2

It’s important to make sure that you give the same information to each bidder as to what you want to be done. This is called the “scope of work.” This defines exactly what you want to be done such as “paint all exterior surfaces with two coats of Sherwin Williams paint. All shrubs and hardware need to be covered. All glass to be masked from overspray. Shingles must be covered from paint mist. All windows and doors to be painted with two coats semi-gloss latex,” etc. This insures that your estimates are comparing apples to apples. Everyone bids on the exact same set of details, instead of what each individual contractor wants to do.

Always obtain written estimates from each and every bidder. You never want to enter into a verbal contract. It is always best to have agreements in writing and every time you add something to be done, use a form called a “change order.” This is agreeing to pay additional money for additional work.

Some areas of the country require the contractors be licensed and registered. You should check what the industry standard is for your area. If your area requires a license, contracts signed by unlicensed or unregistered contractors are unenforceable. Also in these areas, they may require contractors to carry general liability and/or worker’s compensation insurance. You can call your local insurance agency and ask them what the state requirements are. When you ask for a copy of the insurance letter, don’t accept one from the contractor, call the agency the contractor says insures them and have them send you a letter of insurance. This way you can be assured that the insurance is current and paid up.

Following the format of this article will help you when you need to hire a contractor. Keep in mind the most important things are making sure you have a written contract that spells out the work to be done. Specify the quality of materials to be used, agree upon the price of the contract as well as how the contract is to be paid and in what kind of money installments, and that if you are requiring license and insurance, all paperwork is in order.

Pete Youngs is a national speaker better known as “Mr. Rehab” and a longtime friend of the Metrolina Real Estate Investors Association, which provides education, mentoring, and networking for real estate investing in the Charlotte region. He can be contacted at PeteYoungs.com. For more information, visit www.MetrolinaREIA.org.

 

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