The Contractor Success Triangle : Real Estate Renovations

When getting started investing in 2003, I ran across two properties in dire need of repairs. I purchased both properties at the same time, and my personal creative real estate investing/rehabbing career was under way. I spent the next 3 months rehabbing these properties.

I had renovated houses before but for other people. Even with my background, I still got “taken for a ride” by a couple of contractors. Like my good friend and mentor Lou Brown says, “They’ve got it built right into the name, CON-tractor!”

Still, I managed to turn a profit on those first two houses and have renovated well over 100 houses since. That said my friends, my goal here is to help you navigate the shark-infested waters of residential rehabbing…without getting bit!

The Contractor Success Triangle

You’ve heard of the Bermuda triangle, that mythical space in the Atlantic the superstitious stay out of at all costs. Well, the contractor triangle is just the opposite; it’s the space you should stay inside of – when hiring a contractor that is.

Defining The Triangle

The corners of the “Contractor Success Triangle” are defined by the contractor’s:

1. Price
2. Quality
3. Reliability

As any one of these change, the other two change as well…sometimes in the same direction, other times in the opposite direction.

Your job as a rehabber is to decide what level of each you are happy with. For example, if price is less important to you than quality work, like in a higher-end or retail property, you should be willing to pay more for a contractor as long as the work is top-notch. When the quality of work isn’t as important, for example in low-end properties, you can push a little harder on price. When it comes to reliability, I’ll let you make up your own mind. However, as with quality work, the less reliable contractor should expect to be paid less if they get the job at all.

My philosophy has always been if the contractor can’t, or doesn’t show up on time, they either don’t get the job if they’re coming to bid, or they lose the job if they’re coming to work. I don’t have time for unreliability from any of the professionals I deal with. Maybe you shouldn’t either. It’ll save you countless headaches and sleepless nights.

Live In Your Space

Once you’ve defined your triangle, your job is to stay in the space defined by your needs! It might feel good initially to save a little money, but when the contractor isn’t showing up or is doing less than top-quality work, the money you saved won’t seem nearly as important. Stand your ground and your business will benefit. Remember, we teach people how to treat us. Let your contractor do low quality work for high quality prices, or show up whenever they like, and that relationship will be hard to change. Start out making your contractor toe the line, and you’ll both be better off because of it.

Paperwork Can Set You Free

Never rely solely on a contractor’s (or anyone else’s) word. Get EVERYTHING in writing from the start. If there are ever any misunderstandings or disagreements, you can always refer to the paperwork. In the case of the contractor, your paperwork should include ALL the work to be done, permits to be pulled, material purchased, number of workers onsite each day, start date, finish date, total price with no exceptions for increases, and, perhaps most importantly, a monetary penalty for each day the work goes past the completion date.

Another important piece of paperwork is your contractor’s liability and worker’s comp insurance. Make sure you see a current declarations page. Skip this step and their employee’s injury could become your problem.

There are many awesome contractors out there, but you have to do your part to check them out and hold them accountable. That said, once you find them, treat them like gold, and they will do the same for you.

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