If you are venturing into the world of real estate, particularly fix-and-flip projects, then you need to make sure you have a top-notch general contractor on your side. Why? Because a trustworthy general contractor can mean the difference between finishing a project on time and on budget, or potentially having the project drag on for weeks or months and losing a significant amount.
A contractor is a company or person that specializes in constructing or repairing properties. Some contractors specialize in smaller jobs such as tiling or painting while others take on more complex projects. Selecting a general contractor for a real estate project is an important, yet challenging, decision for many real estate investors.
To increase your odds of finding the right contractor for your project, here are some tips on how to properly select one.
Utilize Your Network
When hiring a general contractor, make sure to ask around for references and recommendations, particularly from friends, family and other real estate professionals. Why? Because they are most likely to provide unfiltered and honest recommendations of people they know and contractors they have successfully worked with in the past.
A general contractor should provide an “as built” cost for your real estate project. Make sure to get this quote from multiple potential contractors. Why? Because you can then compare the quotes to get a better idea of what the project is likely to cost and how realistic it is that your budget will cover it.
Select a Local, Licensed Contractor
When hiring a general contractor, make sure they are licensed and insured.State licensing is regulated by the department of insurance in each state (including California). In addition to making sure they are licensed, ensure their license has not been revoked, suspended or denied. Furthermore, make sure to verify the amount of liability insurance coverage they carry, which is usually at least $1 million in overall coverage.
To avoid any misunderstandings, always get estimates in writing and never let work begin without a written contract signed by both you and the contractor. Also, make sure the contract contains the following information:
- Pertinent information regarding both parties;
- Beginning and completion dates;
- Comprehensive description of work to be done;
- Material costs; and
- How payments will be made.
The contract should also detail your rights as a homeowner to end the agreement if problems arise or if things go over budget. This is an important provision that often gets overlooked.
Insurance and Bonding:
Make sure to verify the insurance policy and bonding information for every prospective contractor. In fact, make sure to request a copy of the bong certificate before hiring any general contractor or subcontractor.With the risk of getting hit with a significant civil lawsuit, you (and your contractor) cannot afford tonot be fully insured.
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