In real estate, it’s all about having a good product to rent. Whether you fix up a property from the beginning or buy a property brand new, it won’t take long before you’ll need to make repairs on your product. At first, you may feel comfortable making your own repairs, but there will come a time when the repairs become too complex and require an expert’s help, especially if you plan on growing your rental business.
Some people see rental repairs as a place they can build sweat equity, and rightfully so. However, if you fall into this category and find your rental business expanding, it’s probably time to evaluate the cost of making your own repairs. To do this, I would ask yourself the following questions:
1. Are you really good at repairs?
If you have true experience in maintenance, you may be able to service your rentals for the time being. If you consider yourself to be more of a casual handyman, it may be time to look for a professional. Just remember, you can usually tell the difference between something an expert fixed and something a do-it-yourselfer fixed.
2. Is making repairs the best use of your time?
If you have a full-time job, a dozen or so rental units, and a family (not to mention extra hobbies and commitments), it’s unlikely that you’ll be able to keep up with rental repairs. In this case, outsourcing your repairs could be a more effective use of your time and energy.
Why a Good General Contractor Is Critical:
1. A good GC can handle a large variety of repairs.
While you may be able to handle a small project here and there, a general contractor can (and should) handle anything and everything beyond that. You can’t be everywhere at once, so the ability to call in a GC to make inevitable repairs on a regular basis is essential to your business’s success.
2. A GC is (usually) a licensed professional and knows other licensed professionals.
Many states require licenses for certain types of maintenance and repairs. A GC can perform many of these repairs and/or can get you the contacts of licensed electricians, plumbers, and HVAC technicians.
3. A GC makes your life (and business) more manageable.
If you have a GC you trust, you can rest easy knowing the repairs made on your property are sound. With a GC making all necessary repairs, you will probably have better results in the long run, thus adding longevity to your business’s success.
4. A good GC understands the swinging pendulum of remodeling and building.
The rental market is cyclical; sometimes it’s better to buy existing units and rehab (or remodel) them, and sometimes it’s better to buy lots and build new units. If you’re in the rental property business for long, this cycle will continue, and the pendulum will swing back and forth. Fortunately, a good GC understands this pendulum and will be able to meet your needs in either category.
Finding a General Contractor:
A great way to find a GC, especially if you’re unfamiliar with the ones in your area, is to contact a local HBA (Home Builders Association) and ask them for recommendations. You can also contact local supply houses, paint stores, or lumber yards and ask to speak to one of their sales representatives. Oftentimes a sales representative can give you the lowdown on local GCs and help you understand their reputations. A great question to ask any of these representatives is whether or not a GC is professional and pays their bills on time.
Choosing a General Contractor:
Once you have a list of potential GCs, it’s a good idea to meet with them one-on-one and ask a series of questions. It’s important to remember that a good GC is likely busy, so be respectful with their time and be willing to wait for an appointment. Once you’re able to sit down with a potential GC, I would recommend asking them the following questions:
1. What kind of work do you do?
- Do you do any rehabs or remodels?
- Do you have a minimum-size project before you’ll look at it?
2. What is your contractor’s fee? (this will vary; I’ve seen fees range from 6-30%)
3. Can you tell me about your subcontractor base?
- How long have you been working with those subcontractors?
- How do you pay your subcontractors?
- When you pay your subcontractors, do you get lien waivers or releases as a condition for payment? (you want the answer to this question to be YES)
- Have you had any issues paying your subcontractors? Why? (there may be a legitimate reason)
4. How do you perform estimates?
- How do you reconcile budgets with your estimates?
- Will you report these reconciliations to me with every draw? (this will help you stay within budget)
5. What is your preferred communication style? (you want to make sure they communicate well)
- Should I call, text, or email you? Should I do a combination of those?
- How will you communicate timelines with me?
6. How do you manage your job sites?
A personal note here: I believe a dirty job site is an unsafe job site and leads to poorer quality work. I would recommend walking through a potential GC’s job site to check out its level of cleanliness, and I would never hire a GC with a dirty job site. Period. A dirty job site is a reflection of a GC’s character and management ability. If the trash can’t be managed on a job site, neither can the quality of work.
7. What kind of insurance do you use? (make sure they have adequate insurance)
Most states have a contractor’s licensing board or some other governing body that regulates construction management. If you’re unfamiliar with the GCs in your area, I think it’s a good idea to jump on some of those websites and see if a GC has had any infractions or violations and what those are.
8. Have you been involved in any litigation?
It’s easy to see if a GC has been involved in any lawsuits, and a quick Google Search is sometimes all it takes to steer clear of bad GCs.
After sorting through this list with potential GCs, you should be able to narrow down your options and find a good fit for what you need. And remember, you get what you pay for, so don’t be afraid of a GC that’s a little more expensive.
In Summary:
- While you may be able to perform rental repairs for a period of time, it’s likely that you’ll need help from a good GC at some point.
- GCs are critical for a multitude of reasons. They can handle a variety of repairs (including those that require licenses), connect you with professional subcontractors, make your life and business more manageable, and understand the cycle of remodeling and building rental properties.
- You can find a good GC by contacting HBA or local supply houses for recommendations.
- Make sure you get to know your GC by asking him/her a series of questions. This is a great way to understand what you’re getting yourself into and begin a healthy working relationship.