Questions Investors Should Ask Before Hiring a Contractor

With the many benefits the real estate industry offers when applying the best real estate investment strategies, many property owners and real estate investors remodel or renovate their real estate investments to generate more income. 

How can investors find the right contractor for their real estate investing team? Ideally, you want to find one who will do it right the first time at an affordable price! An excellent way to ensure that you’re working with the best contractor is by asking some questions before hiring them.

How Many People Work on Your Crew?

Start by asking a potential contractor about their team and how long the team has worked together. A crew with a revolving door of new people may indicate trouble with stability and reliability, which can lead to setbacks in your project. A contractor with a stable, experienced crew will generally complete projects on time and to a higher standard.

Look for contractors with a reliable and punctual team that can handle your project while maintaining outstanding service. A cohesive team ensures continuity and quality throughout the renovation so your project doesn’t suffer from delays or miscommunications. Stability in the crew also shows that the contractor values long-term relationships, which can be a benefit when you need multiple projects handled.

How Long Have You Managed Your Own Team?

Many independent contractors start by working for other companies before launching their own businesses. If you’ve decided to hire a contractor, it’s essential to ask about their qualifications as a project leader and how long they’ve been managing their own team.

This question helps you assess whether the contractor has gained enough experience to handle a project efficiently. A contractor with several years of experience managing projects and teams is more likely to have the skills and leadership needed to execute your renovations effectively and minimize any complications along the way.

Are You Properly Licensed and Insured to Do This Work?

Before signing on with a contractor, it’s crucial to verify that they’re licensed to perform the work in your area. Working with an unlicensed contractor could expose you to significant risks, including liability for injured workers or substandard work that doesn’t meet local building codes.

Investors can easily check online or through local agencies to confirm a contractor’s credentials. Ensuring that your contractor has the proper licenses and insurance protects you legally and ensures that the work is done correctly according to regulations.

Will You Be Using Subcontractors?

Contractors sometimes need to bring in subcontractors to help with certain aspects of a project, such as electrical work or plumbing. While this is common, it’s important to ask whether subcontractors will be used and, if so, whether they are reputable, trustworthy, and licensed.

Ensure that your contractor will still oversee the subcontractors and that all work is completed according to your agreed-upon budget and timeline. This guarantees that subcontractors don’t increase costs unexpectedly and deliver the quality of work you expect.

Have You Ever Been Sued or Dealt With a Lawsuit?

While this may seem like a difficult question to ask, it’s a crucial one. If a worker or a client has sued a contractor, it could be a red flag indicating potential problems. However, if they have been sued, ask how they resolved the issue.

Research the contractor thoroughly by checking public records and online reviews. It would help if you also inquired whether the contractor has been involved in any serious accidents that led to injuries or hospitalizations, as these could indicate safety issues or negligence.

How Do You Handle Unexpected Issues During a Project?

Even the most well-planned renovation or remodeling project can encounter unforeseen challenges, such as structural issues, hidden damage, or sudden delays in material delivery. It’s important to ask your contractor how they typically handle such disruptions and what processes they have in place to manage them without significant impact on your timeline or budget. Understanding their approach will give you confidence in their ability to troubleshoot effectively and minimize potential problems that could arise during the project. A good contractor will not only have a strategy for these challenges but also maintain open lines of communication to keep you informed at every step. Additionally, they should have experience working with vendors, suppliers, and subcontractors to quickly resolve issues that arise without adding significant costs or delays.

This is where tools like Privy’s real estate analysis software come in handy. With Privy, you can minimize risk by comparing your contractor’s approach to the success of other investors. By leveraging the Before & After data and timelines of similar projects completed by other investors, you can better understand how delays and challenges were handled. Seeing detailed photos of successful fix-and-flip projects also allows you to evaluate what level of intervention was necessary and how the contractor’s approach aligns with proven examples. This risk minimization feature helps you make sure that your contractor is well-equipped to handle any curveballs during the project without throwing off your overall budget or goals.

Can You Provide a Detailed Estimate and Timeline?

A well-detailed estimate is key to ensuring transparency between you and your contractor. The estimate should break down every aspect of the project, including materials, labor, permits, and subcontractor fees, so you clearly understand where your money is going. Requiring an itemized estimate reduces the risk of hidden costs creeping into the final bill. This is especially crucial for real estate investors working on tight margins, as unexpected expenses can quickly eat into potential profits. A comprehensive estimate will also give you leverage if any discrepancies arise during or after the project. It’s also good to ask for quotes from multiple contractors to compare prices and ensure you receive a fair deal based on market rates.

Using Privy’s investor comps and Before & After valuations, you can validate your contractor’s estimates by comparing them to successful, cost-effective deals completed by other investors in your market. Privy’s rehab/construction budget insights calculate profit vs. revenue so you can confirm whether your contractor’s cost estimate is realistic or inflated. Additionally, by analyzing Before & After photos of completed projects, you can understand what level of renovation is typical for similar properties and ensure that the timeline provided aligns with market norms. This gives you confidence in your contractor’s estimate and ensures you’re making informed decisions backed by data from real deals done by other investors.

What Kind of Warranty or Guarantee Do You Offer?

A reliable contractor should be confident enough in the quality of their work to offer a comprehensive warranty or guarantee. This warranty should cover both the workmanship and the materials used during the project, ensuring that if any issues arise within a specific period after the project’s completion, they will be resolved at no additional cost. Asking about the details of the warranty is important for protecting your investment, as it provides peace of mind that you won’t be stuck paying for repairs shortly after the work is completed. Ensure the warranty is clearly documented, specifying the length of coverage and what specific issues are included, such as installation errors or defective materials. It’s also worth asking whether the warranty covers cosmetic issues, such as cracks in drywall or peeling paint, which can develop over time.

Privy’s LiveCMA tool adds an extra layer of confidence by allowing you to see Before & After photos of similar investment projects. You can review the level of construction involved in other flips, giving you insight into how much work your contractor should perform to meet market standards. This can help you assess whether the quality of the work aligns with what is necessary to achieve a good return on investment and whether the offered warranty covers all potential issues. Additionally, by seeing what other investors have done, you can reduce uncertainty about the scale of the renovation and gauge the level of craftsmanship that should be expected. This confidence, backed by real-world examples, ensures that your contractor’s warranty is comprehensive enough to cover future needs.

How Are Job Sites Kept Clean and Safe?

A clean site is essential for safety and a successful project. If your contractor does not maintain a clean and safe work environment, they may expose themselves and you to risks. Ask them about their policies on maintaining cleanliness and safety throughout the project. How often do they remove debris? What precautions do they take to prevent accidents? Ensuring these precautions are in place will help you avoid legal liabilities and ensure the project is completed without unnecessary hazards.

Additionally, ensure they’re using safety protocols and have the right insurance coverage. Contractors who take safety seriously are less likely to experience costly delays due to accidents, and they also help ensure your investment remains secure during the renovation process.

How Many Clients Do You Have?

While the best contractors often have busy schedules, it’s important to ensure they don’t have so many clients that your project will be delayed or neglected. Knowing the number of active projects they manage will help you gauge their availability. A contractor with too many projects may spread their resources thin, leading to longer completion times and lower quality of work.

It’s also wise to ask how they manage multiple projects. Do they have a well-organized team to handle different sites simultaneously? Understanding their workload ensures that your project will get the attention it deserves, allowing for timely and efficient progress.

What Is Your Payment Process?

Before starting any work, clarify the contractor’s payment process to avoid confusion later. This includes understanding the upfront deposit, the payment schedule, and how payments will be tied to project milestones. Some contractors require a portion of the payment at the project’s beginning, middle, and end, while others may ask for smaller payments throughout.

Ensure that the payment structure aligns with your budget and timeline, and confirm that both parties are clear on the scope of work covered under the agreed-upon price. A well-organized payment process is a good sign that your contractor operates professionally and ensures clear communication throughout the project.