How To Find Contractors For Flipping Houses (Never Pay Upfront)

Hey everybody, Dr. Toby Potter here, the Unshakeable Investor. Today I want to talk to you about contractors. One of the things that you have to fully understand and really appreciate— contractors will make or break your deal 100% of the time. A good contractor who is partnering with you will make you tons of money, remove a ton of stress and really help you enjoy real estate investing. So, and then a bad contractor, just, it's a 180. It will stress you out. You're always behind. They're always over budget and the quality work is crappy. So I need you to fully understand what it takes to know whether you have a good contractor versus a bad contractor. So I'm going to talk about 5 things. First, you must make sure they are legit. If you're being— if you have not gotten this contractor through a referral, then you've got to do some due diligence. You need to go see them on a job site. You need to go see work they've done. Hey everybody, want to jump in here real quick. Don't mean to interrupt you. I know you're learning a lot. If you like what you're seeing, you like what you're hearing, click the link below, download this book, can be delivered to you. And let's get back to the study and really check out the quality. Talk to their team. Ask their team how long they've been employed with them. It is— seems a little invasive, but trust me, this is your business. This is your livelihood and this is your future. So don't skimp out. Make sure they are legit. Okay. Make sure that they have tools. They have equipment and they've been around for a while and get references. Number 2, make sure they fully understand the difference between contract work and investor work. The difference is contract work is I went into a house and I remodeled a kitchen, I remodeled a bathroom, I built this back patio. I did one-off jobs on a homeowner. That is a complete different quest than what you're wanting on a rehab for an investment property. If they've not done any investment properties from beginning to end, you don't want them. You don't want a project manager. You need a general contractor that knows everything about rehabbing, understanding city codes, understanding how to get stuff done. Top quality, bottom price. It's a huge variable that you must understand. Third, Make sure that when you create the scope of work, and if you're using our system, it'll do it for you. Line itemed out, priced out, turnkey, and that price includes material and labor. Understand that. You hand that to them and then you make sure that they walk the property, look at the item and confirm, yes, that works. Yes, that works. There may be stuff on there that you miss that they should pick up. And sometimes I do that on purpose. Sometimes I'll leave off something just to see if they say, hey, we need to fix this too. Now I know they're vested in my profitability and in my success. If they don't say anything, then I know they don't care. They're just doing a job. Understand that. And then go through and have tremendous communications throughout the work. And then number 4, you control the money. This is so important. Number 1, if a contractor tells you they need upfront money, do not hire them. Do not. Oh, I need a deposit. I need— no, you don't. You don't. This is not a homeowner who's buying, who's hiring you to remodel their kitchen or their master bath. No, this is an investment property. And the investor, the lender, the bank, the hard money loan pays on work completed. So why are you out money that they pocket? So many times I have had clients come and say, hey, I paid $20,000 down, $25,000 down to my contractor and I can't get ahold of him. That doesn't surprise me. He's got your money. He doesn't need you anymore. He'll just keep pushing you out, pushing and pushing out. Make them earn their paycheck. It's always work pay or money paid on work completed. Money paid on work completed. If they have to have money up front, they're not a contractor that you're going to work with. They're not a friendly contractor. And number 5, the communication between you, the lender or the bank, and your contractor is invaluable. You have to have clarity. When we do a deal, when we lend on a deal, and we get a draw request and the contractor's completed demo, or he's completed plumbing and electrical, or he's completed walls, whatever, we send a third-party company out there to inspect it. We get that inspection report. This guy doesn't care whether the work's done or not. He just tells me what's there. It's a fact finder. It's not an opinion, it's not emotional, it's facts. The work— he sends us the report, we then review it with you, the client. And if we think that the contractor has not done quality work or completed, we're going to tell you we're not paying on this. And then you got to communicate that with your contractor. Many, many times I've had to go to a job site with that report with the contractor and say, you said the HVAC system was done. But I got pictures. There's no HVAC system. There's no vents. There's no compressor. There's no blower. Where's it at? Oh, well, my HVAC guy was going to do it last week. Okay. When he didn't show up and didn't do it, you should have marked it off. Communication is imperative. And finally, the last is compare bids. If you're doing this for the first time and you haven't narrowed down your contractor, Get 2 or 3 contractors out there and then find one that you really, really can get along with that has the price where you need to be. Ladies and gentlemen, I'm going to close this out with saying contractors will make or break your deal 100% of the time. Build a team that's a long-term team, not a one-off. And I promise you, your real estate career will go through the roof. This is Dr. Toby Potter. The Unshakeable Investor, and I'll see you. 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