Has it ever occurred to you how similar are the processes of finding a reliable contractor to renovate your investment property and locating a decent mechanic to fix your car? Just think about it for a moment. When you own a car or a house, you are investing both your time and money into that purchase (or investment). You went through countless hours searching through numerous vehicles and properties, and looked at different options (or test drove) until you located one that you felt would best suit your needs. Now that you have acquired the car or property, you need to maintain it or risk it slowly failing on you down the road (no pun intended).
When it comes time for your car to require repair, you’ll clearly need to find a mechanic you can trust to complete the job. Similarly, real estate investors interested in renovating their investment property will want to locate a good contractor to conduct the repairs.
Does this sound familiar?
Research—The first thing you do is begin searching for a mechanic. Perhaps you have had your cars repaired frequently so you use the same reliable mechanic each time because you are comfortable with that person. If not, you may ask around to see who your friends, family or coworkers recommend. You go online and research local mechanics and read reviews from other customers to determine who sounds qualified enough for the job.
When it comes to real estate investing, investors who are planning on renovating their properties need the help of an experienced contractor. They’ll utilize the same strategies to find a reliable contractor as you did locating a mechanic. They may ask other investors who they have used in the past for their own property rehabs, search the internet for reviews and complaints, or request referrals from contractors before deciding if partnering with them is feasible.
Well, isn’t that a coincidence?
Estimates/Bids—When you finally find a few suitable mechanics, the next step is to bring your car in for an estimate. Mechanics will do their own initial inspection of the vehicle in order to know what repairs need to be done and how much it will cost. You’ll probably want to get more than one estimate before deciding who is offering the best deal. You never want to necessarily go with just the first amount your mechanic quotes you.
Once investors make a list of potential contractors, they will schedule an appointment for the contractor to walk the property. Just as your mechanic did a thorough assessment of your car, the contractor will go room by room, discussing what structural and cosmetic issues need to be addressed. At the end, the contractor will provide a bid detailing how long the job will take and the price for the overall work. Investors most likely will want a few different estimates before deciding which contractor to hire for the repairs. Just as you want to save money and not be overcharged for fixing your car, investors want to keep their budget in check to ensure they’ll make back a profit after their investment property sells and all expenses are paid for.
Where have I heard that before?
Contract/Paperwork—When your mechanic gives you an estimate, it is based on the list of potential tasks they perceive doing. They’ll present you with an itemized breakdown of everything they anticipate fixing, the cost of each part necessary to complete the repair, and how much they charge for labor. This should also give you an idea of how long the entire repair will take. Once you are satisfied with everything, you’ll sign paperwork stating that you understand and agree to the estimate and work to be done.
When choosing to partner with a contractor, real estate investors will commonly draw up a contract before any work begins. Similar to your mechanic, your contractor should also give you a detailed report of all work to be done on the property based on both your expectations and their evaluations, along with the materials needed, what the prices are for each of these supplies and labor, a designated timeframe, and how much the overall project will cost. Not only does this itemized list make it easier for investors to know exactly what they are spending on, but if they are applying for loans, this list can be sent to the lender who may require a construction budget documentation plan before offering the necessary funding.
Is there an echo in here?
Unforeseen Charges—Now that you have chosen the mechanic you are willing to entrust with your car, you allow the work to begin. However, during the repair, you start getting phone calls about unanticipated fixes that need to be done before your car will be suitable for driving again, so that nice low estimate your mechanic originally gave you slowly begins to rise. How often have you received that dreaded (and expensive) news that there is something wrong in the engine that wasn’t noticeable before or some part is wearing out and needs to be replaced?
Real estate investors who have fixed and flipped homes or conducted renovations for their rental properties are certainly no strangers to unexpected issues arising throughout the course of the rehab. Contractors may find rusted pipes that need replacing, mold that needs removing, or foundation issues that need addressing. Whenever the phone rings and it is the contractor calling, you can practically feel the tension coming from investors as they apprehensively answer, wondering what new pricey dilemma has been uncovered. Each of these problems will require more time and increase the overall cost of the project.
Although not identical, the connection between the processes for dealing with a mechanic and a contractor are very much alike. If you are satisfied with the work your mechanic did on your car or the rehab your contractor completed on your investment property, you’ll most likely want to recommend that service provider to others as well so they’ll be able to continue growing their own respective businesses. Putting in a good word for a job well done is a great way to build rapport with your mechanic or contractor, which may also be useful for you in the future for any additional repairs needed. Sometimes it isn’t always obvious how well you can draw connections between two seemingly different situations, but when you do, the similarities can be quite surprising.
About the Author
Erica Hackmyer is the content writer for LendingOne, a direct private real estate lender that offers short-term loans for non-owner-occupied residential properties, specifically regarding fix-and-flip, buy-and-hold and lines of credit to fund larger projects. With direct access to its own capital, exceptional customer service and a user-friendly online application, LendingOne has streamlined the overall lending process and made it faster and easier for investors to be approved and receive their financing in as little as 10 business days. For more information, visit www.lendingone.com or call 866-412-1574. You can also visit https://calendly.com/lendingone to set up an appointment to speak with a LendingOne loan specialist.