General Contractors: Challenges & Solutions
Finding outstanding general contractors can be quite the arduous task. In the world of real estate investing, we all encounter many challenges; this is inevitable! Once we accept this fact, we must begin to take action towards solving these issues. In this blog, we will be diving head first into the most common dilemmas that investors face as they look to hire a general contractor and our recommended solutions for those. We prefer to organize these problems into three major categories: Finding, vetting, and managing general contractors.
Excellent contractors are not going to fall in your lap. You must reach out and find them. To scale your investing business, you will need multiple teams. Not only do you need to find great contractors, but you will need to find several of them. With that being said, you must have a plan of outreach. In today’s technological world, we cannot ignore the tools that we have been given. All of us have ample ways to communicate with each other.
The first way to find general contractors is through social media. Creating profiles and pages will attract people to your business. Creating content will help drive traffic to your website. However, it takes quite a while to gain a large following. If you are just starting out, this can be difficult and time consuming. In this case we would recommend using Facebook; it allows us to connect with people from all around our market. Search for local contractor groups and create a post about what you are looking for. Remember to keep it short and simple. Not only will you get immediate responses, but your post will continually spark interest over time. We like Facebook groups particularly because you are connecting with other people who are also reaching out. This tells us that they are making an effort to find customers. General contractors typically are not the most technologically savvy.A GC reaching out for business on social media most likely has above average communication skills, compared to typical contractors This can be a desirable trait because the number one challenge investors face with contractors is lack of communication.
Another way to find crews is by going to big box stores. Hanging out at your local Home Depot can be advantageous. Usually, the most active contractors are there early in the morning. A lot of GC’s and their crews will grab the things they need early in the morning before the day begins. Go up to them and talk to them. This can spark their interests and possibly lead to you checking out their job site. Something else you can also do at Home Depot is talk to the pro desk. The pro desk will have recommendations for you. Additionally, different stores will have other referrals as well. If you invest in homes all around the county, or in multiple counties, you can visit many different big box stores.
Then, our last recommendation for finding teams would be networking with other investors. Google your local real estate investor meetup; every market has one. If you are in a smaller market, you may have to drive a bit out of your way, but this is entirely worth it. Not only will you speak with others that can help you find contractors, but networking will also help you in all areas of your business. This is one of the most convenient ways to find contractors because you should be going to these meetups anyways. This type of investor referral is the highest quality lead that you can find. This is because the contractor has been used by someone who is doing the same thing you are trying to do. However, some investors are not willing to refer their own guys because it can disrupt their own businesses and systems. With that being said, this can still help fill the pipeline of contractors to interview. The main takeaway from this is to get out there and talk to people. Whether it is virtual or in person, talking to people is the only way to find an outstanding contractor.
No matter how many contractors you can find, choosing the right team for your business can be difficult. First, we need to establish why it is imperative to vet your contractors first. Skipping this step in the process can be a huge mistake. Many investors are too passive in choosing a general contractor for a job. Hastiness is risky and can be expensive. Not all contractors know what they are doing. Taking the interview process seriously can save you time and money down the line. For example, we had a contractor whose performance did not parallel our company’s values and expectations. One of our company’s values is reliability. This contractor had to be let go because they did not align with our ideals. Firing a contractor during the middle of the job can present its own challenges. New contractors are less willing to take a job that has been started by another contractor. We discovered that a lot of the work that was done, was not done properly or to the high standards of our company. This caused a significant amount of rework which is costly. This also happened on another job where the work was so shoddy, it literally cost thousands of dollars to undo what the unscrupulous contractor had done. Skipping the vetting process can cost you time and money.
Now that we know why it is crucial to vet your teams, let’s talk about how to do that. Hopefully at this point, you have found multiple crews of contractors to talk to and choose from. The more options you have, the better the candidate you can hire as your general contractor. Even with plenty of options, you must be able to vet them. If you wish to scale your business, there must be a system in place. As with any part of real estate investing, you must do your homework. By doing your homework, I am saying that you need to research each company and qualify them. Your qualifications will be your own. Our high level qualifications include: the area that they work in, their ability to complete full rehabs, time availability, etc. By doing this, we should have a general idea of whether or not they have potential to work with us.
Next, we usually meet face to face with the contractor(s). Make sure to set their expectations; communication is key. Interviewing contractors is similar to hiring an actual employee. Are they personable? Does this person’s values align with your company’s? These are all questions you should be asking yourself when talking to the person. When it comes to their performance, the three expectations you need to set are quality, price, and speed. When it comes to quality, you will want to at least see pictures of their work. Preferably, being on sight with the contractor gives you a clear vision of what services they can perform and the quality of work they do.
It is a great idea to convey your interest in creating a long term working relationship with them. Communicating this will boost their interest in your company. The GC is more willing to lower their prices if you can offer consistent work. Although you are hiring them, it is important to remember that this is a give and take. A relationship requires both sides to bring each other value. Needless to say, you should be selling your company the entire time. This has to be worth it for them as well. It is common to hear that contractors have been burned by investors before. Investors can be seen as greedy and unfair to some. Spending the time to create these working relationships with GC’s can be invaluable. Communicating your interest in the long term can help lower their prices and build trust between both parties at the same time.
Speed can be a tough attribute to gauge. We all know time kills deals. Prolonging a project’s timeline can eat away at your profits. A great way to vet for speed is to ask for references. If they help people and do excellent work, they should have many happy customers to use as references. A solid reference can be exactly what you need to convince yourself to hire someone. However, if you have never used them before, you do not know what to expect. No matter how many contractors you find, and how good you may be at vetting them, things can always go wrong. This is why the last point is so crucial to avoiding problems.
Finding several teams and vetting them as much as possible can only take you so far. Until you have personal experience of working with them, it could be the best decision or the worst decision you have ever made. At this point, you should have a smoking hot deal and what you believe to be the best person for the job. This is an exciting moment for everyone. Here comes the hardest part of the process: managing the contractor.
Managing, as well, must be systematized. Managing new contractors can be quite different from someone you have used before. To be successful in managing a project, we have to treat every person uniquely. Yes there needs to be a system, but it must be flexible too. One issue we ran into with a recent project is the GC didn’t actually do any work himself, instead he subcontracted everything. That model could work if the contractor actively tracked what his subs were doing, when, and with what level of quality. However, our recent experience with this model didn’t work since the GC in question typically had no clue what the subs were doing, when or if they were showing up at the job site, etc. A great way to avoid issues in the rehab process is to provide a detailed and precise SOW(Scope of Work) and require them to be onsite daily in the contract.
Google Sheets is convenient and effective at creating your SOW. The purpose of the SOW is to translate what seems to be an extensive project, into miniature, more manageable projects. It also establishes a crystal clear vision of expectations for your investment. Before the project has begun, it is highly recommended to sit down with your contractor and define what each activity will cost and approximately how long it will take. High level communication like this will prevent most, if not all issues. Once the construction has begun, it is important to be involved in everything that is happening. If something is not going according to plan, you must know about it. For example, if the painting is not being done; why is that? Is it because
they are short on labor, or are they not spending enough time working on the project? These distinctions are important so you can manage them accordingly. Bringing another crew into the same project could be a good idea. Another reason you want a contractor who works well with others is because you may have multiple teams in a project at the same time. You may find the need to fire the contractor because of continued struggles; and that’s okay. All investors fire at least one contractor, if not multiple. As we grow and become better investors, our skills sharpen.
Being on site frequently and randomly is advantageous. Frequently because we want to make sure tasks are being completed. Randomly because we get to see what is happening behind the scenes. Are they doing what they say they are doing? Checking in at random times allows you to spot check your team to ensure that expectations and action are equal. With that said, do not micromanage your crew. Being on the site too often can actually deter the contractor. This can be seen as distrust in your team. Not only that, but being on the job too much can distract them from doing their jobs. There is a balance between negligence and micromanagement. We believe two to three visits per week is appropriate, at least one of them being random.
We cannot forget, surprises happen. You must not blame your contractor for surprises that can happen during the project. These are situations that cannot be controlled. However, if you read our last blog titled: Rehab Estimating Like A Professional, you could minimize surprises as much as possible before they happen.
Finding the right team for your business can be challenging. Hopefully our overarching system of finding, vetting, and managing general contractors provides solutions to you and your business. After all, we are in this business to provide solutions for property owners. Dregalla Development LLC is a Northeastern Ohio-based real estate investment firm focused on helping people….
Whether you are a property owner, investor, contractor, or simply someone who wants to network with us, contact us here!