BiggerPockets’ Tarl Yarber gives his tips to avoid losing money when hiring contractors for renovations
- Cheapest is not always the best: pay trades what they are worth.
- Get multiple bids, at least 3 if it is a market you know and have referrals, and between 6 or 10 if you are new to the market and have no referral.
- The bids must be broken down by line items.
- Depending on the project, you can prioritize speed or pricing but never give up on quality.
- Keep in mind the current economic cycle as material and labor are impacted by demand.
- Have a clear scope of work and study bids details line by line.
- The scope of work can also be broken down and awarded to different contractors.
- Have a clear contract with your contractor (draws, escalation of issues, delays, change orders…).
- When you grow, you can have your own construction attorney-reviewed contracts.
- Have a clear draw schedule based on work completion and do not pay a large deposit upfront (20% maximum).
- Keep track of work completion and payments.
- Know how to handle change orders and how to effectively approve changes and pricing (always in writing)
- Spend the most time planning what you want to do with the property in order to have the clearer scope of work. You will avoid further issues or change orders.