Flipping Houses and Negotiating With Contractors
In flipping homes, there are certain aspects that a real estate investor has to deal with. These are to buy low-priced homes, renovating them a bit and selling again at a higher price. Although these things may seem easy to some people, there is still another important aspect of home flipping that needs to be handled well. This is about negotiating with contractors to do the renovation works for the home you just bought.
Many real estate investors will agree that negotiating with contractors is really a huge challenge. It is here where a person’s negotiating skills will come to work. Searching for reliable and reputable contractors alone is never easy. Negotiating with them especially for an affordable labor cost is all the more challenging.
Professional contractors are licensed, do quality work, can work on schedule and charge a reasonable labor cost. If possible, get the names of at least three references and find out from them how long the job took and the quality of work. Establishing a good relationship with contractors is beneficial. Not only can they work for you, they can also help you determine your repair costs, can refer you to other investors and can help you with future home renovation works. And once you’ve established a good rapport with your contractor, there’s a good chance he can become your reliable friend who can negotiate the best deals for your future projects.
Avoid getting a contractor who pressures you into making a decision and hire only those who have a current certificate of insurance. Make sure that the contractor you hire is insured for liability and workmen’s compensation.
As for the labor cost they charge, do negotiate for a lower price, a time table and payment schedule which will allow you to pay the contractor only as work is completed. It’s never a shame to negotiate low with contractors because it’s best that you tell them right away that you are working on a limited budget. Haggling for a lower contract price is the right thing to do. Talk your contractor into lowering his price in a nice way and work with him well during the repair works.
Concerning the payment, you may opt to pay partially as certain things are finished. But don’t pay a large sum of money up front or pay in advance, if possible. Some contractors who get money in advance usually end up working for someone else before their job is done. In fact, it is sometimes better to pay a little more for a contractor who can complete the job on schedule because you can save money.
Be sure to put everything in writing. In other words, insist on making a contract that will specify the work to be done, the time it will be completed, the materials to be used, the names of any subcontractors and the schedule of payments. Also, be sure that the contract provides for a "retention" or a percentage of each payment or of the total job. This retention is usually ten percent which you retain until the job is completed.
Keep in mind not to sign a completion certificate until all the work specified in the contract has been done. For investors utilizing financing programs, lenders normally require a signed completion certificate before releasing the last payment.
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