Lessons Learned - Top Three Warning Signs Your Contractor Isn't Performing

I have experienced a delay in my rehab project for my property in Mt. Clemens. I have been stacking up tenant applicants and missing out on opportunities to generate cash flow because of the delay. But, this is what happens when you mess up like I did. Don't worry though, I have dismissed my contractor and have hired someone I trust to get things done properly and quickly. I'll be back on track in a couple weeks.

But what did I do wrong? I paid my contractor too much money before completing an appropriate amount of work. That’s right! I did everything else right, but paying too much money before enough work is completed is the “kiss of death” to any rehab project. Even though I used this contractor in the past and I knew what to expect, and even though we had a very detailed scope of work written out, and even though I had an iron-clad contract signed, I still guaranteed failure by paying too much, too early.

What are the top three warning signs your contractor is going to be a problem? Here is what I have observed over time:

The first sign of trouble that your contractor is going to be a problem is that he or she starts letting your phone calls go to voice mail. Now, don’t be paranoid here. Just be in tuned for a significant change in the pattern of communication. If you normally get right through to your contractor over the phone and discuss the plans for the day or for the following day and all of a sudden you start getting voice mail and it takes a couple of attempts before you receive a call back, that’s something to be concerned about. The first time it happens may be nothing - we all get busy. But if you start to get that “feeling” that you’re being avoided, something may be wrong.

The next thing you want to watch out for is a sudden change in scheduled hours. If your contractor is usually on site at 8-am and stays hard at work till around 4-pm on a daily basis, but suddenly seems not to be on site till around 10- or 11-am, you should ask questions. Also, you should be inspecting the work on a daily basis to check their progress. Until you develop a strong relationship with a contractor and really can trust them to do what they say they’re going to do, you must inspect their work regularly. This will help you detect warning signs early.

Finally, when you start noticing delays in your project due to “unexpected” problems, you need to be concerned with the capability of your contractor. Sure, you may encounter the occasional “surprise” during the rehab, but I have learned that there is nothing that cannot be corrected pretty quickly. Any more than a day or two delay for anything except for maybe the most serious things like structural problems not identified during the initial inspection should have you seriously concerned with your contractor’s ability to complete the job.

So there you have it. My “lessons learned” as I continue down the path of real estate investing in south-east Michigan. Hopefully you will not make these mistakes if you are starting out. Learn from those of us who have learned the hard way.

I’m enjoying the process. I’m looking forward to continued successes. I’m excited about the ongoing opportunities to invest here in Michigan. It’s a tremendous opportunity outside of the typical IRA, 401(k), KEOGH, or other investment vehicles. After all, I have lost over 46% of the value in my 401(k) I have at work. I will not rely on that alone for my future retirement years.

If you have pulled your money out of the stock market or mutual funds and are interested in putting it somewhere more secure over the next 2-5 years, send me a note. I would like to talk with you about how you can partner up with me and make a positive and almost guaranteed return on your investment!