Tips for Working with a Contractor on a Flip Loan
If you’re considering a flip loan to help get you on the way to real estate investing, there are lots of factors to have in place before you close a deal on a property. Experienced flippers will tell you that a most of the problems with investment properties come from miscommunication with the contractor. We’ve got a post on how to find a reliable contractor. In this post, we’re going to talk about how to set clear expectations so the work finishes on time. With a fix and flip loan, you are spending quite a bit of money every day that you continue to own the property. Before purchasing, do your best to walk through the property with the contractor. He can give you an estimate of how much work his crew will do and how much it will cost. Take account of these estimates in making the purchase offer.
Make All Expectations Clear for Repairs on a Fix and Flip Loan
Once you’ve closed on the property, be ready to get the work. Use the time between purchase and closing to write a detailed contract for your contractor. Include a clear timeline for how the work will be done and the cost of materials. Be sure to have a process to deal with unexpected repairs or with changes to the work. It’s best to require that all changes or additions be made in writing and both parties sign off on them. Experienced investors suggest adding in a penalty for not completing the work on time. But you have to be reasonable. For instance, if you get a week of rain just as you’re ready to work in the exterior, it’s unfair to hold the contractor liable. You won’t maintain a good relationship with the contractor if you’re unreasonable in your demands.
Be clear about when you will pay the contractor. Conventional wisdom is that it’s best to tie payment to amount of work completed, not time worked. Don’t get in the trap of paying 50% upfront, either. That’s a recipe for getting cheated.
Investors looking for a competitive flip loan should contact LendingXpress. We’re happy to work with investors at all levels.