10 Tips to Create a Powerful Contractor Relationship
Episode Resources:
Episode Links:
https://hbr.org/2015/01/how-to-handle-difficult-conversations-at-work
https://www.grainger.com/category/safety
Episode Transcript:
Welcome to the Housing Literacy Podcast with Matt Guarino, founder of Powerful Homes. Matt's mission is to empower dreams through home ownership. We're here to help. We're going to do this together. And now Matt Guarino.
Welcome back to the Power from Homes Podcast, where we empower dreams through homeownership and real estate investing. And how do we do that here at Powerful Homes? Well, the way we do it is through a certain set of mindsets and as well as some very specific tactics and actual things, rubber meets the road, boots on the ground things that you can actually use. So what we're trying to do on these videos and these podcasts is to create value for you guys. So if you are looking to buy a home, if you're looking to sell a home, if you're looking to get into real estate to buy an investment property or many properties, what we're trying to do is give you some tactics and things you can use and have immediate impact.
So today's topic is one that it's probably the most asked question that I've had other than should I buy or not buy and where should I buy and that kind of thing? It's how do I find a good contractor and how do I have a good relationship with that contractor, a long-term relationship? So what we're going to talk about this time on the podcast is 10 things to do to create a successful long-term relationship with your contractor. And the way we're going to do that, I have a little three words or a couple of words that we use within punctuation. We say often at Powerful Homes that “we got this!”. And so each one of those letters stands for one of the things you should do to develop a long-term relationship with your contractor. So we're going to use, “we got this!” exclamation point to make the point of how to create a great relationship.
But one of the things I was thinking about before I jumped on this podcast today was that for the last 20 years, every single day, I've had some contractor working for me doing something. Either doing a remodel or building homes, subdividing lots for across the country and in Washington, Utah, Tennessee. All over the country, I've had contractors working for me. So basically that means that for the last 7,000 straight days, I've been working with contractors. And the big point I want to make is these set of best practices and tactics that you can use to improve your relationship and make it long term aren't because I did everything right. In fact, I would say that, you know, it's like that old adage, you know, how do you get good judgment? Well, you use bad judgment, and then you learn from it and amend that change behavior.
So these 10 things, these 10 things to do to have a great relationship with your contractor are basically mistakes I've made. So what I'm going do is go through the 10 of them and add a few stories in there. But I'm not going to go through every single one and add a story.
But what I am going to do is there are notes to this podcast and on our website, I'm going to post the full summary of these 10 things, as well as give you my cell phone number. Because we are truly, sincerely in it to help you do better than we've done in the past and have successful in real estate experiences as a homeowner and investor. So I'll put a bunch of materials out there. You can download and take a look at, and if you had any questions about any one of these things, you can just text me or give me a call.
So let's jump into it. So, the first thing is the "W" in “we got this!” is to WRITE IT DOWN. I'll say that one more time, write it down. And what I mean by that is to get everything you're going to do with a contractor in writing, and to get it in writing before you start. And what would that mean? That would mean the contract, the contractor agreement including payment terms, and it would include labor. What are the labor costs? What are the material costs? And then what is the profit that the contractor is going to take? Also, it would have the payment terms. I strongly recommend a very small deposit, and then maybe doing percentage of completion for payment. Meaning, you know, you pay 10% down, then you go a third, a third, a third and then maybe, or maybe not hold back, it's called the hold back or retainage; five or 10% until everything's done to your satisfaction. So write it down.
Also get in writing before you start, I can't stress that enough because after it starts, it's maybe too late, but I would get a copy of the general liability insurance of the contractor, or get a copy of the worker's compensation insurance from the contractor. I'd also get a copy of their license that's in good standing in the state or the jurisdiction that they're working. So the "W" is to write it down before you start.
Second, is to set realistic EXPECTATIONS. And that's important again, before the job starts, because you know, the contractor might not know what you expect when it comes to the job, what time of day and what time of day should you start and finish; possibly weekend hours, if you're living in a home, what do you want to do to make sure your kids are safe? And on the flip side, so often contractors bid tons of jobs, and then two months later, he accepts your job. And by then he's got eight other jobs going, and you're number nine and you're sitting there wondering why is it taking longer? How come I'm not as important as I was two months ago.
So setting expectations upfront about all the logistics of the job, what you expect, even putting in writing in that contract the timeline and a delivery date, maybe even a bonus if they delivered on time. But setting those expectations, airing that out beforehand is really, really important.
So, the "G" in “we got this!” is to GO DEEPER. What I mean by that? So often, you know, we know people from our kids' sports teams or just our groups that we're in, then somebody recommends a contractor, just because we know the person that referred them, we believe that it will be a great experience and we don't need to do any vetting or digging. That's a huge mistake, and I've done it many times, but what I would say is to do a thorough screening process. And what does that mean? You can run a background check, you can run their credit score to make sure that they're okay with their money. And, you know, they're going to be handling some of your money, and you can do it just a basic Google search. Checking with the contractor association and to see if any of their references. Definitely check references before you start. So lots of things you can do to protect yourself there.
So this is one of the ones I wanted to give an example of it. So all four of my kids, they're grown now 25, 23, 21 and 20, but when they were in their teens, we would be on the sidelines for hours and hours, days on end watching soccer games and basketball games. One of my son's friend's father approached me one time after I'd known him for years and said, Hey, I know you do a lot of real estate. I'd love to do some work for you. I'm a really great guy and I knew him. He seemed like a pretty cool guy. So did I do any screening? Did I run a background check? Did I do any of the things I'm telling you and really stressing for you guys to take a look at? No, I did not.
So what happened was I hired him for the job and I paid him a bunch of money for a $50,000 project. And then one day I drove up to the job site and all the contractors were really upset in the driveway waiting for me to get there. And they said that this person hadn't paid them since the job started, they're going to walk off the job and what a nightmare. So what happened was then I went home and I ran a background check. I did a Google search, turns out that he lived in Hawaii for 10 years, and it was all over the internet, how he used to skip out on jobs. He had like five different lawsuits and I could have known it all before I started. So go deeper before you start. Even if you think this person is a friend, or a friend of a friend. Do not take any of that at face value, go deeper, dig in and find out.
So, the "O" in “we got this!” is to stay ORGANIZED. It's so easy to get excited about the work part, doing your kitchen or changing the floors out. You know all the fun stuff that goes with it and to put off the billing and administration part? I don't love it. I used to be a CPA, no I'm not. I feel sorry for my clients, looking back on that. So organization and doing that is not my favorite thing anymore, but I can't stress enough how putting off that stuff to later, either it's a big job or a small job is a huge mistake. So I'd even advocate on a weekly basis having a digital filing system, a cloud-based filing system to put all your stuff, all the payments, the invoices, the permits, copies of everything, just put it out there and do it on a weekly basis to stay on top of it. So the "O" is get organized.
The "T" in “we got this!” is to TRUST, BUT VERIFY. So one of the things that you can do, there's a few different structural things you can put in place to make sure that you are trusting but verifying. And one of them is to put a process, a payment process with a lien release. You can even stamp on the back of a check a partial lien release. And for those of you don't know what a lien is, it's just a claim on the house. The mechanics lien is probably one of the only ways for a contractor to get paid. So if you don't pay them, they can attach to your house and put a claim on your house. It's called the lead. So one of the ways, the structural things that I would really stress you putting out there is to you know, and again, this can be in the show notes after this podcast, you can look it up is a partial lien release, which means, say it's a hundred thousand dollar job, and you're going to pay them 25, 25, 25, now, after deposit of 15.
Each time you pay the 25, you put a stamp on the back and essentially it says that the contractor swears that they have paid all the labor and materials with this payment. So if they don't do it, they get in big trouble. So basically you're releasing the lien as you go on the project. A fantastic thing to do. And I can't stress enough how good of an idea that is. The other one is to trust, but verify. So trust that the work was done right, but make sure that the permits are pulled and then as the work is done, have an inspector from the city or the jurisdiction you're in, come and sign off on it. So trust, verify, have the work done and have it signed off by an inspector or a third party.
And finally, one other thing you can do to trust, but verify is if you give your keys out to your house or the code to your garage, I would suggest changing that code or changing the pad on your garage every couple of few weeks. So that way your number, the security of your house doesn't get into the hand of people you don't know. Again, trust, but verify, put some guard rails in there to make sure things are going right now.
Another "T" in “we got this!” is to TALK REGULARLY. So often there's some cool software out there these days that people use. But I think that talking either on the phone on a zoom or face to face is such a big thing because the culture, the vibe of your job needs to be one where contractors trust you. And you trust them, mostly with the mistakes, if something happens, or if there's a squeeze test where the guy doesn't know what to do or the woman doesn't know what to do, they feel comfortable because you've spent time talking to them. So that's the "T" for to talk regularly.
The next one is, is the "H" in “we got this!”, is HONESTY is the only policy. Can't stress that enough. So often I have found that egos kind of creep in often, you know, there's certain things I've never done but it's the first time, or it's the contractor's never done something for the first time and there's a vulnerability and security about all of that, I think to set a culture of honesty and telling people, I want to hear the bad news. I want to hear if something goes wrong is so important to do. So honesty is the only policy. And then even putting a policy in place that you reward it, if you bring a problem, and we take it down and we solve it. That's a big deal.
The next one, in “we got this!” is to INSPECT WHAT YOU EXPECT. So one of the things I recommend here is that if it's a big project, you can even hire a third party vendor. There's one called Multivista. It's a franchise, but they'll come in and take videos and photos as you're going of the project, what's behind the walls. Really good idea, so that way, three years down the road you'll know exactly where the plumbing pipe is or where the shutoff is behind the wall. So inspect what you expect and even a good example of that would be walking around with a level as you go through the property or have your inspect bring a level, making sure that the countertops they just put in are level or the bathtub is level or the new wall that they just framed is vertically correct. So inspect what you expect.
And then the "S" in “we got this!” is for SAFETY, safety first. Of all the things I would say, making sure everybody's safe, no job is worth it. Nothing ever is worth it, if people don't go home safely every night. So one of the things that the story I would share there is I just like to create almost like a game atmosphere. Gaming is a big thing these days, especially during COVID, but I would create almost like a family feud once a week, I'd go there and have 10 safety questions. And the person that got the most right, gets a reward. Maybe a $50 bill, actual $50 bill, which is fun to receive and then or the person that they voted was the safest on the job they get a reward.
Some other things you can do for the safety is to have a policy. Again, this is going to be in the show notes. I have a safety policy, then you can download it and use it, saying that look, no smoking on the job, no drinking on the job, no drugs, supposed to keep the windows and doors locked at night. How you clean up after yourself and you take care of each other. And if you need any safety materials, ask the owner, ask your boss, ask somebody on the site. I've often bought steel-toed boots for people. I've bought safety glasses, the cool ones that people like to wear, the cool gloves to wear. You're showing that they matter, folks matter to you, and you're following through with the safety policy and all these kinds of things and making it fun.
So finally, the last thing, and “we got this!” exclamation point is the punctuation, the exclamation point. So for me, it's to bring the fun and make this not the most stressful thing you've ever done and to be grateful about all of it. There's a vibe about a job if the owner's having fun, he's upbeat and positive with a good attitude, it kind of ripples through to the people working there. So I've heard so many people say it's the most stressful thing in the world remodeling or doing an investment property. But really that's a choice. It doesn't have to be like that. So people will reflect your attitude as you walk onto the site and talk to them and, you know, treat them like family. If this was your family, would you be screaming at them all the time? Probably not. So why would you do that on a job site? So those are the 0 things that will create a successful, positive, long term relationship with your contractor. So don't forget and please keep in mind to remember the phrase, "we got this!" Staying united, staying together, you guys can solve anything and hopefully this has brought some value to you guys, with powerful homes and I'm so glad you're here on the Powerful Homes Podcast.
Thank you for listening to another episode of the Housing Literacy Podcast. Don't forget to like, comment and hit that subscribe button and stay connected with Matt Guarino by visiting www.powerfulhomes.org.
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