Every rental property owner depends on contractors and vendors to assist with the proper management of the rental units.  The real challenge for many rental property owners is finding the right people or companies for the job and ensuring that they’re paying a competitive price for quality services or materials.  Not to worry though.  The following suggestions can assist you in assembling your team.

NOTE:  Whoever you hire, be sure to issue and IRS Form 1099, Statement of Miscellaneous Income at the end of each calendar year to each independent contractor or vendor who isn’t incorporated and was paid more than $600.

What to Look For

I’m going to let you in on a secret.  Having a list of competent and reliable contractors, vendors and suppliers who price their services and materials fairly is crucial to successfully maintaining your sanity as a rental property owner.  You can count on these high-quality individuals and firms for any situation or need that arises at one of your rental properties.  Unfortunately, finding them can be a real challenge and you may be wondering where to turn.  Locating and screening vendors is a constant process because the best contractors often become so busy that they can’t handle all the work, leaving you to find another contractor.

Where to Look

To locate the better contractors, check with other property owners or the product service council of your local apartment association or IREM chapter.  [Call AOA for contractor referrals who are available to service all of your needs!]  Be sure to obtain several references and call them before signing on the dotted line.  Look for a contractor or vendor with a proven track record, all required insurance and a minimum of three to five years of experience.

Honesty, Dependability and Competence

After you find a contractor, start her on a relatively simple job and supervise carefully so that you can see the quality of her work firsthand and avoid any billing surprises.  If you own one or only a few rental units, you have too much at stake and can’t afford any problems or delays.

You typically pay a major portion of your overall expenses to contractors and service providers, so spending these dollars wisely is important.  Care must be taken to ensure that the contractors are honest, dependable and competent.

Giving a contractor unlimited, unsupervised access to a rental unit can be dangerous because you usually have very little, if any, personal background information on the contractor or her employees.  Likewise, don’t ever hire day laborers who congregate in front of your local home improvement or building supplier because the savings are illusory and the risks are tremendous.

Get Copies of Insurance

In addition to good work, dependable response and competitive pricing, when you hire contractors, you must insist that they provide a copy of their certificates of insurance including current and adequate workers’ compensation and liability insurance coverage.  Contact your state contractor’s licensing board to ensure that your vendor’s license is current and that she has any required bonds.   This information is often available online at each state’s official web site.

You Get What You Pay For

Remember one of my favorite sayings and understand that it clearly applies to the management of rental housing and contractors:  “You get what you pay for.”  I’ve found that this statement is painfully true through my own experience and through the feedback I’ve received over the years from my nationally syndicated landlord-tenant advice columns Rental Roundtable and Rental Forum.

Many rental property owners are so concerned about keeping their expenses down that they get into trouble by selecting contractors based strictly on pricing.  Pricing is important and the profit margins in rental housing require diligent conservation of financial resources, but you don’t want to skimp on hiring contractors and vendors.

Avoiding Common Pitfalls

To avoid any potential problems down the road, watch out for the following:

  • Bids that are much lower than others
  • Contractors who don’t have full-time employees
  • Products and services that either barely meet the minimum or far exceed what you need
  • Service contracts with odd terms
  • Quotes that aren’t competitive or bidders who aren’t using identical specifications
  • Unclear billing and/or payment expectations
  • Contractors who don’t supervise their employees
  • Vendors who demand payment before the work is done

Note: Have your attorney review all contracts before signing them.  Also, although vendors initially say otherwise, all terms of the service contract should be negotiable. Unless a contractor has a monopoly in your area, seriously consider another if the one you’re talking with refuses to negotiate.

Robert Griswold is a hands-on property manager with more than 30 years of experience, having managed more than 800 properties representing more than 45,000 rentals.  He owns and runs Griswold Real Estate Management, Inc. with offices in southern California and southern Nevada.  This article is an excerpt from his book, Property Management for Dummies which is available at www.LandlordBooks.com.  For more information, visit www.griswoldremgmt.com.

 

 

 

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