Lessons Learned Flipping Houses
Lessons learned flipping houses can come from several sources. Lessons can be learned from others that have experience flipping houses, if they are willing to share these lessons. A lesson or two can even be learned from watching the all too pervasive house flipping shows on A & E and other television networks. But the most lasting lessons, and typically the most painful ones, are those learned from first hand experience. This article will share a few lessons learned flipping houses, first hand.
Working with a general contractor in many ways is similar to being in a relationship with a significant other. The core relationship fundamentals of respect and trust need to be in place in the relationship with your contractor, just like in the relationship with a spouse. Without trust and respect, the outcome of the project will suffer and may even end up in disaster.
There are several steps to take to avoid disaster with a contractor and to build respect and trust. First, be very careful selecting the contractor to perform the work. Ask for, and follow up with, references. Ask your contractor to give you a reference that they know will be bad. Find out what happened and then determine whether what you learned is fatal or whether it was just a bump in the road. Every contractor has a bad reference or two…..it happens. See if they’re honest, which is a pillar on which to build trust.
Insist upon strict adherence to a formal contract and detailed scope of work. Use industry standard contract documents and edit the standard documents to build in the specifics of the project. Agree upon the contract language with the contractor before allowing work to start. Agree upon, and then enforce, a detailed scope of work. Place contract values on each scope item and then pay for these items once they’re completed to your satisfaction. Do not advance pay your contractor without a reciprocal offering of collateral from your contractor. Put the details of the collateral in writing and have both parties execute the writing. If the contractor is unwilling to adhere to a contract or commit to a detailed scope of work, do not hire them, they are not trustworthy.
Make sure that the contractor is responsible for pulling permits and gaining inspection approvals before paying the contractor in full for that item and before allowing the next phases of work to begin….no exceptions!! Build language into the contract that clearly makes permit compliance and correction of non-permit compliant items the responsibility of the contractor.
Finally, demand proof of insurance from the contractor and require that they have, or that they obtain, licensing in the jurisdiction of the project. Have the contractor include your company as additional insured on their insurance certificate for your project.
In summary, lessons learned flipping houses can come from several sources but hands on experience is undoubtedly the best. Build trust and respect between you and your contractor first by hiring honest, referred professionals. Then, use and adhere to industry standard contract documents and a detailed scope of work to guide you both on the path of completing the project. Last, make permit compliance a contractor responsibility and demand insurance to protect you both in the event of unfortunate circumstances.