By Kris Sawyer, Redlands Construction Inc

It's no secret that one of the most effective ways to flip a real estate investment is to purchase a fixer-upper or distressed property, invest in strategic improvements, and then sell at a profit or rent at an attractive rate.

In practice however, it's not quite that simple. Which improvements should be made and in what order? Which improvements are not worth doing at all? How much money should you expect to spend? And, most importantly, how to you manage the projects from start to finish to ensure that the end result comes in on time, on budget and as expected?

If you've got the time and experience necessary to answer these questions and coordinate the simultaneous work of several teams of subcontractors, you may be able to do this on your own. If not, one option is to hire a general contractor (GC).

The role of the GC is to help you answer the questions above, as well as oversee the work in an efficient, responsible and timely manner. Not only can a good GC help you prioritize what needs to be done (i.e. help you decide where you get the most bang for your buck) he or she can also help get the job done quickly - a key consideration if carrying costs are significant.

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That said, how do you make sure that you don't become one more person with a GC "horror story" to tell? Tales of GC's who don't return phone calls, don't show up when scheduled, or leave jobs midstream are widespread, and you'll never hit the numbers you need to turn the profit you want if you can't depend on this critical player.

And so with that in mind, I offer five, time-tested, battle-hardened "must haves" for screening and hiring a GC:

1. Make sure the GC is both licensed and insured. In Massachusetts, this is a regulatory requirement. Ask to see (not just hear about, see) a current "Home Improvement Contractor" certificate or registration with the state. If there is structural work involved, ask for a Massachusetts Construction Supervisor License.

   For your protection, make sure the contractor is fully insured with both General Liability (which protects your property, among other things, from any accidental damage during the remodeling process), and Workers' Comp (which covers the trades people who are working on your project in the event of an accident). Without both of these in place you could be on the hook for significant expenditures.

2. Insist on a free initial consultation. Any reputable GC should be willing to meet with you and invest an hour or so to talk about your project. This will give the two of you a chance to get to know each other and review the scope of work to be done. Ask the GC to bring a portfolio with pictures of past work (if they don't have this, you may be dealing with a GC who hopes to learn on your nickel).

   Pay close attention to the GC's professionalism and communication skills. Big projects always (always) have tense moments; ask yourself if this is the kind of person you will be able to work with through both good and bad. Depending on the scope and complexity of the project, the GC should be able to give you a ballpark estimate at the end of the consultation (or within a few days).

3. Ask for and check references. Most people know enough to ask for references, but few actually bother to check them out. This is a big mistake. Many excellent salespeople are lousy at execution, and the only way to really know whom you're dealing with is to speak with past clients.

   References should be easy to contact and it's up to you to be prepared with questions. Don't just get "a general feel" for the GC's work... ask specific questions. Was the GC reliable and responsive to their questions and concerns? Did he or she return phone calls promptly? Did the quality of workmanship meet their expectations? Did the workers respect the property and clean up? Were they pleased with the completed project and did the GC stay within the expected schedule and budget? Would they hire the GC again, and if not, why not?

   Remember, you've got a lot riding on this person and you want to minimize any surprises down the line.

4. Get a written, detailed quote. An initial, free, ballpark estimate can help you decide whether the costs for your remodeling ideas fall within your budget. An estimate, on the other hand, is a detailed specification of the project, including breakouts for major portions of the job. Having one of these will ensure that barring unforeseen conditions, you will have your project completed within your budget.

   Keep in mind that unless it is a simple job, you should expect to pay for the detailed specs and quote. Many GC's will bill this up front (in case you decide not to move forward), and then apply it to the project when it gets underway.

5. Get a written, detailed contract. The written contract should include full specifications for your project, as well as the approximate start date and time frame required to reach completion. It should also include the progress payment schedule.

   Massachusetts law MGL c 142A requires every "Home Improvement Contract" to include certain items. You can get a copy of it here.

All in all, working with a capable GC can save you time, money and headaches, as well as ensure that the improvements you want are done in a professional and timely manner. Take the time necessary up front to make sure you hire the right person for the job... you've got a lot riding on it!

Kris Sawyer is president and founder of Redlands Construction Inc, a residential remodeling company serving the Greater Boston & Metrowest Area. She can be reached at 617-469-9012. www.redlandsconstruction.com.

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August 2006

Legal Landmines of Pre-Foreclosures »

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