rehab loans

Choosing the Right Contractor Using Rehab Loans

If you’re using rehab loans to fix up homes you buy and want to flip, you’ll need reputable contractors. While it’s easy to do a quick Google search and find a contractor near you, that doesn’t mean that’s the right person for the job.

Here are X ways to find the right contractor for your job so your rehab loan gets approved and funded.

1. Get Referrals

Don’t be afraid to get referrals from your network. Chances are the people around you will tell you the truth about a contractor. If they didn’t like his work or he wasn’t timely, for example, they will tell you.

Your network could include friends and family, real estate professionals, appraisers, or even your lender. You never know who knows someone in the business that can help you get the great contract work you need.

2. Stick to Local Contractors

While you might find better deals from contractors not from the area, they may also be a part of a scam. Many ‘out of towners’ ask for money upfront and then run without doing the work.

Instead of taking a chance, stick to local, licensed contractors that have a brick-and-mortar office near you. They are more likely to follow through on their contract because they have a reputation to uphold in the area if they want to stay in business.

3. Ask for Proof of Insurance and Bonding

Never work with a contractor that can’t prove their insurance and bond. You want to make sure the contractor has enough liability coverage should something happen to either the contractor or the home. Without the insurance, you could be financially liable which could throw your potential profits out the window.

4. Never Pay Up Front

Contractors that ask for payment upfront are usually scam artists. While it might be acceptable to ask for 25 – 50% of the payment upfront to cover materials and hiring the labor, paying the full amount gives you zero leverage on the contractor. Withholding a large portion of the costs ensures they will follow through on the contract and hopefully not bail on you.

5. View Past Work or Reviews

At the very least, read a contractor’s latest reviews, but always ask to see past work too. Contractors should be proud to share the work they did. If they hesitate to offer names or even pictures of what they’ve done, it’s a red flag and you should look elsewhere.

Final Thoughts

Rehab loans give you the money needed to buy fixer-uppers and pay for the renovations. It’s up to you to find the right contractors for the job that will do the work needed to improve the home’s value.

Do your research, talk to others in your network and ask as many questions as needed of the contractor until you feel comfortable. It’s best if you shop around and get quotes from 3 – 4 contractors too so you have something to compare each quote to and can make the right decision.

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