Choosing Contractors and Property Managers: Keys to Successful Real Estate Investing

January 9th, 2024

Owning and managing rental income properties can be highly profitable, but it also comes with major responsibilities. As a landlord, hiring trustworthy property managers and licensed contractors is critical for protecting your investment in residential rentals, handling winter challenges, conducting repairs and maintenance, keeping good tenants happy, and sustaining rental revenues. This comprehensive guide will explore the significance of selecting quality vendors and provide a blueprint for a rigorous selection process.

Why Careful Contractor and Property Manager Selection Matters

Choosing the right property management team and contractors for repairs like heating system tune-ups, roof leaks, or driveway cracks carries huge upside in maximizing returns while minimizing headaches for landlords overseeing income properties. The importance of diligent selection includes:

  • Avoiding expensive mistakes: Paying more upfront for proven managers and licensed contractors insures against shoddy work or financial pitfalls from inexperience that could cost more long-term. It protects the owner’s investment in rental properties across regions and mitigates the need for repeat visits to fix issues.
  • Ensuring quality workmanship: There’s no shortcut to regularly checking online reviews and client satisfaction with previous projects when assessing contractors for your specific needs. Verifying at least five recent projects with positive feedback and proper permitting lends confidence skills align with the job.
  • Saving time: Distance and travel between income properties eats into precious time for landlords as a rental property strategy scales into more units. Working with the best enables focusing on big decisions rather than countless small ones.
  • Reducing headaches: Fewer headaches mean more revenues to your bottom line. Tenants stay longer and recommend properties to others when operated smoothly. A survey showed 73% of renters rank maintenance response time as a key factor in renewal decisions.
  • Matching services to property: The right mix of services suited to your investment and income properties prevents overpaying. Define must-have capabilities around number of staff, experience with certain property types like multi-family units, technological capabilities, and specialties in plumbing or electrical alongside basic maintenance offerings.

Vetting Contractors Thoroughly

Making sure a contractor or vendor meets key criteria protects against risks inherent in major upgrades or fixes involving practices like electrical wiring, gas line connections, masonry, carpentry repairs, window installations, and plumbing that keep tenants comfortable. Property inspections also matter for spotting issues early before they worsen.

Researching Key Contractor Qualifications

Don’t just settle on the lowest bidder or first search result. Conduct thorough due diligence:

  • Verify licenses and insurance paperwork: Ensures compliance with state and local licensing boards, OSHA safety procedures, and covers liabilities if workplace accidents happen. Require copies before starting a project.
  • Check online reviews: Scan across multiple sites like Google, Facebook, Yelp for any red flags about unreliable service, poor communication, hidden charges. Pattern of complaints merits further probing.
  • Request project examples and references: Any contractor operating for several years should readily provide a track record of successes licensed under their operating company. Contact 2-3 former clients to corroborate details.
  • Confirm experience: Number of years in business and involvement with professional trade organizations signals capable, accountable practitioners focused on quality and building a word-of-mouth reputation.

Questions to Ask Before Hiring Contractors

These questions further evaluate expertise for your specific job:

  • How are cost overruns or change orders handled? Is pre-approval in writing required before exceeding initial estimates?
  • Will lien releases from subcontractors be provided upon final payment ensuring your property itself is not liable for any unpaid project balances?
  • What OSHA safety procedures are followed on work sites to avoid injury risks? Who conducts inspections for compliance?
  • Where do building materials come from – domestic warehouses or overseas? Local supply chains enable higher quality control typically.
  • Are multi-year warranties offered on project work confirming durability in case issues arise later?

Evaluating Contractor Professionalism

Warning signs of inexperienced or inferior vendors include:

  • Slow, non-responsive communication on bids, material delays, scheduling
  • Vague estimates/quotes omitting exact project specifics
  • Incomplete or dismissive answers to your questions
  • Pushing unnecessary add-ons driving costs higher

Positive indicators include:

  • Business operates locally out of a commercial facility
  • Company trucks and uniforms denoting professionalism
  • Quick call back times for inquiries
  • Staff answers questions directly and acknowledges what they don’t know

Assessing Property Management Qualifications

Managing residential income properties with quality tenants requires careful organization and coordination skills. Everything from marketing listings to fielding maintenance requests, conducting property inspections, enforcing lease terms when rental payments fall behind, to customer service interactions with tenants supports owners earning steady rental revenue.

Secure References and Management Portfolios

  • Verify number of properties under management mirroring your own
  • Get at least three references willing to candidly assess responsiveness, business integrity
  • Ask specifically about experience with similar property types like multi-family units

Review Screening Practices

Understanding how selectively tenant applications get approved protects against delinquencies.

  • What specific criteria rejects prospects? How extensively are backgrounds vetted? Credit checks and employment verification are vital.
  • Will periodic interior/exterior property inspections happen? At what cadence? Are inspection reports provided?
  • Is security deposit collection and refund tracking handled properly via ledger entries and bank reconciliations?
  • How are late rental payments pursued? When are evictions initiated relative to state laws? Slow pay can signal future problems.

Evaluate Fee Agreements

Having a clear breakdown of costs for budgeting expenses also ensures funds are properly accounted for:

  • Understand all management, leasing commissions, and per service fees involved
  • Confirm accounting controls over property income and owner distributions like monthly bank transfers and 1099 tax reporting

Crafting Strong Contracts

Successful partnerships between clients and service providers start with structured expectations and protections.

For contractors:

  • Require milestone-based invoicing/payment tracking progress to limit exposure to upfront overpayments
  • Mandate lien releases upon phase completion before advancing additional project funds

For property managers:

  • Establish procedures for responding to emergencies like pipe bursts within two hours
  • Institute periodic review meetings to address issues proactively

For both:

  • Clarify dispute resolution avenues if expectations substantially degrade
  • Note ability to exit agreements if vendors fail to remedy complaints

Our Selection Process for Contractors and Property Managers

We have fine-tuned a data-driven selection process benefiting both individual property owners plus owners of multiple income property units not located near their assets.

A Property Management Perspective

As investors ourselves now owning 42 income properties worth over $18 million, we focus on choosing best-in-class vendors meeting our strict criteria:

  • Licensed status confirmation with state and local authorities
  • Insurance requirements for liability coverage
  • Positive online reviews reflecting experience
  • Reasonable costs balanced with quality for maintenance and unit turnovers
  • Clear ongoing communication about emerging property issues

We require extensive documentation across these aspects before approving any new partnerships.

Working Only With Top-Tier Contractors

We focus on partnering solely with licensed contractors committed to:

  • Project success metrics of at least 90% free of major issues
  • Using durable, quality materials sourced stateside
  • Maintaining budget and timeline integrity within 10%
  • 4 hour maximum response times for defined urgent issues
  • Willingness to offer multi-year warranties on work

This hands-on visibility having operated on the front lines both investing personally and managing other properties enables discerning excellent vendor choices with confidence. We dismiss anyone falling short of thresholds.

Guidance for Selecting Service Providers

Winter Preparations

With colder months approaching, HVAC inspections, sealing cracks letting in drafts, evaluating roof conditions after summer storms, and checking adequate boiler heat systems takes priority for making vacant units rent-ready for new college student tenants. We require upgrades passing rigorous testing before listing available units.

Overseeing Complex Projects

For large-scale renovations with structural changes, secure bonded contractors to avoid legal hassles if issues emerge. For centralized multi-family buildings, verify fire safety with emergency personnel. Bring in certified electricians, plumbers for complex wiring and piping before walls get enclosed.

Traveling Investors

For out-of-state real estate investors unable to directly verify vendors frequently, ask for video walkthroughs after repairs. Have a trusted contact do periodic random drive-bys. Some WiFi connected systems let you remotely monitor property access. Require ample liability insurance protecting assets.

By aligning with our selective standards and oversight protocols aligned to different property types, we aim to give clients complete confidence in vendors underpinning the profitability of rental assets over the long-term even when not physically present.

Want Help Choosing Service Providers?

We encourage investors serious about expanding rental property assets to schedule a free portfolio consultation with Empire 8 Property comparing notes on optimal contractor and property management selection for your specific needs. Our team brings decades of combined experience to determine where operational gaps exist and how to choose partners best equipped at filling those needs. Call 0433 213 993 or email manish@empire8property.com.au to discuss your property goals and learn how Empire 8 Property can help you succeed through our rigorous vendor selection process.

As leading experts in rental property investments, we welcome any investor to contact us for a free, no-obligation consultation on how to protect and grow your assets.

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