Contractors/GC’s… a proper due diligence process
Failing to hire a good contractor can cost you tens of thousands of dollars in lost time, cost overruns, and unforeseen/unplanned renovation costs.
That being said, we’ve outlined our processes through years of experience and recent events that have equally costed many local real estate investors and partners $100’s of thousands in lost money.
First, we need to understand that the search for a good contractor should never be “finished”. If you’ve found yourself an incredible contractor/GC, and you utilize them exclusively, you should continue to be “open for business”, meaning open to new trades, contractors and GC’s and our recommendation is to always onboard those contractors/GC’s if they meet your initial checks.
This is important for a few reasons:
It forces you to constantly be advertising for new trades/contractors
It always ensures your list to be evergrowing
Should a problem arise, you have others you can call on that have already been onboarded.
Lastly, we’ve found that contractors become comfortable, unreliable or begin to treat you differently typically after around ~2 years. Our hope is to always remain loyal to our trades and we like to see them succeed, so we pour into their growth and development and are transparent when they may be slacking but if they cannot keep up or get uncomfortable, our business and our success is our first priority as many others including financial partners depend on us and so we cut them immediately and that’s much easier when you’ve got a long list of trades/GC’s who have connected with you and been onboarded waiting to take on a project and impress you.
How do we vet our new contractors when onboarding?
We request the following up front,
Copies of WCB coverage
Copies of liability insurance
Copy of one piece of ID (Drivers License, Passport, Etc). - this is important as it provides you with the contractors legal names as well as the address for their personal residence
Portfolio
3 references - recently completed projects - we also do research, check mutual friends and try and find references not referred, as the references that are referred are likely bias, to some degree.
Addresses to two active projects that we can view - we request lockbox codes so we can view these projects at random and without notice. The idea is we want to understand, what’s the shape of the property upon arrival, is the exterior being maintained? Once we enter, is the inside organized, are the trades organized? Catching people in their “natural” working order truly showcases their character, behaviours, etc. whereas if viewing a property under construction with a scheduled walkthrough - its very easy to put on a good show.
Example contract & example scope of work - we have contractors execute our contract, but as you scale and grow, its more likely that contractors will stand firm or contracts will be agreed to between lawyers, in any event, we request example contracts and scopes of work and keep them on file in the event they’re not agreeable to executing our contract.
Getting to know the contractor/GC:
Questionnaire or google form with some of the following questions,
How long have you been in business?
Do you employ people or hire subtrades?
Do you warranty your work?
What is your desired work & what type of work is not desired, i.e., your great at bathrooms but don’t enjoy installing flooring? Or, are you complete turnkey operation who specializes in being a GC?
Organize an initial in-person meeting
Conduct research:
Schedule walkthroughs
Complete random walkthroughs
Speak with references
Research their social media:
business
personal
family/friends
Add them on social media if required to investigate further
Research court of queens bench in each province (we’ve recently discovered a contractor who’s record was in clean in Manitoba, but had a criminal record in another province, so it is crucial to do investigations in every province):
https://web43.gov.mb.ca/Registry/NameSearch - MB
If due diligence is successfully conducted and they appear to be a fit,
Have them quote a project
See how things work between you both, communication, quoting process, organization, et.c
Build relationship
Have them begin on a small project to start, I recommend for example a rental unit or a renovation of $25-30,000 maximum from start to finish and then begin awarding them more projects.
