Managing Contractors Image by USACEpublicaffairs via Flickr

The buy-fix-sell or rent out real estate investing strategy often fetches heftier returns than flipping because it entails a lot more work. This includes dealing with contractors who will be renovating your property. The profitability of your investment property partly depends on how the contractors execute their job since you will be spending a considerable sum of money for the project and because the quality of their work will dictate how much asking price or rental you can command from buyers or renters. That is why if you are new in this strategy, it is essential that you establish a good working relationship with some of them so that in your next rehab projects you know who to turn to. Of course, you would want to choose the competent and professional ones, those who are reliable and would not take you for a ride because you are inexperienced. Try to make your rehabbing debut a great one, follow these tips on how to screen the right contractor.

1. Require candidate contractors to fill up application forms.

Some contractors may laugh at this but seeing candidates make the additional effort of filling out an application form will help you measure how intent they are in getting involved in the project. If they do not take your application requirement seriously, it could be an indication of a lack of commitment and that they could be sloppy in their work or fail to show up during work.

2. Ask for references and consult them.

Most likely, contractors bidding for your project may already furnish a list of references for your perusal. Call them and get a glimpse of how contractors deliver their job from their experience by asking specific questions about the quality of the contractor’s work. Be alert on reports about a habit of playing hooky because hiring this kind of contractor can delay the completion of the project and drag profitability down.

3. Stop by one of their project locations.

You can confirm the quality of their work further by visiting one of their project sites. With your own two eyes you can witness the quality of their work and how tidy they are in their work stations. Naturally, you need to secure the permission to make the visit.

4. Put all agreements in writing. Always!

Do not think that the rehab project you have is small-time and asking for written bids is too formal for your case. You or the contractor may forget or misinterpret your verbal agreement so to ensure full understanding of what you have agreed on and avoid any disagreement later, a written document will straighten things out.

5. Opt for contractors with License and insurance.

As the property owner, you cannot pass the buck to someone else should a fire or freaky accident occur. So make sure that the contractor you hire is truly insured and licensed. Verify that they have provided you the correct coverage details and that their insurance is valid on the dates of the project.

6. Pay in full only after the project has been completed and back jobs have been addressed.

Some newbies may fall for this: paying the contractor a substantial amount, after which the contractor does not report to finish the project. Ugh! this can bleed you dry! To protect you from this unfortunate scenario, phase your payments over a number of installments. For example, if they finish half of the job, agree to pay them, say, 25% of their agreed fee. When they finish 3/4th of the job, pay another agreed sum of money, and so on. Of course, you have to release money to buy materials. Do not forget to ask for receipts for their purchases. Expect to receive requests to make advance payments, but if you make an agreement early on that this should not be the case, then you have just saved yourself from the headache of facing a fully paid absentee contractor and an unfinished project. If you do not take this measure, you may end up paying double for the same project and delay renting out or selling the property. This means delayed profit and possibly additional expenses.

These tips do not necessarily imply that contractors lack work ethic because many are great and professional to work with. We offer these tips to help manage expectations and nip potential headaches in the bud before they complicate. By following these measures, you see to it that you start and end your dealings with your contractor on good footing. and that you can hire them again for a new project.

Related articles

• Landlord’s Guide To Exterior Rehab Choices
• How to Find a Contractor to Flip That House
• Estimating Construction Cost – Actual Repair Budget Attached
• 4 Great Reasons Why REIs Must Do A Green Rehab

A door is not merely a door, but the primary method one enters and leaves your house. It can leave a lasting impression on your guest if you have a unique, one of a kind door. Within this post we want to show you some examples of some of the most beautiful doors in the world and to expand your imagination of its incredible possibilities of style and color.

Law office in Dubin

The windows give this door an added touch of elegants.

The blue gives this door a contrast with the beige walls

A work of art with all the colors: Green, yellow, and a touch of orange.

A used door that color faded a bit. The lock adds another element to its character.

Wonder style, and this door gives you a glimpse of what is inside.

This looks as if it were out of a Pixar movie.

Blue and yellow never looked so good.

The shape of the door, color, and texture.

The most photography door in Denmark

An old red door with great character.

Sharp, classy, and intricate.

A law office in England

A blast from the past.

The magical white door.

The Tuxedo of doors.

This door makes you want to know who lives behind it.

A typical door, but with a touch of texture to it. It’s not as flashy as the rest, but it gets its point across.

Photo courtesy of Philip Taylor PT

With the tremendous earning potential in real estate investing and the velocity of money with which one can rake in earnings doing this business, financial freedom and early retirement could just be on the horizon for many successful real estate investors. If you are one of them, then perhaps, the forecast that Social Security may no longer be able to pay full benefits in the years to come as it is about to run a negative cash flow by the year 2017 is none of your concern. It may not even matter to you if you cannot yet avail of tax-free distributions from your IRA. However, a savvy real estate investor like you can make use of your expertise to accelerate the growth of your IRA. This is through self directed real estate IRA’s.

Self directed IRA’s are a type of Individual Retirement Accounts that allows the account holder have control over money and investment decisions. While the typical IRA’s involve mutual funds, CD’s, stocks and other paper assets, self directed real estate IRA’s can also make investments in the real estate. For instance, you put a rental property under your self directed IRA by putting the rental income into the retirement account. However, properties that you personally use are excluded from this account. You are also not allowed to rent out properties under your IRA to your spouse, parents, grandparents, children and grandchildren. But you can take in your siblings as your tenants. Besides these, there are many other rules that complicate self directed real estate IRA’s. Nevertheless, this type of retirement account has several advantages that outweigh its complexity.

Why Bother With Self directed real estate IRA’s

Enjoy Tax Free or Deferred Tax Advantage.

Depending on the kind of IRA, you can enjoy either deferred tax or exemption from paying tax. In the first kind, your yearly contributions, which you make using pre-tax dollars, is not taxed. You will not be taxed until you make withdrawals when you retire.

The tax-free kind is called Roth IRA. Here, you pay annual contributions using after-tax dollars. Although you do not enjoy tax advantage in the year you paid the contribution, but the growth of the retirement account and the income you withdraw when you retire are not taxed. Because of this tax advantage, the majority use as instrument Roth IRA for real estate investments. By using this, all the profits you make from your real estate deals would be tax-free.

Benefit From the Power of Compounding

Just like in other financial vehicles, the power of compound interest speeds up the growth of your retirement fund. Combine that with lucrative real estate investments in your self directed IRA, plus the fact that the amount you ought to pay as tax is also added in the total account balance also compounding interest, and witness how fast your money grows. Too bad, you will have to wait for your 59th birthday, before you can start making penalty-free withdrawals. But at least, your future is secure.

Protect Your Assets From Creditors

Under the shelter of federal bankruptcy law, IRA’s are normally protected from creditors in bankruptcy cases.

Pass On Tax-Free Inheritance for the Next Generation

Roth IRA’s allows you to pass on a growth savings instrument to your heirs after death sans the burden of assets.

Leverage On Your Expertise in Real Estate Investing

As a savvy real estate investor, you can cherry pick the real estate investments to include in your IRA. With a self directed real estate IRA, you may not always need the services of a hard money lenders. You can flip a house using funds from your self directed real estate IRA as option money or as downpayment.

In the world of real estate investing, you can make money with little to no money. Hence, it is an excellent tool to achieve financial freedom and fund your retirement. Enhance that with self directed real estate IRA’s, and you can zoom your way to financial security and bliss.

With the growing social awareness of the need to care for the environment, emphasizing the importance of  green living to parry climate change, every rehabber may have toyed the idea of doing a green rehab. So what’s holding you back from jumping on the green bandwagon?

While you think of some excuses why you cannot get involved in green rehab, here is a list of why you should:

1. Let’s Begin With the Obvious: Green Rehab to Help Minimize Climate Change

It is the conscientious thing to do. Since this opens up to a larger topic, and perhaps may spark several arguments, let me leave it to Greenpeace and other tree huggers to expound on it.

2. Do Green Rehab to Cash In on the Growing But Untapped Green Market

The spate of global events linked to climate change, such as the recent flash floods in Australia, the cold snap in the Northwest and the die-offs of fish and birds in Chesapeake Bay, have certainly roused even more people to consider leading a green lifestyle. Yes, consumers have been inundated with energy saving appliances, hybrid cars, organic products, recyclable materials and sundry other eco-friendly items, but the room for a real estate investor to venture into green rehabs can still be measured in many acres.

Results of a 2010 study conducted by AvidBuilder.com showed that 60 percent of the respondents who are potential homebuyers considered “Green Features” as must-have’s while only 38 and 9 percent, considered “Home Design” and “Home Fixtures” as must-haves, respectively.

Roughly 58 percent of first-time buyers and 62.5 percent of retirees deemed overall energy efficiency as a must-have. Although they understand that they have to pay a premium when opting to live in a green building, yet first-time buyers and retirees who usually are the financially challenged look for these eco-friendly features. Real estate investors must take note that while more than half of the market composed of retirees and first-time buyers look for these green features, only less than 5 percent of this is supplied for.

Into the bargain, the After Repair Value of your property with these green features will increase allowing you to command a higher asking price.

With some real estate investors starting to understand this market need, it may not be for long before this unsaturated market be drenched with green rehabbers. So why not consider this as your niche NOW?

3. Green Rehab to Save Some Green on Green Real Estate Rebates and Incentives

Green Rebates. Buying energy efficient heaters, air conditioning units, furnaces, washers, and the like, entitles a real estate investor, even if not occupying the property, to get this reward. Just fill up some forms, furnish a proof of purchase and you can claim a check for a certain amount.

Green Incentives. When you green remodel, build or cut down consumption of energy or water on property, you may be entitled to cash checks; enjoy deductions or waivers on planning, zoning and engineering department fees; and be in the priority list in processing your application for zoning, and the like. These incentives usually come as part of local government programs backed by Stimulus funds. Most incentives are awarded to owners and they do not have to be occupying the property. Rebates and incentives for doing a green rehab may be incorporated.

Loan Some Green With Energy Efficiency Loan Programs for Your Green Rehab

You can apply for a loan to fund the upgrading of energy efficiency in your rental properties or fixer-uppers. Rates in this loan are often lower accompanied with friendlier terms.

The craving for greener homes has not been satiated. This unserved market seasoned with enticing rebates and incentives and supportive loan programs will make a number of real estate investors salivate at the prospect of feasting on this potential to earn more green. Before doing anything, chew over it as this may not be your usual salad.

Green rehab may entail additional details to the work done with respective costs, but it may soon be a standard rather than just an option.

Should you be afraid of trying to comply with the EPA’s new lead based paint laws?  I have heard several real estate investors offer up many different opinions on this topic.  Based on the fines involved, I would not willfully violate these laws whether you like them or not. The six ideas presented below are derived directly from the EPA’s FAQ website.

The good news is that only one in four homes built after 1950 has lead based paint.  Depending on your city, this may not affect you very much.

The first thing you have to do is pay $300 to have your firm lead based paint renovator certified; which is strictly a fee in order to get on the EPA’s approved list and receive an approved vendor certificate.  Then, the newly certified firm has to pay to have their workers or supervisors trained on the “new laws” by a certified instructor trained by the EPA.

Fines for violations for the EPA Lead laws start at $37,500 per day of work! This goes up if they can prove that you knew about the law and went ahead with the work anyway.

As you will see from the FAQ’s, the EPA has decided that these rules do not apply to homeowner’s working on their home or to someone volunteering their time.   The law only applies if there is compensation involved – interesting?

How to Avoid Dealing with the EPA’s Lead Removal Rules

• Only buy and fix houses built after 1978
• Have the home tested and keep your fingers crossed (only 1 in 4 homes after 1950 have lead based paint)
• Do not disturb more than six square feet of interior surface or more than twenty square feet of exterior surface
• Gut rehab the entire house (reference question 6865 below)
• Have the tenant do all the repairs, landlord just pays for the material and tools (you can’t reduce the tenant’s rent though, remember no compensation for labor)
• Have your brother or friend perform the work for free

As you can see, there really isn’t a great solution here and the last two options aren’t very realistic.  You either have to get your own crews certified and trained or wind up paying a premium for a certified subcontractor.  Should you take the risk of ignoring the new law all together?  Be careful.  What are you going to do when your FHA approved buyer needs proof for his loan underwriting that the home was properly renovated under the new EPA guidelines?  Don’t think this can’t happen.

Here is what the new Lead Renovation, Repair, and Painting Rule (RRP) actually says:

EPA regulations now mandate that any contractor or maintenance staff, from plumbers to electricians to painters, who disturbs more than six square feet of lead paint, replaces windows or does any demolition while working in a pre-1978 home, school or day-care center, must now be Lead-Safe Certified and trained in lead-safe work practices. If not, you could face tens of thousands of dollars in fines. These regulations are now the standard of care for the industry and complying with them will reduce your chance of being involved in potentially “expensive lawsuits”.

Valuable Link to Materials and Downloads for Renovators on Renovation, Repair and Painting

http://www.epa.gov/opptintr/lead/pubs/lscp-renov-materials.htm

Below are the most interesting and relevant facts from the EPA’s FAQ website that would be of most interest to rehabbers, flippers, landlords, and property managers.

http://www.epa.gov/lead/pubs/rrp-faq.pdf

Question (6865)

If all or a portion of a pre-1978 housing unit has been gut-rehabbed after January 1, 1978, as evidenced by property owner and/or other verifiable documentation, do the RRP Rule requirements apply to work in that unit?

Answer

EPA believes that whole house gut rehabilitation projects may demolish and rebuild a structure to a point where it is effectively new construction.  In this case, it would not be a modification of an existing structure, and therefore not a renovation.

Question (5861)

How can homeowners protect themselves and their families from exposure to lead dust if they plan on doing their own renovations?

Answer

The RRP Rule does not impose requirements on homeowners performing renovations in their own homes. If you do decide to do a renovation yourself, it’s very important to take precautions to protect you and your family from exposure to lead dust.  EPA recommends that you follow these simple procedures:

• Contain the work area so that dust does not escape from the area.  Cover floors and furniture that cannot be moved with heavy duty plastic and tape, and seal off doors and heating and cooling system vents;
• Keep children, pregnant women, and pets out of the work area at all times;
• Minimize dust during the project by using techniques that generate less dust, such as wet sanding or scraping, or using sanders or grinders that have HEPA vacuum attachments which capture the dust that is generated; and
• Clean up thoroughly by using a HEPA vacuum and wet wiping to clean up dust and debris on surfaces and wet mopping the floors with plenty of rinse water before taking down plastic over doors, windows, and vents.

Question (6836)

If a renovator is only reimbursed for materials, would that be considered compensation?

Answer

No.  Compensation includes pay for work performed, such as that paid to contractors and subcontractors; wages, such as those paid to employees of contractors, building owners, property management companies, child-occupied facility operators, State and local government agencies, and non-profits; and rent for target housing or public or commercial building space.  Reimbursement for the cost of materials is not compensation.

Question (6837)

Is work done by friends, a brother-in-law, or volunteers covered by the RRP Rule if no one is compensated?

Answer

No.  The RRP Rule only applies to renovations performed for compensation.

Question (7009)

When repainting rental housing, if the landlord supplies the paint and materials, and the tenant does the labor without receiving money, credit toward rent, or other compensation, does the RRP Rule apply?

Answer

No.  The RRP Rule only applies to renovations performed for compensation.

Question (6703)

If I rent out apartments built before 1978, do I need to get firm and renovator certification if I do my own work on it?  What if I hire a renovation firm to do the work?

Answer

With respect to landlords, EPA believes that there are two circumstances where work being done in pre-1978 apartment is for compensation such that the landlord must be a certified firm and use (or be) a certified renovator.  First, if the landlord does the renovation him or herself, then the landlord must have firm and renovator certification.  Second if an employee of the landlord does the renovation work, then thelandlord must have firm certification and the employee must be a certified renovator.  However, if the landlord hires a renovation firm to perform the renovation, the landlord does not need firm or renovator certification, but the firm hired by the landlord must be certified and must perform the renovation using a certified renovator that directs and provides on-the-job training to any workers that are not certified renovators.

Question (6865)

If all or a portion of a pre-1978 housing unit has been gut-rehabbed after January 1, 1978, as evidenced by property owner and/or other verifiable documentation, do the RRP Rule requirements apply to work in that unit?

Answer

If only a portion of the unit has been gutted, the RRP Rule applies unless you have determined that the components affected by the renovation are free of paint or other surface coatings that contain lead equal to or in excess of 1.0 milligrams per square centimeter (mg/cm2) or 0.5% by weight.  This determination must be made either by a certified inspector or risk assessor, or by a certified renovator using an EPA

recognized test kit.  You must keep records of any lead-based paint free determination and make the records available to EPA if requested.   EPA believes that whole house gut rehabilitation projects may demolish and rebuild a structure to a point where it is effectively new construction.  In this case, it would not be a modification of an existing structure, and therefore not a renovation.

Question (6694)

Does the RRP rule apply to simple painting activities that occur when rental properties turn over?

Answer

No. If there is no surface preparation that disturbs the existing paint prior to painting, the RRP Rule does not apply.  If you disturb paint by scraping or sanding while preparing the surface, the RRP Rule applies.

Question (6832)

My firm is performing a renovation in an unoccupied home that will be put up for sale when work is done.  Does the RRP Rule apply to this renovation?

Answer

Yes.  Temporarily unoccupied or vacant housing is not exempt from the requirements of the RRP Rule.

Question (6659)

Is it a violation of the RRP Rule for a homeowner to hire a firm that is not certified?

Answer

The RRP rule does not impose requirements on homeowners, unless they are performing renovations in rental space. However, the hired firm would be in violation of the RRP Rule if it was uncertified and performing a covered renovation.

Question (6949)

I have hired a firm to renovate my home, but now I am concerned about whether the firm is a lead-safe certified firm.  How can I find out?

Answer

EPA has a searchable database to help you locate lead-safe certified firms near you at:

http://cfpub.epa.gov/flpp/searchrrp_firm.htm.  It is possible that your firm is not yet listed on EPA’s web site, but is certified.  If you do not find your firm on EPA’s web site, you should call EPA’s lead hotline at 1-800-424-LEAD (5323) and speak to an expert who can help you find out whether your firm is certified.

Question (6802)

Does the RRP Rule require a certified state lead inspector or risk assessor, who does not do renovation work, to become a certified renovation firm in order to take dust wipe samples?

Answer

No.  A certified inspector or risk assessor may make determinations regarding the presence of lead based paint at a renovation site without becoming certified as a renovation firm.

Question (6803)

Is the fee for firm certification waived for self- employed individuals or landlords?

Answer

No.  Congress requires EPA to impose a fee on certified contractors that is sufficient to recover the costs of administering and enforcing the RRP Rule.  All applicants for firm certification must submit the $300 fee as part of their application.  A firm’s certification is effective for 5 years.

Question (6677)

Does the term “target housing” mean just low income housing, or any home built before 1978 regardless of the financial status of the occupants?

Answer

“Target housing” means any housing constructed prior to 1978, except housing for the elderly or persons with disabilities (unless any child who is less than six years of age resides or is expected to reside in such housing) or any 0-bedroom dwelling.  The income of the occupants of the housing is not relevant.

Question (7203)

If a project disturbs six square feet or less of interior surface or twenty square feet or less of exterior surface, is it necessary for a firm to comply with the pre-renovation education requirements, such as distributing the pamphlet?

Answer

No.  A project that disturbs six square feet or less of interior painted surface or twenty square feet or less of exterior painted surface is not considered a “renovation” under the Rule. It is considered a minor maintenance and repair activity.  As long as this type of disturbance does not involve any prohibited work practice, window replacement or demolition of painted surfaces, a firm need not comply with the pre-renovation education requirements.

Question (6992)

When renovating a common area in an apartment building, must my firm provide pre-renovation education to all tenants?

Answer

Yes.  Firms performing renovations in common areas of multi-unit housing must comply with the information distribution requirements before beginning renovation activities.  The firm must provide the owner of the common area being renovated (generally the building owner) with the “Renovate Right” pamphlet and obtain a written acknowledgement of receipt.  The firm must also provide the occupant of each individual unit affected by the renovation with information describing the general nature andlocations of the renovation and the anticipated completion date.  The firm may comply with this requirement either by mailing or hand-delivering the pamphlet and information to each unit, or by posting informational signs while the renovation is ongoing describing the general nature and locations of the renovation and the anticipated completion date.  For additional information on these requirements, visit

http://www.epa.gov/lead/pubs/sbcomplianceguide.pdf.

Question (6666)

Can you list specific activities deemed a disturbance of painted surfaces?

Answer

As a general matter, EPA believes that activities that create dust or paint chips are activities that disturb paint.  There is no definitive list of activities that disturb painted surfaces.  Some examples that can disturb painted surfaces include, but are not limited to:

• Making cut-outs in walls.
• Replacing a window from the inside or outside.
• Removing paint with a heat gun.
• Scraping paint.
• Removing kitchen cabinets.
• Removing paint by abrasive sanding.
• Removal of large structures, including demolition of interior plaster walls.
• Window replacement.
• HVAC repair or replacement, including duct work.
• Repairs resulting in isolated small surface disruptions, including drilling and sawing into wood and plaster.
• Scuff-sanding.

These activities and other activities which disturb paint could be relevant to many trades, such as (but not limited to) renovation, remodeling, general repair, general maintenance, plumbing, electrical work, carpentry, window installation, painting, weatherization work, and more.

Please feel free to leave your comments and vent about either how difficult this making life for you or if you plan on complying at all??

Electrocution (check with your local zoning laws first)

I came up with this brilliant idea after my first break-in.  My first home rehab project was completed the day before Thanksgiving in ’01.  The very next day, on Thanksgiving, I received a call from a fellow investor informing me that the back door to the house was wide open.  Upon arriving at the house, on Thanksgiving night, I found that all the copper plumbing was ripped out of the basement, along with the kitchen counter tops, kitchen cabinets, furnace, and the toilet seat.  They even left a souvenir in the toilet for me.  I have not figured out how to legally implement my electrocution security system yet.  Please let me know if you have any suggestions on how to make this happen legally.

Security for Vacant Property

Steel Doors and Steel Window Screens

By far the best vacant property security system on the market is the type offered by VPS Inc.  Find them at www.vacantpropertysecurity.com.  They will install keyless, solid metal doors on the front and back of the house along with steel perforated window screens on all your windows.  Typical costs are $450 for installation with a $250 monthly rental fee.  The metal window screens allow air and light to enter the house so your rehab crew can work comfortably and safely on the inside.  The system does not cause any damage to the house and adds to the curb appeal of the house while securing your investment.  Look for VPS Inc. or other similar providers in your area when break-ins and vandalism are a constant problem.

Security for Vacant Property - Steel Doors and Windows

Plywood Board-up

The standard protection used on most properties is sheets of plywood over all the windows along with solid wood or steel doors with deadbolts on all the doors.  This is good for standard protection when vandalism and break-ins are not a common occurrence.  The determined crack head will pry these open eventually.

Security for Vacant Property - Boarded-up Homes

Security Dogs

Either get your own dogs to watch the property at night or rent some.   Some cities have security dog services where they will drop off one or two dogs in the late afternoon and pick them up in the morning.  I have never used this service but the rates were reasonable.

Make my day! Security for Vacant Property

Sleep at the Property

It is not uncommon to find volunteers from your crew that will actually sleep at the property once the more valuable updates are completed, such as copper piping installation. An extra $30 a night is worth the piece of mind.  The longer a house sits vacant, the greater the chances of a break-in.  This is why it so important to complete rehabs quickly and get then rented out ASAP.

Security for Vacant Property - Sleep at the Project

Alarm System

The installation of alarm system is another option for securing your rehab property.  A basic system from Brinks or ADT can be installed for $100 if you sign up for a contract monitoring plan.  There are other options out there including those that do not require a monitoring contract.  A company recommended by another investor is LaserShield.net.  After installing their motion detectors, you can have their monitoring center contact yourself, the police, and whoever else necessary all on a month-to-month contract.  Once the home is rented or sold, you can move this monitoring system to your next project unlike the permanent ones installed by ADT and Brinks.

Home Security System

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• How to Manage Property Rehab Costs for Maximum Efficiency and Value