Did you know that using your own contractor to make repairs, upgrades or otherwise improve your rental can seem cost-effective in the short term, but in the long term it can introduce unnecessary risk and expenses?
Why should you be concerned about this matter? Understanding the pricing and pitfalls will help you to better manage the overall outcome of your rental, in both the short-term and in the long-term. Property owners will often employ contractors who have not invested in training personnel, licenses, proper insurance, etc. These contractors may appear on the surface to be less expensive. However over the long term, sometimes sending in your own contractor can end up being even more costly than you imagined.
There is an intuitive logic that many homeowners employ in using their own contractors when preparing rentals for tenants. You may have been happy with someone’s work in the past when it was done for you, when you were living at the property, for example.
This logic makes sense to the owner because there is an opportunity to get the work done less expensively. They may also trust contractors they already know to give them a good price. This approach appears to save the time of having to get multiple bids to control for price differences and to ensure the quotes coming in are reasonable for the work needing to be done. However, owners may not understand what things normally cost at current market rates.
At Columbia Property Management (CPM) we believe a better approach is to rely on your professional property manager (PM), their established vendor relationships, and their pricing knowledge developed by dealing with repairs on a daily basis for hundreds of properties like yours.
Sometimes owners are willing to sacrifice the quality of work done for a lower out-of-pocket expense. At a minimum, work done to a rental property in Washington, D.C., must be up to housing code standards to ensure a safe and healthy environment for the tenant. Further, working with a contractor who knows these codes inside and out will reduce the risk to the owner and manager of being non-compliant or even facing fines. Many vendors do not know enough about the housing codes to ensure the work done will be compliant.
A better quality standard would be “workmanlike manner,” an industry-standard term which refers to the desired and acceptable standard of the quality of work and materials. This standard helps to make the rental more attractive to the renter and encourage them to take better care of it. It also provides some protection to the homeowner in terms of recourse for shoddy work.
Contractors working with a professional property management company must not only perform work according to the housing code, but they also must meet this workmanlike standard. Occasionally if the work is not up to snuff the PM will require the work to be redone or will make them pay for another firm to complete it correctly.
Control of Liability
Having work done while a property is vacant is certainly easier. Vendors don’t have to coordinate with tenants or work around their personal effects. Still, it is important that a worker or company that is performing work in a rental that will be tenant occupied be licensed and properly insured.
Using such a vendor also means that after the needed repairs are completed, the homeowner will not carry all of the liability should the work fail. Poor work quality can cause property damage, damage to tenant property or even worse—personal injury.
Often owners see the short-term savings by hiring their own contractors. However, they must also determine if the savings are worth the increased risks.
Sending in your own vendors once a tenant is living in your rental creates all sorts of potential liability for you including:
- Accusations of theft,
- Accusations of inappropriate or discriminatory behavior,
- Damage to tenant property, or
- Oversharing of information with the tenant
The last one can really stymie an owner who faces tough decisions on costly repairs. The following is a real-life example. In one unit, CPM had to contend with a tenant after a contractor visiting a client’s property for repair proclaimed to the tenant:
“Oh, the plumbing in this house is all messed up and needs to be completely replaced.”
Imagine being the tenant in this situation! Once the tenant hears something like that, it is difficult to do any less work than what the contractor told the tenant. Working with a contractor who knows and understands the complexities of working inside a tenant-occupied home makes a critical difference and can save owners money and many headaches down the road.
Some owners do have long-standing relationships with quality contractors, and we appreciate those relationships. CPM is glad to work with your preferred contractors and may even use them on other jobs if they are licensed and properly insured.
More critical to you, however, CPM tracks the performance of the contractors we use. We monitor the amount of time it takes for them to complete jobs. And we survey the residents living in rentals to rate the contractor’s performance. If a contractor consistently underperforms over time or takes too long to complete jobs, we limit the jobs we send to them. This work is valuable to you as a rental property owner. Doing so is just one way we ensure the work gets done promptly, with industry standard quality, and meets your tenants’ satisfaction.
It is human nature when you are working on your rental business to keep your expenses under control, perhaps even to cut some corners. Some of those decisions might be harmless, some might turn out with time to be poor decisions. One of the main things we do for our clients is to educate them on where the risks and liabilities are and to try to limit that exposure for them.
There are consequences for using your vendors in a property that is or will be tenant occupied if those vendors are not aware of the housing regulations. Worse, if a vendor’s work fails in the future it could cause damage and injury. As an owner, you want to be insured against that liability coming back to you by working with people and companies that are licensed and properly insured.
Find out more about what Columbia Property Management does for our rental owners: http://www.columbiapm.com
Scott Bloom, Owner and Senior Property Manager
Columbia Property Management
Bloom founded Columbia Property Management in 2012. CPM’s goal is to provide a powerful, personal level of service to our clients. We focus on smaller landlords, professionally managing their assets, so they can succeed by investing in rental real estate. Scott is an active member in multiple professional organizations including the National Association of Residential Property Managers (NARPM) and serves on the property management committee of Greater Capital Area Association of REALTORS® (GCAAR).
For more information and resources, go to www.ColumbiaPM.com