Despite California having a relatively competitive real estate market, there are still opportunities for real estate investors. Whether you are an individual who wants to generate income by improving real estate properties or someone who runs a business that specializes in flipping houses, with enough investment capital and attention to detail, it is possible for such a business venture to be highly lucrative and successful.
Unfortunately, you have to be careful about what information you disclose to potential buyers and the professionals that you select to work on your improvement projects. If you fail to inform buyers about potential issues with the properties or if you don’t do enough to vet the previous performance of contractors and review the work that they do on your property, you might be the one held liable for the corners they cut.
Contractors might not be as cautious as they would in an owner-occupied house
Contractors working in specialties ranging from plumbing to tiling build a career either on their professional reputation or on the fact that they offer cut-rate prices. The cheaper a company is, the greater the risk that they will make compromises with the work they perform, the labor they hire or the materials they use.
People investing in their own homes are more likely to focus on quality than price, while for those flipping a home, the final amount of profit is the most important consideration. Not only could you endanger your profit by hiring the company with the lowest quote, but the company might do mediocre work because they don’t have to worry about you noticing any defects right away. There have been some high-profile lawsuits because flippers allowed substandard work on homes they sold.
Buyers can hold you responsible for defects caused by contractors
When you hire an outside company to make repairs to a property and then sell that property to a third party, you are the one who assumes liability if the condition of the property isn’t what you told the buyer it was. The buyer could potentially bring legal action against you, which could damage your reputation and cut into your company’s operating budget.
Carefully inspecting work as companies perform it and after they complete it can help you catch defects early on. Holding a business accountable for construction defects can help you get reimbursed for wasted resources and set you up for success when the time comes to list and sell the property.