All of these rules have been established because I have been burned by contractors in the past.<\/p>\n
5 Vital Rules For Working With Contractors on Investment Properties<\/h2>\nRule 1: Never give a contractor more money than the work that was completed.<\/h3>\n
When we are working with a new contractor, we require the contractor put a week of work in before a draw. We have been burned so many times by contractors that we don\u2019t want to take the risks any more. They say they are going to do the work and then disappear. Most recently another investor I know was ripped off by a contractor for five figures. The contractor bid his jobs and cut rates and took the deposit money and split them. We\u2019ve had that happen in the past, and we don\u2019t give deposits until after the relationship has been established.<\/p>\n
All too often contractors will disappear after getting that final check, even if they still have work to do. For some strange reason I haven\u2019t figured out yet, the last 10% takes 25% of the time. I don\u2019t know why we don\u2019t just rename it “the last 25%.”<\/p>\n If they can\u2019t make it through the week and pay their guys with cash on hand, any delay on the project could threaten whether or not they can complete the project. We\u2019ve seen it too many times that everything is fine up until something goes wrong and the contractor doesn\u2019t get his draw. His workers stop showing up because they haven\u2019t gotten paid, and the project comes to a standstill unless you carry his payroll.<\/p>\n The contractor provides us three separate lists of materials. We will do three deliveries during a project: rough, between rough and finish, and finish materials. These three orders will cover 85% of all the materials they will need. We do this for two reasons. One, it controls costs. We have preferred vendors that we get preferred pricing from. Second, after auditing projects, we have found that contractors seem to overbuy a lot of materials when they are in charge of materials. For some reason, those materials never make it to the next job site.<\/p>\n![\"fix-and-flip-tips\"](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/09\/fix-and-flip-tips.jpg\" "\\"\\"")
<\/a><\/p>\nRule 2: Never make the final payment to a contractor until the job is completely done.<\/h3>\n
Rule 3: Understand your contractor\u2019s cash position.<\/h3>\n
Rule 4: Control all materials.<\/h3>\n
![\"house-flipping\"](\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2015\/08\/house-flipping.png\" "\\"\\"")
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