How to reward a good GC?

Question

Hi everyone! So I'm under renovations for my first property and I used a conventional purchase and renovation loan, not knowing how tedious the draw process would be for me and my GC, but saw it as the most convenient way to fund the renovations.

Doing our best to communicate with each other to ensure a smooth draw (fill out work completed form, get inspector out, review from both HUD Consultant and lender, send for signatures, 3-5 days of processing). On draw #3, the tediousness of this process, which caused delays, and then an extension form was requested where we would need to explain the delays, was really getting to the both us, and my GC vented to me his frustration about the delays in payment.

He's been really patient and understanding, his team works fast and they do good work. I'd like to know how you guys would reward good GCs. I'm looking to BRRRR this property, and hoping to be able to provide a bonus out of the refinance portion. But I haven't said anything because I don't wanna make any promises until the refinance comes through and until I get your guys' thoughts. Thanks in advance!

Andrew Syrios · Answer

In that case you certainly can't give them any immediate work. I don't think it's necessary to give them a bonus or anything like that. But I'm sure they'd appreciate it and it may build some loyalty moving forward.

Lionel Quiambao · Answer

Absolutely! I definitely will give them more work, but considering this is my first one, I wanna stabilize this as a rental before attempting to purchase a second one. I would like to compensate them by paying a bit extra, but what amount is too little and how much would you say is too much? I was thinking an extra 5k - 15k, but this is my first time, so I'd like to hear your thoughts!

Andrew Syrios · Answer

We generally reward them by continuing to just give them more and more jobs. That will usually keep them happy. If you don't have another job to give, you could always pay a bit extra and tell them you really appreciate their patience, speed and quality of work.

Andrew Freed · Answer

@Lionel Quiambao - Are you able to cover some of the balance while waiting for draws. I'm assuming this is a FHA 203k which is known for being administratively burdonsome. Not saying this is right, however I've known other investors who pay the draw to the GC while HUD processes the paperwork which takes a very long time. Paying contractors quickly is instrumental to them being on your side. Delayed payments to contractors will only sour the relationship. Many contractors are not good at budgeting hence need quick and timely payments. Nothing will ruin a relationship with a contractor quicker than untimely payments.

Lionel Quiambao · Answer

Yes! I covered some of the balance while we waited for draws. And this was a conventional purchase + renovation loan, so I haven't used my FHA 203k loan yet, but it's still been pretty tedious. Would it have been better to use the conventional loan to just fund the purchase price and then funded the renovation another way like hard money? (if I didn't have the upfront capital)

Matthew Paul · Answer

Why do contractors work ?      Money .    Consider yourself extreemly lucky that while the contractor is waiting for inspections and draws , he doesnt move to another job while he waits .

Its not the contractors responsibility to float your job with his funds ( unless this has been agreed upon ) .

Want to reward the contractor .   Cash , plain and simple . Thays what keeps the wheels turning

How to reward a good GC?

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