@David T coello Definitely some good responses in here regarding payment and contractor vetting. As someone who works in commercial construction as a GC, my perspective is a little different, just because the game is played a lot differently in a larger scale. There is no doubt about it that there are great contractors and absolutely terrible contractors in the residential world. As an investor / owner, it is your responsibility to properly vet and manage your contractors. Just because you hire someone to do a job, doesn't mean you can just sit back and relax on the beach and wait for them to finish. While you may have a project manager (GC) running the construction project, you are running the overall investment and project. In the commercial world, you would be considered the construction manager; you make sure the GC is hitting their schedule, getting compensated adequately for the work completed and ongoing, and making sure that the quality of work is where it needs to be. If you aren't prepared to take on this role, then you can always hire a construction manager (this is what most owners do in large scale construction or they have someone in house that does this for them). Managing your own expectations of how the process works is very important here. It is important to understand you have a role in the process and that just because you hire a GC to run the construction, doesn't mean your part is done.
Some good management / best practice tips:
1. Have a well written contract with the GC
- Make sure the scope of work is clearly defined
- Include the construction schedule and clearly define the required completion date and any project milestones (i.e. all framing completed by DD/MM, walls and ceilings inspected and closed in by DD/MM, construction completed by DD/MM, etc.)
- Include or discuss liquidated damages associated with not hitting project milestones or the completion date (i.e. "project to be completed on DD/MM, failure to meet the required completion date results in liquidated damages of $500/day following a 3 day grace period after the aforementioned specified construction completion date"
- Make sure the project's cost is clearly defined and any contingencies or allowances are noted (i.e. the project value is not to exceed the $135,000.00 budget laid out by the contractor with an owner allowance of 10,000 for unforeseen conditions). Include language regarding any additional costs ( All additional costs to be submitted to the owner for review prior to proceeding).
- Clearly define payment procedures - As some of the folks before me have said, some projects could be 1/3 at the start, 1/3 halfway through and 1/3 at the end or you could pay the entire project at the end. It all varies so make sure to discuss with your contractor and clearly define this in writing.
- Permitting fees and inspection costs. Make sure it is clearly defined who is paying and obtaining all of these. If you are covering the permitting costs and getting the permit or if the contractor is providing a price to apply and obtain the permit, make it clearly defined.
- You can google construction contracts and find a lot of good examples to help you with verbiage needed to ensure you are protected and the project is run properly. You are a professional and this is your business, run it as such. Make sure you have good contracts and procedures in place to protect yourself and your project.
2. Make your contractor submit you weekly or monthly progress reports. Review their reports and pay close attention to make sure your project is progressing properly.
3. When hiring a contractor for a project, get at least (3) bids. This will allow you to really understand the total cost of the project, some contractors may be high, some may be low, but this will allow you to find the middle ground and really understand if someone is low balling you to get the job or if someone is high balling you and taking advantage of your lack of knowledge in construction. Have the contractor break the bid out (never accept a lump sum price for a project) into the different aspects of the job (i.e. paint = $2,000, drywall = $5,750, etc.). Check all three bids and compare them to each other to make sure they all priced the same scope, have all the required components and double check that there aren't any exclusions noted. It's easy for contractors to make a fine print note saying they have excluded some aspect of the project and then you have no ground to stand on when they tell you it will cost extra to have it done.
4. Check in frequently and make sure your project is being well managed before you step back and let the contractor run with the project. Many investors / owners will check in 2-3 times each week until they are confident the contractor has everything under control.
5. Get the contractor's licenses (driver's and contractor's licenses) and keep a scanned copy on file. This will ensure you are working with the person they are saying they are, and that they have the proper credentials to be doing the work.
As far as finding good contractors, word of mouth is always a great way to find out about good contractors; people who have a good experience (or bad) will always be willing to tell you about it. Ask your friends, family, or if you are confident enough, swing by a local jobsite and get familiar with the GC or reach out to the owner and ask about the GC on the job. I strongly recommend staying away from hiring anyone on craigslist, but that is my personal preference. Angie's list is a good place to look for contractors, and they have reviews and ratings for each business.
Once you have a couple GC's in mind, ask for references (minimum of 3) and past projects (maybe even ask for tours of previous work if the other owners are willing). Review their work and call all their references; make sure to ask each person about their experience, if their needs were met, how the contractor responded if changes or additional work was required, etc. Really do your homework to make sure you are dealing with a good contractor.
Lastly, as others have said, keep in mind that you get what you pay for. If you go with the lowest bidder to cut some project costs, you very well may end up with tons of cost on the back-end fixing low quality or incomplete work and craftsmanship. But be weary: just because you choose the highest bidder there is no guarantee for your project to go perfectly and have the best quality. Do your homework on the contractor, get multiple bids, be active on the project, and communicate clearly and effectively. If you can do all this, then you have the highest chance for a successful project.
