How to pay your contractor fairly ?

Question

I'm struggling with how to fairly pay my contractor without being taken advantage of.  How is everyone structuring payments? Do you pay a flat rate, daily? Do you pay a salary? Bid each job? I'd like to bid each job but so many little things come up I don't know how to quantify each item but know they take time. I've got a good contractor right now and I don't want to lose him but I also need to make money. Any advice on how you price/pay.

Matthew Paul · Answer

Flat rate and I will use my skill and experience to get the job done as fast as possible , Daily rate and I will take my time , the more days , the more I make . Pay a salary and I am no longer a contractor , but your employee , you now need to get workmans comp , insurance and with hold taxes .

If this is a professional licensed contractor he will give you a bid price and scope of work , anything thing that comes up outside the scope of work is an extra charge .

You make your money when you buy a property , not by hiring a cheap contractor

Jalen Greenlee · Answer

Totally hear you. I haven’t dealt with this personally yet, but I recently read Investing in Real Estate Out of State by David Greene, and he lays out a helpful approach.

He suggests having contractors bid each job instead of paying hourly or daily. That way, you know exactly what you're paying for. He also recommends breaking the work into clear tasks with set prices, and setting up milestone payments tied to progress like part at the start, part in the middle, and the rest at the end.

If extra stuff comes up, he says to treat it as a separate bid, so you're not constantly renegotiating or overpaying. And always get things in writing, even if it's just a simple scope of work with timelines and costs.

Might be worth looking into if you're trying to keep things fair and organized.

Bruce Woodruff · Answer

@Matthew Paul is spot-on! Get your trusted Contr to give you a price to complete your project, making sure that you have a very detailed SOW and there will be no changes or misunderstandings down the road.

I suggest paying as you go, for instance, when demo is done, pay him just for that, same with framing/electrical/plumbing/etc.... If he has a legitimate request for some extra upfront money (to purchase cabinets or tile) give him that amount, although any established GC should have enough in his bank to buy these materials.

You definitely do not want him as an employee, as Matt says, now you are in a different arena and a very risky one for you....

Min Zhang · Answer

Hey Katie , Totally get where you’re coming from — been there myself! I usually do a flat bid per job with a clear scope, then handle any extras as change orders. Keeps budgets in check and avoids daily rate creep.

What kind of projects are you running? Happy to bounce ideas around!

How to pay your contractor fairly ?

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