Wholesaler · Easley, SC · Member since 2010 · 340 posts · 249 votes
I did a quick search but didn't find a discussion about this.
How do you guys pay your contractors?
Do you guys let them quote the job knowing they need to pad it a little in case they mis-estimate the job?
Do you allow them to work by the hour? Could be better price IF they do not fudge the hours.
What do you guys do? My wife gets mad because I trust them to work by the hour. She thinks they should quote the job. She makes a good point so I am asking the experts.
Also, which ever method you use, how do you control them. With the hourly pay do you put a limit on the number of hours a job should take. If they need to go over they should call you. Any other ideas like this?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
16y
Others may disagree, but I'm a big proponent of only paying by the job. I don't want my project manager to have to scrutinize every second of every contractor's time, and I certainly don't want to encourage work to take longer than it should.
That said, I have a handyman who I trust implicitly, and he often has the task of handling the final punch list for a rehab job; because punch list items will continue to pop up over the last few days of the job, I'm happy to pay him by the day (or even by the hour) for this work.
That work and that one contractor are my exception to the pay-per-job rule...
Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes
16y
Are you going to be acting as the general on the job and hiring & scheduling subcontractors? Are you hiring a general contractor that will be responsible or controlling and hiring any subcontractors that might be needed.
How you decide to do the job will impact some of the control.
You can use your contract to control your contractor(s) by adding a retention that is not released until a final inspection is done and approved. You can set a maximum amount for a contract that is time and materials. You can add incentives or penalties for projects completed ahead of schedule or behind schedule.
You want to be very clear on what the scope of the work is. If an area is left vague you may find that even if you have a set price that your contractor asks for a change order. Changes can be quite expensive.
Full-Time Investor · Charlotte, NC · Member since 2009 · 2k+ posts · 1k+ votes
16y
for skilled labor and tasks that i dont have the equipment for, I pay by the job, such as siding a house, removing trees, plumbing, electric, sidewalk paving. However, paint, and nonskilled things like that can be done by 8/hr guys off craigslist for the most part. eventually, however, i'd like to have a construction company set up to do everything and pay all employees on the hour.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
16y
Others may disagree, but I'm a big proponent of only paying by the job. I don't want my project manager to have to scrutinize every second of every contractor's time, and I certainly don't want to encourage work to take longer than it should.
That said, I have a handyman who I trust implicitly, and he often has the task of handling the final punch list for a rehab job; because punch list items will continue to pop up over the last few days of the job, I'm happy to pay him by the day (or even by the hour) for this work.
That work and that one contractor are my exception to the pay-per-job rule...
Rental Property Investor · Baltimore, MD · Member since 2009 · 624 posts · 559 votes
16y
Definetly by the job... controlled by the contract that stipulates work to be performed, how draws are earned and just about anything else that makes sure the job gets done and the contractor isn't categorized as an employee.
Real Estate Investor · St. Petersburg, FL · Member since 2010 · 63 posts · 40 votes
16y
Hey Chris,
I always ask the sub-contractor what does he charge by the hour because the cost for doing it by the "job" is determined by their hourly rate. I always do a walk-thru with the contractor and I make out a punch list...the contractor will determine how long it will take (man hours) and I can pretty much tell by my punch list how long it should take to complete the job. Compare the job quote by multiplying the manhours x hourly rate and see how close it is to their "by the job" quote. Sometimes I hire just one contractor and sometimes I hire a crew. I have it pretty much down pat. I have electricians for electrical, flooring guys for the floor covering, etc. etc. and I use them over and over again because they do the job right and their price is fair. Hope this helps. Debby
Real Estate Investor · MD · Member since 2010 · 124 posts · 84 votes
16y
Always by the job. NEVER by the hour. If you want to see how lazy Americans really are then pay by the hour. If you want stress free then pay by the job. I only paid by the hour once 3 years ago and I fired that lazy son of a :)-&^$ for trying to milk me. People are dishonest by nature, don't put them in a position to show you. Contractors are a step below people in terms of honesty, lol.
Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes
16y
If it's new construction, it is by the job per their quote and my subcontractor contract. I generally use the same subs and know them well. If it is a remodel, I will usually go "time and material, not to exceed". This works for all....my budgeting, what the subs can't see behind the wall and I don't pay for what potential problems didn't arise! The subs don't worry about that "what if' possibility. Fair for all!
Bill
Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes
16y
Originally posted by Tracey Bowers:
Always by the job. NEVER by the hour. If you want to see how lazy Americans really are then pay by the hour. If you want stress free then pay by the job. I only paid by the hour once 3 years ago and I fired that lazy son of a :)-&^$ for trying to milk me. People are dishonest by nature, don't put them in a position to show you. Contractors are a step below people in terms of honesty, lol.
Wow, Tracy....I'm a contractor. When I'm doing a T&M job, I always work harder because I'm spending my customer's money. If it is a bid job and the building inspector wants to "shoot the breeze" I take the time because I'm spending my money. There are good subcontractors out there that you can trust. I know....I use them!
I'm sorry that you must have gotten some bad contractors! I hope I don't have to fall back on my Dad's long time advice...The people that trust you the least are the ones that YOU need to watch out for the most!
Bill
Real Estate Investor · MD · Member since 2010 · 124 posts · 84 votes
16y
lol, very funny. I am giving advice for an investor. If your like me, then you wouldnt pay by the hour because the things I usually need can take 5 min or 5 hours and if i pay by the hour it would take 10 hours. I own lots of rentals now and the type of repairs and stuff that the typical investor who also has rentals would need, it wouldnt be worth your time Bill so most investors like me will find people who can do minor repairs for a flat rate. Didnt want to offend you, but I know a lot of investors and that is the general consensus.
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
16y
Hi, well I'm with the others, by the job, to a point.
I never advance money for labor. I usually order materials on my account unless the sub or GC can get it cheaper. This can happen as I alsways ask what other work they have going and if they are going to order a truck load of sheet rock, then we talk.
Advances on the bid job are to a percentage of the total work accomplished and change orders are a flat hourly rate. If the change is due to their screw up or mistake, it's on them as well as any significant material loss. Mistakes will happen and that's OK, but making the same mistakes over and over or making a big blunder, they will have to cover it in the end!. Workers will sometimes walk off the job. That's a big deal if they bid it. Not only do they not get paid, I have other complete tyhe work and if significantly higher, go after them for the difference. That needs to be in your contract for a major job, knowing that up front will keep some there. ALso I have a time frame and allow one day per five for weather days, emergencies, etc.
What also happens is that some sub or worker will be on the cell phone half the day, electrician are real bad about this for some reason since they are usually there the least time of anyone else. Had a guy a few months ago that was on the phone about other jobs, well, that is important for him, but I'm not paying him to be on the phone. So if you see this, watch them and write down the time they are walking around with a phone in their ear!
Very good advice above....tie it all together! Good luck, Bill
Real Estate Investor · Portage, MI · Member since 2010 · 470 posts · 315 votes
16y
Hi Tracy,
Have you thought about getting a "Good" maintenance man to do all of the routine maintenance? If you don't have enough units, maybe you can team up with another investor or two and create enough work for a person. I did this in a town that I only had 10 units in. He was self employed, on call and billed every two weeks. Sometimes I had a lot and sometimes I had little or nothing. It worked great! Where I had lots of units, I had full time maintenance that took care of most of the work. Since when I started, I did all of my own maintenance, I knew how long things should take and therefore could make sure I was not being taken advantage of. I’ve let a few maintenance people go for poor performance, too.
For the investor, I still stand by my above advice and what I previously posted. I think you sell people a bit too short.
Bill
Developer · VA · Member since 2010 · 5 posts · 0 votes
15y
Generally speaking, If your the GC then hourly for most of the work. If you are the owner and does not have the time / expertise to actively manage then per job.
In order to qualify as the GC you must have an understanding of how long a specific job would take regardless of how you do it or who you hire.
For example, my HVAC, plumbers and electricians are on hourly. But my gas tech is not. The reason? I do not have enough work in "gas" to justify the hourly. So I sub it out to a company that I have a close relationship with.
Typically, hourly only works if you have them as in-house. But if you can make it hourly and you have the experience in handling crews, you will save a lot of money going that way.
Developer · VA · Member since 2010 · 5 posts · 0 votes
15y
I am sorry for not clarifying. I got an email asking for clarification.
Since I go by volume, the hourly rate I bill is half of what most other people charge. Steady, reliable work = volume pricing. So it makes more sense to go hourly. If they try and overcharge a job (and since I know how long a specific job should take) hourly makes the most sense to me.
If you cannot afford volume with them, then it should be sub'd out and based on the overall job.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
I have almost everything quoted and invoiced by the job. By the hour gives no incentive to complete on time or early. The main exception is work done by my brother or by painters. With my Brother, I know I get what I pay for. With the painters, I walk the job site and I (yes me) quote how many hours I think the job will take. I then quote how many painters and how many days. Then multiply that by the hourly wage I pay them and come up with a set figure. If that figure is agreed upon, that is what I pay for the paint job. So in essence, I am really paying by the job, yet I get hourly pricing which is usually less.
I also purchase most of the materials myself with exceptions and therefore avoid contractor mark-ups. I also buy in volume and get as good (usually) of a discount as a contractor would. In fact, at my local Lowes, I am one of the commercail sales desk manager's top customers!
Houston, TX · Member since 2008 · 79 posts · 24 votes
15y
I completely agree with will. Everyone has they're own way of doing things but on most of my jobs, I am the general contractor so I dictate price and timeline. I usually pay by the hour but I dictate how long it should take. If they can't get it done within my timeline, then they are fired and the other jobs that we talked about gets done by another sub. Jobs are not accessible now like they use to be, so my subs usually have fires up under they're butts to get jobs done so that they can continue working. My .02