Managing contractors

[Sharad M.]

Hi,

I am having some confusion on how to develop a working relationship with a contractor, so I am hoping someone here can help me. As I work on expanding my business, I am working with a contractor who just finished rehabbing one of my properties and is getting ready to begin work on the next one.

But here are my questions:

1) If I find a contractor who does quality work, do I still get bids from other contractors to make sure his bid is competitive? The reason I ask is because when he submitted a bid for the current project he finished, I negotiated the price with him based on bids submitted by other contractors. So I am not sure if I should continue getting bids from other contractors just to make sure he's giving me good price. He does good quality work, so that's not an issue, price is the only thing I am confused about.

2) Do you guys let your contractor buy material, or you guys buy the materials and have the contractor provide only the labor part? I have had a really bad experience with a contractor in the past, so I am extra paranoid about dealing with contractors. I just want to make sure that I am not overpaying for anything.

3) What's your disbursement timeline for the project? This contractor that I am working with currently requires 100% of material and 50% of labor before beginning any work.

Thanks in advance for replies.

[Josh Sterling]

I recently started using a contractor after doing several rehabs myself. I already had a set list of materials I had been using and a good relationship with the commercial sales desk at lowes, so I set up an agreement with a contractor to provide building materials and labor only. I defined building materials as anything which cannot be seen on a complete project (subfloor, hardie bacter, mortar, drywall, screws etc.) After a lot of advice from bigger pockets (thanks JScott) I put together a spreadsheet of all my finish materials and item numbers/prices for each (cabinets, sinks, countertops, doors, faucets, etc.) all the way down to outlets, light switches and smoke detectors. I can now put together an order for a complete project (5-7k) in about an hour.
I'm sure we will end up with a few discrepancies on what are/are not building materials on the first couple jobs because it is impossible to define every item that goes into every house, but I secretly plan on a $500 contingency for those items alone.
This has allowed me to control exactly what goes into our properties and actually makes estimating the rehab costs much easier because I don't have to worry about the 100+ trips to lowes that I was making, especially as the project neared completion.

As for as negotiating with the contractor: I had several come out to look over a house that I had just closed on. It was pretty standard for what we normally do. Complete remodel. I had a detailed scope of work typed up and I had a price in mind for labor/building materials. Each one of them asked me my budget. I explained how I would buy all the finish materials and told them my budget for labor/building materials was $xxx.
A couple of them never even responded with a bid (I guess my numbers were pretty tight) but the one I really liked from the beginning negotiated the scope of work with me to meet my budget, and we were able to come to an agreement and start the job. I am currently about to begin my 4th rehab with this contractor, each time I walk through the house by myself and develop a scope of work. Then I come up with a budget target and tell the contractor what I want to spend. If he doesn't agree to the scope of work for a given price we negotiate both scope and price until we are satisfied.