There comes a time for many of us starting out, particularly in rehabs, where we wonder what exactly our contractor is doing; or where he is; or why he needs more money RIGHT NOW?! In fact, that time seems to come for many of us over and over again, sometimes in spite of our best efforts. This is particularly true in investing, where we're trying to get the best bang for our buck and keep those margins nice and wide. Unfortunately, this often comes back to bite us.

To be clear, I'm sure there are a lot of good contractors out there. Unfortunately, there are also those who either a) just aren't really very good, b) just aren't going to play straight, or c), run a serial racket and who will be glad to take the money but never do the work. Fortunately, there are ways to mitigate (not eliminate) the risks. The following are some methods I've used in the San Antonio market, and while they are not all-inclusive and work to varying degrees, hopefully some of the following information will be helpful to some. You can be as comprehensive, or not, as you like; these are just resources.

Have a contract: this is helpful in direct proportion to the assets of the contractor, which is to say that if the contractor isn't sue-able, then the contract is really just a guideline. Not to say that you want to get sue happy, but it's good to be covered, and can be used in some cases to get the agreed upon work done.
Do your homework on your contractor. Is he or she licensed (many aren't, some are, results vary for both)? In order to be licensed in San Antonio, a contractor is required to have insurance. If licensing is something you're going to insist upon, have them show you proof of insurance good for the foreseeable future, and look up their license. State licenses (electrical, HVAC, plumbing, etc) can be checked at the Texas Department of Licensing and Regulation search page, and local licenses in San Antonio (home improvement contractor, residential building contractor, etc) can be found at San Antonio Development Services Department Online Services. At the SADSD page, you can also search permits by address, etc. It can be a good idea to get a couple of addresses if they're willing to share and, depending on the work, verify if they pulled permits or not if they said they did so. Permits are often not pulled, but it can be used as a measure of integrity to crosscheck.
If the contractor owns a business, it's a good idea to verify its existence as a business. You can search at the Bexar County Clerk's website for sole proprietorship and other local business types; it does require registration, but it's free and well worth the time and effort to verify veracity. The appropriate registration and login buttons should be somewhere around 3/4 of the way down the page. The business names you find for an individual are also sometimes useful for further internet research on the company (reviews, complaints, etc). LLC information can be found at the Texas Secretary of State website, SOSDirect, for $1.00 per entity. It's worth the effort in many cases. You can get in quickly, without having to wait 24 hours or so on a login, using the temporary login form. After that, use the UCC and Business Organizations links in the top left corner to search for the entity, individual, etc. Not so great contractors can have a tendency to shed company names (assuming they set one up originally), so this is one way to check that. Also, just search the company names on Google, etc and see what comes up.
Have a potential contractor give you their cell phone number, then randomly verify it by calling it later. I've had contractors use other people's cells before. Also have them give you a company address, something tangible. Then either drive by or do a Google Maps satellite view to verify that a building is in fact there, and that it looks like what it should. Also check out street view, if possible, for the same purpose.
If possible, get a driver's license and a) take a photo, or b) write down and keep the data, just in case. In Texas you can use PublicData.com to search using the driver's license number or other data on the license (results vary by state). I've had items stolen and property vandalized after firing contractors, and the more information you have, potentially the better your chances of getting things squared away. I'm a big fan of taking a photo of their vehicle and plates for the same reason. Sometimes things just get weird, and information is a good thing.
Check out their tech-savvy. You don't have to get crazy, but having a contractor who can get email on their phone, who accepts credit cards, etc shows that they've bothered to at least make an effort to keep up. Personally, I will never hire a contractor for anything of any size at all who only accepts cash, and preferably one who will take credit cards. Square readers are sold in Lowe's stores at the counter down here in SA, so in my opinion there's no reason for a squared away (pardon the pun, I swear it was accidental) contractor to have to make you chase them across town to deliver a check. That's just my opinion, though.
When you hire a contractor, DO NOT give significant funds in advance or ahead of work, at least not by much. Consider those funds gone, no matter which draw you're on. If they're reliable, that's great, but IF they're not really great at managing their funds, it's quite possible that your funds will get mixed with the other guy's and your chance of getting it back becomes pretty slim.
Listen to your gut. Forget the shows. Do you trust the contractor you're talking to? If so, continue with due diligence. If not, it might be a good idea to move on. Always have some type of recourse and never let any contractor put you in a particularly bad spot.

Hopefully some of this has been helpful to you. Some of it can be overkill in some situations, but some of it can become unexpectedly necessary over time. Each of the things I've mentioned above are things I've had to do regarding contractors, and that's just a sliver. Like anything else in life, there are good and not so good. Don't go in blind, and always protect yourself. Good luck and invest smart!

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