I have my first deal funded. Im 45 all in 35k will be used for rehab. Lender has me set up on Draw and inspection then payment for contractor after certain task is done. Although this isn't uncommon Im wondering how I can explain this situation with my contractor without offending them,or should I just raise funds for rehab or find partner and split profits for bringing cash to the deal.
I’d tour “contractor” is “offended” by that....he’s not a contractor. This is SOP, and any real contractor is used to it. Put your hesitation on this out of your mind
@Dante Foreman If your contractor has done this type of work before, I'm referring to working with investors, they should know the drill. They may want some money upfront, but maybe you could set up a deal where the demo is done and then you'll give him a check. You may have to front some money to get things started, but the lenders are going to make sure that things don't get out of hand and more money is paid than work done.
At some point, there will need to be trust on your end and his. You need to know they will show up if you give money to start the job and they need to understand that they will be paid after agreed on tasks are completed. Personally, as a contractor, I like this set up especially if I don't know the other person really well. The lender is protecting all involved including themselves.
As far as the conversation goes, just be straight up with the guy. He shouldn't be offended. Don't present it as you don't trust him, but as this is how the lender is doing it. It should be fair for everybody.
@Charles Goetz Thank you I think I'm gonna be straight up with him
@Wayne Brooks I get what your saying