First House Hack Rehab!! How should I pay my contractor?

Question

Hey everyone, my Fiancé and I are finally purchasing our first home and we are house hacking it! Whoo Hoo! We are so excited to embark on this journey. However we're not sure what kind of payment schedule or agreement to set up with our contractor once everything closes and we can start renovating. We're designing a detailed plan of what work we want done as well as our budget. Once we match with a contractor that we like. How should we pay them in order to both keep them motivated but to also keep the budget and timeline on track? Should we ask them? What are some of y'all strategies for working with contractors? I would like to build a relationship where we both win. Thanks in advance for your help.

Jack Swank · Answer

@Paul Stamm

So right Paul! I’m a General contractor in California and I hear stories of contractors needing deposits or half money before the job and running. Crazy right! I also agree with Paul on payment structure on milestones. No payment before lien releases are given to you, shows that the contractor is a actually paying his bills too. With the construction schedule, I would suggest a weekly meeting on the topic with the contractor giving you a 3 week look ahead of what he plans on completing. This helps you in 2 ways, make sure if he has things you need to choose or decide on finishes and forces him to stay ahead of the project. Many decisions need to be made and you don’t want contractor to double the schedule and say, “well I was waiting for you to pick paint color”

Good luck

Justine Veal · Answer

Thanks Paul! Sounds like great advice

Paul Stamm · Answer

@Justine Veal

Congrats on your first home purchase!

One thing for sure is you do not want to pay the contractor the entire sum of money up front before they do any work. You don't want them to take the money and run. You may want to look into a system where you pay them after they get certain tasks completed. Once they have finished the entire project, then you pay them the rest of the money. This way both sides win; the contractor stays motivated and you get the job completed without getting scammed.