Contractor money problems during the rehab

[Gerald Alphin]

BP I need your advice. I started a pretty hefty rehab in June using a contractor I’ve known for many yrs. that has 30 yrs experience. I am familiar with his work, families know each other the whole nine.

I financed it with hard money, front loaded the construction contract (So we could get ahead concerning draws) and spotted contractor 15k out of pocket to get through soft cost and get the project rolling. Here we are 2 inspections draws in, and this most recent Inspection I fronted another 3K that was reimbursed when the money came just so we could get a decent draw.

Our weekly construction meetings are about upcoming expectations and usually I’m strategizing to him about getting the 15K that I fronted the project with back to me slowly during the remaining project. It’s also written in our contractors contract. However he is saying it’s going to be a tough grind because its a old block house that had tons of concrete on inside walls & during the demolition the extra manpower it took...we wanted an open floor plan. Also the extra framing because of the inside walls being concrete, more dumpsters than anticipated etc.

He feels bad about miss bidding and understands that he is my contingency plan so yes he’s working to save on subs, he did all of the HVAC rough, the electrical, it’s framed up, he is blocking in the windows and doors we don’t want and subbing whenever he can in other words we are tight and that’s how he plans on getting the fronted money back to me.

I have everything tracked through a project manager software... here’s the numbers and my question.

So far there has been 32,000 that I’ve given my contractor but only 20,500 has been Inspected and cleared into my project by my hard money lender. That leaves more than $11,500 absorbed somewhere else. I know there’s Some hidden cost that's not in the construction budget like he mentioned more dumpsters than they ever thought they would need, framing up the whole house because of concrete walls, and of course he’s taking his pay too. Up until now I’ve let him control the budget and the spending, he’s the GC. So now he’s negotiating with contractors paying them partially until we can get to another draw. This was not the plan that’s why I frontloaded the construction budget so we would not be in this position. I think he missed managed the original 15K that I gave him now the project is slow because we can’t really afford subs. I have only charted the dollars going out.

There is still more than half of the funding in escrow to complete the project. I have a strategy of how to turn this around but I’m very interested in your suggestions. What can I do at this point?

Thanks for reading and your help.