Contractor wants a 50% Deposit

Rehabbing & House Flipping
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Contractor wants a 50% Deposit

James Sloan
Member since 2022 · 40 posts · 13 votes

Should I be worried if a contractor wants a 50% deposit (initial payment) on a 15 K interior paneling project? 

The material cost for this project is very linear over time. The first 100 square feet of paneling costs the same as the next. So, I cannot imagine why he would need this much up front. 

Thanks in advance for any insight. 

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Bruce WoodruffPro Member
Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
4y

^^^What @Account Closed said. NEVER give 50% up front. If he says materials are at that 50% number, ask to see a quote from his supplier.

And he does not buy 100sf at a time....he will/should buy it all at once.

This is a big warning...think about it - if an established Contractor does not have enough capital to but a few grand worth of wood, or does not have an account at any supply houses or lumber yards.....are you sure you want him anywhere around your property?

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  • Account Closed
    Investor · Scottsdale Austin Tuktoyaktuk · Member since 2021 · 4k+ posts · 4k+ votes
    4y
    Originally posted by @James Sloan:

    Should I be worried if a contractor wants a 50% deposit (initial payment) on a 15 K interior paneling project? 

    The material cost for this project is very linear over time. The first 100 square feet of paneling costs the same as the next. So, I cannot imagine why he would need this much up front. 

    Thanks in advance for any insight. 

    MMM, I wouldn't go above 1/3, 1/3, 1/3.

    I'd give him enough to cover materials and a little to cover time, then I would agree to an inspection date or inspection level and on approval I'd release the next 1/3 and then on final inspection and approval I'd release the rest.

    9Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    @Account Closed What if I already asked him to add a deadline fee? Would that prevent him from running with the initial 50%? I ask because he has run into issues on our last job that set him back, and he may be trying to recoup his losses in the short term. I don't want to burn bridges with any contractor considering how hard they are to come by right now. 

    Then again, I am not sure how easy it would be for me to sue in a small claims court in the case that he did run with the $$

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    ^^^What @Account Closed said. NEVER give 50% up front. If he says materials are at that 50% number, ask to see a quote from his supplier.

    And he does not buy 100sf at a time....he will/should buy it all at once.

    This is a big warning...think about it - if an established Contractor does not have enough capital to but a few grand worth of wood, or does not have an account at any supply houses or lumber yards.....are you sure you want him anywhere around your property?

    16Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    Best I would do is pay for all the materials and have them delivered to your place. And then pay daily/weekly for labor. 

    8Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Originally posted by @Bill B.:

    Best I would do is pay for all the materials and have them delivered to your place. And then pay daily/weekly for labor. 

    Except no good Contr would go for this IMO. They don't work hourly. But maybe a handyman? Then you're possibly sacrificing quality......

    5Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    Please let me know what you think of what he says here: 

    0Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    4y

    Sorrry Bruce. I meant a percent of the labor not paying them hourly. If the total is $2,000 material and $3,000 labor then whatever percent of the job is done is what percent of the $3,000 I give you. They have no risk of paying for materials you have no risk of them leaving with your money. 

    2Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    I am going to take on a bit of faith and trust him; he has done good work for me in the past. 

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Originally posted by @James Sloan:

    I am going to take on a bit of faith and trust him; he has done good work for me in the past. 

    But still don't give him 50%...that is just not done. Is this guy even licensed? You asked what I thought about the texts....I think he sounds rude and pushy....I'd kiss him goodbye and find someone else.

    8Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Originally posted by @Bill B.:

    Sorrry Bruce. I meant a percent of the labor not paying them hourly. If the total is $2,000 material and $3,000 labor then whatever percent of the job is done is what percent of the $3,000 I give you. They have no risk of paying for materials you have no risk of them leaving with your money. 

     Gotcha...that would work fine.

    0Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    @Bruce Woodruff You have to consider the location of the property, and the shortage of contractors. I have had a dozen out here, and this contractor is the only one who will come up to do the work. It's on a mountain, and not very accessible. He actually got his service van stuck the other day. To burn the bridge, and cease progress on the renovation, would be a mistake, I would think. 

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Originally posted by @James Sloan:

    @Bruce Woodruff You have to consider the location of the property, and the shortage of contractors. I have had a dozen out here, and this contractor is the only one who will come up to do the work. It's on a mountain, and not very accessible. He actually got his service van stuck the other day. To burn the bridge, and cease progress on the renovation, would be a mistake, I would think. 

    Well I guess you have to consider that...he's kinda got you over a barrel I guess....? I don't like being over the proverbial barrel. Any way you can do this yourself/with a friend?

    Is this guy a licensed Contractor?

    0Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    @Bruce Woodruff I certainly do not like being here either. Yes, he is licensed. I am kind of in alignment with David Greene in that I think more value is derived by investing my time elsewhere. Also, I have not come to the point where I can quit my W2, for which I travel continuously. I also do in a sense identify with the guy; he does not have the personal touch, but he does usually deliver, and offer a reasonable price. I could be wrong. Let me know if the following is worth less than 15 K: 

    Note: the letters [F] and [G] are visuals not pasted below. 

    • Maintenance / Safety
      • Add carbon monoxide and smoke detectors to 1st and 2nd floor (42)
        • Remove old detectors
      • Install gutter downspouts to prevent moisture intrusion (126)
      • Reinstall vapor barrier in crawl space (127)
      • Replace insulation within wall by the bathtub (106)
        • § To be discussed when wall is opened
    • Pine Paneling
      1. Install 1x6 T&G Pine Paneling
        1. Everywhere that vertical paneling is currently installed.
          1. Total Square Feet:
        2. Exclude:
          • Bathrooms
        3. Remove / Uninstall the following:
          • · Place colored items in storage shed; the rest can be kept or disposed of.
            • From Closets:
              • Current Shelving
            • From Wall --
              • Old gas heater (living space wall)
                • Facing back door.
              • Gas heater thermostat (lower bedroom)
              • Baseboard heater (lower bedroom)
              • Two baseboard heaters (living room, under stairway)
              • Coat hangar (bedroom)
              • Two thermo sensors (bedroom and hallway)

    .

    • Replace Folding Roller Doors
      • Laundry closet door >> Sliding Barn Door
        • Like [F]
      • Slides open to right, to preserve walking space while it is opened.
      • All others >> Hardwood doors (knotty pine)
        • Should closely resemble [G]
      • Black handles

    Lower Bedroom Closet:

    • Install interior wall dividing closet sections.
    0Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    Total square feet is 2500. 

    Sorry; that was added in later. 

    1Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    4y

    @James Sloan do not give him 50%.

    3Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    @Bud Gaffney If I do, and we have a contract, don't I have recourse to get it back? 

    0Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y

    If you're getting 2500 SF of pine TG, materials and installed for $6 sf, that is a smoking deal.....

    0Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    @Bud Gaffney I think I am going to trust him. We have had 2 other contracts closely resembling this one (one where he releveled a deck and added handrails, and another interior handrail update), with 40 percent upfront on the first, and 50 percent upfront on the second. He showed up for the first two. No reason to suspect he won't on this one. 

    @Bruce Woodruff Not just that, but installing the doors, etc. I think he has a way to get quite a discount on the materials. People often rely too much upon personality and general rules. Merit is king. Nothing else matters to me. As long has he can deliver, and does deliver. Besides, don't I have recourse if he does not? -- small claims, etc.

    1Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    4y
    Originally posted by @James Sloan:

     Besides, don't I have recourse if he does not? -- small claims, etc.

     No. Even if you win a SC case, you still have to collect and good luck with that. Ask me how I know....

    But if you trust him, go for it...

    1Reply
  • James Sloan
    OP
    Member since 2022 · 40 posts · 13 votes
    4y

    @Bruce Woodruff What strategy is most effective in getting it back, if any? Is there really no recourse?

    0Reply
  • Sam Tavakoli
    Investor · San Diego, CA · Member since 2016 · 5 posts · 5 votes
    4y

    Big red flags in that text James, do not pay this contractor 50% up front 

    2Reply
  • Jamaica Adviento
    San Diego, CA · Member since 2021 · 13 posts · 3 votes
    4y

    @James Sloan I would pay 100% for the material and have them stored in a place of your choosing and pay 50% of the labor for each job and the rest after each job.

    If anything goes south, you still have your materials and only paid for whatever job they started.

    1Reply
  • Loren Clive
    Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes
    4y

    Hm, here on Maui this is pretty standard practice. You could offer to buy the materials for him?

    1Reply
  • Joe S.Pro Member
    Investor · San Antonio · Member since 2020 · 3k+ posts · 3k+ votes
    4y
    Originally posted by @James Sloan:

    @Bruce Woodruff You have to consider the location of the property, and the shortage of contractors. I have had a dozen out here, and this contractor is the only one who will come up to do the work. It's on a mountain, and not very accessible. He actually got his service van stuck the other day. To burn the bridge, and cease progress on the renovation, would be a mistake, I would think. 

    You came on here asking for advice and you got it. You then argue with those giving you advice and believe this is a great guy. If it’s a great guy why are you asking for somebody that don’t know the guy to give you their opinion on whether or not they would give half upfront? Please understand I’m  not trying to be a overly blunt just trying to point out that you already have strong feelings that this is a great guy so if this is a great guy and why are you even asking? 

    You said that you’ve used him on several more jobs and things went well. Hopefully they go well on this one since you seem to already have your mind made up. 

    Regards 😊

    12Reply
  • Edgar Z Whelan
    Real Estate Broker · Hollywood, FL · Member since 2019 · 20 posts · 9 votes
    4y

    I would advance him the money if you have been satisfied with his previous work. If I understand correctly in the past you have advanced him 40% and 50% to start prior jobs.   Why do you feel that he will rip you off this time? 

    0Reply
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