How much to give a GC upfront?
I've got a property that requires a pretty major rehab (asbestos siding, and needs new electrical, plumbing, HVAC, walls ....). I have a general contractor that I think will do a good job. I wanted to do the work as cost plus. He is fine with that but wants 30% of his estimate up front. That could be $30K or more. It's not that I can't fund it that way, it just seems like I'm giving him an awfully big chunk of money without having anything to show for it.
I understand he needs funds for supplies, etc and that gives him a bucket to work from, but does he really need that much? I guess I'm worried that if I give him the funds, I have no way of holding him accountable for those funds. Yes, I can refuse to give him any more money, but that is still a lot of money to potentially lose if something goes wrong.
What are your thoughts on how much to give a GC up front?
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I may be biased because I work in primarily commercial work, but if a GC asks for money up front its an automatic decline. I am not opposed to draw at pre defined milestones but money up front is a red flag for me. If they dont have a 15 to 30 day line of credit for materials, its a good sign they're cash strapped. I know it seems hypocritical for investors seeking OPM to have this mentality, but it's an important consideration.