I am busier now than when I have done previous rehab to hold. I use to hire in subs and oversee, but now I need a contractor and I need to not micro manage. That said, I do have a simple scope of work, materials list, chosen finishes and a timeline.
The house has been gutted to the studs so everything needs replacing. it’s a 2600sf house that is on the lower end of the spectrum as far as neighborhood and around 330k arv.
My question is how do most of you work with your contractors? Do you settle on a price, give him draws, let them pick up materials? we have always delivered the first round of materials, then a second round at the midpoint (which should be everything they need except for last minute forgotten or unexpected items) but I won’t be there to “guard” the materials.
So if you have some recommendations, I would really appreciate the input!!
Karen Cook, realtor and investor in Houston
So if anyone has any ideas about paying a contractor during rehab while you are providing most materials and some of the labor, it would be great to hear your strategy!
It sounds like you hired an employee , not a contractor .
I've got a contractor working on a property right now. I went over what I needed him to do, and I gave him a third up front. His guys are getting all the materials. I'll pay him another third at the mid-way point of the job, and then the final third when he's done.
I wouldn't deliver materials if I'm using a contractor. If I was acting as my own contractor and finding various subs then I'd take a more active role.
I pay in draws. I like to stay ahead of the work on payment, meaning that I will always owe the contractor something until the job is finished. There are just too many contractors who pull a Houdini and completely disappear from a jobsite if they book too many jobs and are ahead on their money. In fact, after our flood in the Baton Rouge area in 2016, there was a time when at least 1 contractor was being arrested per day for contractor fraud. On many days, it was 3 or 4. One of them is currently incarcerated and probably won't get out for 20 years.
I know many contractors hate this idea and won't go for this arrangement. If you have a steady stream of business to provide and have a good track record on paying your subs/contractor, then point that out to them. Provide references to subs who you have used. This may be opposite thinking in that you should get the references from the contractor, which you should do as well, but it provides an "open book" to them as far as your reputation and payment practices.
I either have materials delivered to the jobsite, pre-pay, or have the store call me for payment when the contractor picks them up.
Some folks may wonder why you should do this. For one, you protect yourself. Second, you may hire for a turnkey job, but you will also pay extra, much extra. And you would have to make some type of upfront payment to the contractor for materials. To avoid this upfront payment, I want to see at least a day or two's work before I hand over payment. Most of the contractors arrested for contractor fraud received this initial payment and never returned.
As you build relationships with contractors/subs, this payment arrangement won't be an issue.
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Thanks for the advice and yes, he probably would be considered more of an employee than a contractor, but he will be overseeing the jobs of the other subs , which are also his contacts.
This has been insightful and ! am guessing that his salary would be different in other parts of the country. Not sure how to know if what he is charging is a good rate, since we usually hire in the guys and provide materials. One of my regular crew charges 250 a day for his overseeing other guys who are 150 a day. But that is for week long type jobs.
Do you ever worry about your material being stolen by crew?
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