How do you pay your contractors?

13 Replies

Are you paying your contractors by the hour, or by the project, or by square footage?

If you are paying by the hour how much do you pay per hour? 

If you are paying per project how much do you pay per project?

I've been struggling with finding the best way to pay my contractors. If I pay per hour I usually pay less but the progress is slower. If I pay per project I pay more and the progress is fast. Is it normal to feel buyers remorse if I pay per project and they complete it very fast making their per hour rate really high? 

I find paying them with money works best. I once tried paying one with goats and he didn’t find that amusing.

All joking aside I’d pay in installments. Say 25 percent up front, 25 percent in the middle and the rest up j completion

I pay my main contracter when the project is completed to my satisfaction. He knows he'll get a check cut as soon as it's done. I have a relationship with him though so I know many contractors want a percentage down. My contractor can afford to get the materials on his own and just bill me for them. My contractors rates vary by the job but usually $20-40 an hour.

It depends on the job.  I try to get bids, if so I pay upon my inspection.  On jobs that are part time do it in your spare time I pay by the hour.  Rate is $30 per hour and goes up to $75 per hour depending on who it is and what they are doing.  I do not pay anything up front.

Depends on your relationship. I know my contractor extremely well so I pay him by the hour. If I didn't know them I'd rather pay them by the job and establish a relationship first, then take it from there.

I pay my contractor as soon as they finish or invoice me. They never wait.. And I never wait...I do a lot of the improvements/repairs myself, but have a plumber which I use a couple times a year as well as 2 different heating contractors one for boilers one for forced air. Rates range from 30-60 per hour.

1. agree on terms upfront and sign contract that also states the timing and their release of work

2. For upfront, pay them at the end of the first days work the deposit (20% or so)

3. Then pay via milestones in your agreement. 

Thanks,

sjw

It depends as many have indicated depending on the relationship you have with the contractor.

I prefer to pay in cash. Win/win

All paid with credit card air check.

By the job.  I bid out each job and use different sub based upon their bid. Sometimes  they win some times they don’t 

AFTER the job is done 

Electric 

Tile

Floor

Plumber 

Carpenter

A/C

Counter top 

I purchase the materials online they pick it up 

If they need some odds and end they pay, give me the receipts and I reimburse after the job is finished 

I believe the question relates more to what "rate" we all pay verse how often we pay.

Personally I hire very basic labor hourly (demo guy, some landscape work, paint etc). For a true "scope" I prefer to get a bid and not hourly. In my eyes, I would rather pay $1000 for the job, have it done in a day, but feel I got a good deal, verse pay $10/hr, it takes the guy 90 hours or two weeks, but I only paid $900... time is also money in this business!

Why would you penny pinch? If you budget 20k on rehab, spend it it all, but not a penny more. In construction, there is budget and timeline, that is your only concern. Juggling people around just to save $500 vs hiring someone who could do it turn-key is not worth the headache. If I pay my foreman $30/hr, I’m lucky to go out the door of an at-cost of $45/hr, I got to eat and keep the lights on too so per hour rates here won’t even come close to me.

@Joseph Weisenbloom day laborers never have any money, I used to pay them each day. Licensed contractors are paid per the terms of their quote. I will either pay by bank account check or debit card to most, except the day laborer, who needs money today to pay for yesterday’s bills.

Good day, @Joseph Weisenbloom , you present a question that plagued and continues to plague our society since the dawn of the investor/contractor relationship, hourly vs. per job. Please allow me to present a way to view these services from both a contractor and investor perspective.

It would be hard for an electrician to come into one of my properties and get one over on me either on price or quality of craftsmanship because I am an electrician and an electrical contractor. However, since I am not a member of the HVAC industry, I can judge the quality of an installation by looks alone(neat finished product and clean work area after completion). Which I'll admit, is not really much to go by. So when requiring services In which I have limited exposure and knowledge of, I will get a minimum of 2 bids. Put yourself in my shoes for a second, I work and coordinate with plenty of trades on a daily basis, ironworkers, carpenters, plumbers, HVAC, etc. and my knowledge of their trades is limited at best. Now transfer back to you, a real estate investor, and not yet a member of the construction industry, you should get multiple quotes for everything, with the exception of demo work and maybe a day laborer. Why? Because everyone knows how to swing a sledge hammer and rip down Sheetrock, however most people prefer not to do it. More importantly, the more members of the construction industry you talk to/interview, the more educated you will become. For something you have limited knowledge of, I would bid out the work by the job until you can confidently discuss the obstacles a trade faces and the approaches they use to solve those issues. Hourly work is for laborers/handymen, which I will do for certain customers as well. I hope this helps, best of luck.

That depends on your relationship. After signing a contract, you need to put EMD. I selected materials and pay for them myself. For each project completed, I pay right away after inspection. If you know how they operate you can estimate their charge (e.g. 5 days x 8 hrs x 2 workers x $X0/hr). As for schedule it always takes longer than you planned. To meet aggressive schedule you can offer a bonus ~$5K to have it done by such date. The GC works like realtors when they have another job they can drop your project and start another one unless the incentive is high enough to turn down another one. You ever heard a realtor work for you FT by declining another home sale? Never. Same with these guys. I also have another contractor work simultaneously to speed it up to cut the critical path of a PERT.

If you are a prompt paying employer they like to work with you. If you nickel and dime these people you are likely to be a frustrated employer.  

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