choosing the right contractor

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So I'm almost complete with my rehab and it was really scary. I realize why contractors have such a bad name. I was wondering how do you guys protect yourself from bad contractors. Do you do background checks? do you have legal forms you make them sign? I was reading online that its pretty hard to get your money back if a contractor just runs away. The problem is that they require 25% to start doing the work. Also how do you check they are competent? If you can please share your thoughts or experience I would appreciate it.

Thanks

@Laith Ali there are numerous ways to protect yourself from a bad contractor, now remember that not all contractors are bad. 

One of the big things investors run into with bad contractors is they go with the cheapest option. We hear horror stories of contractors smoking inside projects or using the cheapest grade of materials and have been called to correct another contractors work (more expensive than our original bid). So first thing is to not go with the cheapest option. 

Look at the contractor's own contracts, if he or she does not have their own contracts then they are not truly serious about their business and is a red flag to me.

If you do want to take the risk of using a cheap general contractor or using cheap subcontractors then I would develop your own master agreement for your contractors and have them sign it in order to let them know what the standard is. I would also have them sign a detailed scope of work that lays out exactly you want in as much detail as possible. We have one client who demo scope of work usually entails about 2-3 pages it is so detailed.

The next item is asking the right questions and get multiple references. I wrote a blog post on this. 

https://www.biggerpockets.com/blogs/9607/71901-thi...

Now as far as payment goes there are many ways to handle this. If you are a bit of a control freak like I am you could write up a schedule that is sensible and done by the week and have your contractor sign it agreeing to it. This one once that weeks work is done you pay them. This keeps you safe and your contractor happy. The next issue is materials now you should only be buying materials not tools so there are a few ways to implement this. You could request you contractor put together a materials list and you pay for it, have your contractor go get the supplies for the week that they need and pay for it over the phone when they are at the checkout stand are some options.

In order to check they are competent, you can do this one of three ways or all three ways. You could visit the site daily or weekly, you could require them to send pictures at the end of the day, or you could have a third party inspect their work.

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