What do you need before a flip?

4 Replies

what forms do you have your contractor sign before starting a flip? 

What do you usually have in place before you commence the project? 

@Rigo V.

If you're going with a general contractor, they will coordinate all of the different trades that need to come in.

If you're doing the work yourself and hiring contractors where needed, you'll need to understand the flow of the work needing to be done.

Contractors have their own forms. It often will have all their legal verbiage on it. You can have your own contract, but you'll need to be experienced to force your contractors to take your forms over theirs.

You should give them a statement of work. Don't let them wander through the house and pull out random stuff to work on.

Get 3 bids.

They should be bidding on the cost to complete the work, not by the hour. I'm sure you can image how by the hour would work out for you in the long run.

Check the references if you haven't used them before. Try to go see their work if you can.

Make sure their licenses are current (yes, they'll show up with expired licenses)

They'll want some money up front for parts and supplies and to pay their hourly subs/workers. You can work it out where you buy the parts, but better make sure you know what to buy. Don't go there and grab any old grout off the shelves.

Find out who is doing the permits. Sometimes they'll dodge the issue and you'll find out the hard way they expected you to get permits for the work.

There are 5 forms you should have signed/received from your Contractor before you start the project:

  1. Independent Contractor Agreement
  2. Scope of Work Document
  3. Payment Schedule
  4. Form W-9
  5. Proof of Insurance

Independent Contractor Agreement

The Independent Contract Agreement outlines the terms, obligations and responsibilities of both parties to the Contract.  A strong Independent Contract Agreement clearly defines the work that the Contractor needs to perform, when the work needs to be completed and how much the Contractor will be compensated.   The ICA also clearly spells out why the party being hired is not an employee for legal and tax purposes.

Scope of Work Document

The Scope of Work provides a detailed list of all of the repairs that need to be completed on the project. Your Scope of Work Document should include as much detail as possible including:

  1. Detailed List of Repairs 
  2. Plans/Drawings
  3. List of Materials (SKU #s) & defines who's responsible for purchasing (you or Contractor)

Payment Schedule

The Payment Schedule defines the Payment Terms of how and when the Contractor will be paid on the project.  A Payment Schedule should outline Payment Milestones, Amounts & Terms which describe the work that needs to be completed in order for the Contractor to get paid, how much the Contractor gets paid, and when the Contractor gets paid.

Form W-9

You will need to get a W-9 from the Contractor so you have the Contractor's Name, Address & Taxpayer Identification number which will be used for preparing Vendor 1099s for your Contractors at tax time.

Proof of Insurance

Before hiring a Contractor you need to make sure that the Contractor is carrying the proper insurance to protect your property, investments & personal assets.

Your Contractor should carry both General Liability Insurance to protect your property against damages, and Worker's Compensation insurance to protect you in the event that a worker is badly injured on your jobsite.

Before you start construction ask your Contractor to provide a valid, up-to-date Certificate of Insurance that indicates the coverage that they are carrying for their business.

Project Plan

You want to know the order of things happening.  You want this for several reasons.  #1 that there is not just a list of things that need to be done, there is a complete plan for project completion.  (the order of some things may change as work progresses - this always happens) BUT you want a plan for the rehab.

#2 You want the contractor to be efficient.  This is two-fold.  Yes, it gets your project completed faster.  The other thing is - the contractor needs to go in a certain order and make sure he is efficient so he can make money.  If he can't be efficient enough to make money - it will end up causing issues on the project.  Issues on the project are not good for staying on budget and hitting completion targets.