Should I put a down payment down on a subcontractor?
Member since 2019 · 37 posts · 4 votes
We recently bought our first flip and began to get estimates. One of the subs needed is a chimney repairman/tech. He recently gave an estimate for $6500 and wants $2500 down and the balance upon completion. Is it usual to require this much down, up front?
@Christine Krizenesky
Yes good contractors will ask for a down payment. Would you yourself buy any materials for a job with your own money only to show up and the customer got someone else to do the work?
If you are unfamiliar with what goes into repairing the chimney, ask the contractor for a detailed estimate. All materials and labor each on its own line. If they are willing to show you what's going into the project so you understand, then you have a contractor that cares about their customer.
Anyone in business comes across new stuff. There are seasoned investors and there are those on their way, and there are folks who will never make it there. We're 13 units in, and have taken on extremely aggressive projects. That said here we are with something new for me - We have a bowing foundation block wall and are weighing anchoring it, or re-laying a new CMU wall - I haven't paid for this work before (the anchoring or the laying new block wall), and I will be insisting on paying for materials so I know what I'm paying my contractor for their labor. If it's not in line with what labor should cost, unless I'm in a huge pinch - I'll continue exploring other options. You recommending an investor NOT doing this, or taking this approach, is not acting as a fiduciary for that investor.
It's important for the audience of this discussion to understand that your perspective (although good to hear), is on the 'other side of the table' and you are, after all - on a real estate investing site. If you want to go join a forum inundated with contractors you'll see a great deal more trolling, pissing matches over meaningless code interpretations, and poor interpersonal communication skills, which not to broad brush, is much more of the norm statistically speaking in the 'contractor' world.
Regarding contractors using stolen materials, or stuff they have in inventory - I've seen it, now at least 5 times. These might not be licensed, bonded, and insured types, but these are folks out hanging their hats as contractors - for better or worse.
@Jim Goebel I do know this is an investor/landlord/ flipper website I have been on it a number of years . I happen to have a variety of properties I rent and I am a contractor on top of that .
You say you will be paying for the materials for replacing a foundation wall so you know what the contractor is making in labor . You will only have a number that means basically nothing . Total price minus material cost does not equal labor . ( or what you think the contractor is making off you ) Its not even close . Businesses have expenses and overhead . Contracting is a business , really it is . I have been in the business 35 years , its a great business .
"Regarding contractors using stolen materials, or stuff they have in inventory - I've seen it, now at least 5 times. These might not be licensed, bonded, and insured types, but these are folks out hanging their hats as contractors - for better or worse."
Well if they arent licensed , bonded and insured they are not a contracting business . The only person to blame when they hire them is the investor or homeowner . These people are called laborers . They may or may not have a skill set . They are usually cheap , guys working for beer money . 99% of the time a very poor choice in hiring both in quality and liability .
Most small and new investors have in their heads that investors get better pricing from contractors , nope they dont . Some even think that if they supply materials they will save money , nope . They think they are saving money by going with the cheap guy , only to find out it cost them more in the end .
Jim you say " you want to pay what labor should cost " . Now you are replacing a block wall . lets say a block layer makes $25 an hour , thats not what I am charging you . I am charging you $85 an hour for a block layer . My burdened labor cost for that 1 man are close to $60 an hour , the difference is my PROFIT .
And Jim with all due respect , You must be dealing in a whole different contracting world than I . In my peer group we are discussing our recent flips , recent laws effecting land development , who caught a tuna last weekend , if anybody knows of a good employee to hire , tax issues , hunting and which customers not to work for , Hows the family . Mainly we are asking if anybody has any extra time or bodies to help get things done .
Your advice states your position, which helps yourself - not aspiring or established investors on this site.
Further, you are admitting my exact point - which is that without disclosing material costs, you as a contractor get to obfuscate your labor/profit. This is not in your customers' interest, of course!
@Jim Goebel A contracting business that doesnt make a profit is soon out of business , or they cut corners or they abandon a job. Its none of the customers business how much profit the contractor makes . Just as well its none of the contractors business how much the investor paid for a house and how much they make flipping it .
Contractors are not there to "Help" investors they are there to do a job and make money .
A contractor that is making money gets the job done .
And Yes Jim , contractors mark up materials , thats just basic business practices . Just like a mechanic marks up the parts , and the grocery store marks up their products And the investor who marks up the house they just completed .
And I dont know anyone in business that discloses how much they pay for a product , only what the selling price is .
Everyone here can make what they will of your comments. Plenty of people in business have no issue offering transparency into how they do business - including their costs, among other things. My advice to others : don’t hire Matthew Paul or folks who ask for what he’s asking for -
I would not hire you for my block wall project (or others) because you wouldn’t share how much you’re paying for materials and would want a deposit.