When to use crew do and when to hire contractors

3 Replies

Hi!

I am in the St. Louis area. I'm working on an old brick house. Gut rehab. I have been hiring one fulltime "employee" (friend who takes cash). This is an experiment for me to decide if I want to get a crew with guys at 15-25/hr and foreman at 30-35/hr. What jobs should I have my crew do and what jobs should I contract out?

If you are hiring your own employees you should make sure you have appropriate work comp coverage and other business requirements in place. One benefit of using a licensed contractor is that they also pay taxes/insurance/employment related stuff for their employees. If you are the employer you will need to do this.

While paying a buddy under the table for sporadic work could be defended as him being a sole prop of his own business it is different when you are hiring employees.

You can usually look up all the info about this by checking websites for your state. You likely have something resembling a department of labor that will have info on how to become an employer. You should also check with your insurance broker/agent. They likely can explain work comp insurance. Your CPA can explain tax related requirements for payroll. State Construction contractors board will have info on become a contractor/subcontractor if you intend to sell the house or hire your crew out.

Tread carefully, construction is one of the most injury prone jobs. If one of your workers (including your friend) get injured on your jobsite you could be liable for their medical costs and disability. Your homeowners insurance won't cover this if it is discovered you were operating a business. This is one reason it is important to hired licensed businesses, in most states, part of licensing involves proving insurance coverage.

Also, when you hire contractors/subcontractors you will want to make sure they have general liability and work comp. If an uninsured worker gets hurt (even in your home working on your personal house) you can be sued for their injury. In the case of being a homeowner who hired the person for a non-business project your homeowners policy will cover it. 

Along those lines, we want to know about what a Bond means for Contractors. In our area, most seem to carry $15,000 bond. My understanding is this is to help cover mistakes their subcontractors make, among other things. Is this true? We were about to hire a remediation company to do floor and bathroom replacement, when we double checked State Contractor website & found they have a suspended license (for not reporting letting a salesperson go) & their bond is not renewed as of late October. Assuming this is red flag so now searching for new company. Any thoughts/info appreciated.

Originally posted by @Jane H. :

Along those lines, we want to know about what a Bond means for Contractors. In our area, most seem to carry $15,000 bond. My understanding is this is to help cover mistakes their subcontractors make, among other things. Is this true? We were about to hire a remediation company to do floor and bathroom replacement, when we double checked State Contractor website & found they have a suspended license (for not reporting letting a salesperson go) & their bond is not renewed as of late October. Assuming this is red flag so now searching for new company. Any thoughts/info appreciated.

Surety bonds are for when a contractor bails on a job. It's a guarantee that a contractor will abide by their contract. There are other types of bonds but most states only require a surety bond. Usually negligence would be covered under the contractors general liability insurance not a bond. 

my opinion do not hire whoever you said has a expired bond and multiple violations with state. You're basically guaranteed to have trouble with that contractor. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you