Austin, TX · Member since 2016 · 24 posts · 8 votes
Hello - Looking for some advice on how to execute Rehabs remotely. I understand we need a great team but I've questions like how do we deal with transferring money to contractors without the work getting started (even if it's for a deposit).
Appreciate anyone who would be willing to discuss over a phone call.
Investor · Verona, NJ · Member since 2023 · 55 posts · 29 votes
3y
I think the answer to your question is "due diligence". Before you pay any money to a contractor, you need to be able to know enough information that you feel confident sending a deposit prior to begging of work.
Later, your job will be verifying that the work as been completed as stated in the contract you will have before any additional money is handed off to your contractor.
Investor · Verona, NJ · Member since 2023 · 55 posts · 29 votes
3y
I think the answer to your question is "due diligence". Before you pay any money to a contractor, you need to be able to know enough information that you feel confident sending a deposit prior to begging of work.
Later, your job will be verifying that the work as been completed as stated in the contract you will have before any additional money is handed off to your contractor.
Real Estate Agent · Cleveland, OH · Member since 2021 · 383 posts · 361 votes
3y
The standard is having a reliable contractor who you source preferably from another investor who has used them, but an agent or PMC who can vouch for them works too. Other than that, you can pay some amount up front for materials and a "down payment" of sorts and then the rest is disbursed as work is completed.
Hello - Looking for some advice on how to execute Rehabs remotely. I understand we need a great team but I've questions like how do we deal with transferring money to contractors without the work getting started (even if it's for a deposit).
Appreciate anyone who would be willing to discuss over a phone call.
@Ashwin Gudipati My advice would be not to execute rehabs remotely unless you have completed 3 or 4 and understand the logistical challenges from an owners perspective. If you are going to proceed than I suggest that you understand the customs for the payment of a contractor in the projects location. If you are going to advance funds for materials than you should be certain that the materials are delivered to the job or stop advancing funds. A quality contractor does not need to be paid way ahead. You should carefully create a scope of work and a draw schedule. Stick to it. if you front load the payments you may end up with a half finished rehab and no money. Try to put yourself into the contractors shoes if he has been paid a large portion of the contract but not completed a large portion of the work, what incentive does he have to keep working?
Do away with any fundamental notion you have of honor and integrity and follow the money because that is what makes the deal work. If the contractor gets head of you and made his profit he is more likely not to finish the job or come back for the punch list.
As phases of your scope of work and draw schedule are completed make sure you have someone record the work or take pictures to assure yourself that the work is actually completed. If you are paying for the HVAC get the warranty cards and information at the time you pay for it. Have an inspector or architect inspect the property before releasing funds. That is the way a lender will operate.
Before the job begins get copies of the contractors license and the building permits and make sure that the contractor is compliant with the laws of the jurisdiction you are working in. Get references and do a judgment and law suit search in the community the contractor works. When you go to sell the property if the work was not properly approved your buyer will have trouble getting financing for the purchase.
I could go on and on. I learned most of these lessons the hard way by doing deals and fixing the screw ups. You can avoid some of them by heeding advice and getting enough hands on experience to have a chance to successfully execute a remote rehab. Good luck and keep moving forward.
Lender · New York, NY · Member since 2022 · 1k+ posts · 1k+ votes
3y
Think this purely boils down a matter of trust. Is this your first rehab project you've done ever? I also think that's important. Knowing what things to check on, questions to ask whoever you are hiring to do the reno, etc.
Hello - Looking for some advice on how to execute Rehabs remotely. I understand we need a great team but I've questions like how do we deal with transferring money to contractors without the work getting started (even if it's for a deposit).
Appreciate anyone who would be willing to discuss over a phone call.
DO NOT even think about doing this without a trusted team in place, it will not end well. I know dozens of investors from out of state and country that buy deals there monthly, without any issues. I live out of state and do many renos a month. Just in the last 5 days I closed on a 7 unit, and 4 br ,and already started the reno. All while living on the beach in FL,