How to pay your contractor: T&M vs. quote based pricing

Question

This is in regards to a new flip project I have started...

There is not a ton of work to be done, but there is enough... Lots of small jobs like windows, flooring, installing cabinets.

So my question is: If you have a contractor that you know and trust, would you hire them based on paying for Time and Materials? Or should you always get multiple bids on jobs like installing windows or replacing siding.

My only concern is that I do not have any idea what this will end up costing in the end because I am not getting a "set" estimate for the job... Makes budgeting difficult. But on the flip side, my contractor has offered to do the work for a discounted rate compared to his usual because he wants my continued business relationship.. What should I do?

I look forward to hearing your feedback! Thanks!

Aaron McGinnis · Answer

I have a plaque sitting on my desk that says "No T&M Contracts"

It just doesn't work out... for anyone. Contractors get screwed very often by these kinds of agreements, and investors get screwed very often too.

There's a place and a time for T&M... it's on unique projects with deep pockets and totally unpredictable outcomes. Investment properties very rarely fall under this category, so there's no reason not to use hard bids.

Sean Peters · Answer

@Aaron McGinnis Account Closed

Thanks for all the feedback, I guess the consensus is that NO T&M on a flip!

Account Closed · Answer

I don't like time & materials. Just give him a list of what you want done and ask him to give you a price. If you know him, trust him and his price seems reasonable, go with it. For larger jobs it probably is worth getting other bids but not for small stuff.

Kevin Howell · Answer

@Sean Peters , An honest contractor will use time and materials or cost plus to limit his exposure to risk. Some remodel jobs are difficult to bid based on unknown variables. With that in mind a dishonest contractor can use this bidding method to make more money. He may have inexperienced help or use less than specified materials and charge a premium. The best way to avoid these folks is by getting multiple references. As a contractor I prefer to quote the job when possible. More risk can equal greater returns. Hope this helps

How to pay your contractor: T&M vs. quote based pricing

Most Popular Reply