Paying Contractors Upfront
Hello,
I’m fairly new to real estate investing and wanted to see how everyone typically structures payments with contractors on rehab projects.
What do you consider normal? Small deposit upfront? Pay for materials upfront and labor as work is completed? 50% upfront and 50% at completion? Or progress payments based on completed work?
I understand every contractor and project is different, but I’m trying to get a feel for what’s considered standard and how other investors protect themselves while still being fair to the contractor.
For larger rehabs in the $30k–$50k range, how do you normally structure the payment schedule?
Thanks!
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#4 All Forums Contributor
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- 10451 Mill Run Cir #755 Owings Mills, MD 21117
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#4 All Forums Contributor
- Attorney
- 10451 Mill Run Cir #755 Owings Mills, MD 21117
@Caleb Hardesty, I’ve seen rehab projects go much smoother when the payment schedule is tied to clear work milestones instead of just dates. For a larger project, I would want the contract to spell out exactly what has to be completed before each payment is due, what materials are included, and how any extra work or changes will be approved.
I also like keeping enough of the final payment until the job is actually complete and any last items are fixed. That gives both sides something clear to work toward and helps avoid arguments about whether a phase is really finished. I would also make sure any change in price or scope is put in writing before the extra work starts.
I’d be glad to stay connected, @Caleb Hardesty. Contractor agreements are one of those areas where a little more detail upfront can save a lot of stress later. General information only, not legal advice. For Texas-specific contract rules, confirm with local counsel.