There is a saying here on BiggerPockets that goes something like this:
"If you think hiring a $100 electrician is expensive, then try hiring a $10 electrician."
This is a painful lesson that I have learned several times over when dealing with contractors. More often than not, when I go for price without checking credentials and references. I bet you that nearly every investor on this site who has been doing this for 5+ years has an experience similar to what you are going through (although yes, this is particuarly large theft).
First, I'd focus on finishing the project. Without knowing the specifics of your situation, my instincts suggest that the market rate for the work is likely the 20% more that you are being quoted by this "legit" contractor than the folks that you have had working for you in the past. Hire the GC that can do the work, well, on time, and on budget. Underwrite your investments with quality GCs factored in going forward. Do yourself a favor and finish the project, the right way, with quality help, at a fair (likely higher price). Or, commit to doing it yourself. If the numbers don't work, switch your strategy, or again, do it yourself.
Second, I agree, this is a case to get your legal team involved. In the unlikely event that you are able to contact the folks who have made off with your money, you should at least attempt to collect what is owed, and charge them. You owe that to yourself in getting the chance to recoup your losses, and to the community so that they at least have to change up a few things and skip town to steal the next investor's money. That's my opinion at least.
Third, let's think about how to prevent problems like this when working with contractors and when the cards are in your favor and allow you to dictate terms of the engagement - this may or may not apply to the current situation, depending on the financial pain you are feeling and pressure to finish the job.
@David Greene does a great job explaining contracts in his BRRRR book. He has a process that more or less looks like this:
- Contractor quotes the work and says it will cost this much and take 8 weeks.
- You quote the work and structure the contract such that if the project is done to your satisfaction in 10 weeks (ample time on an 8 week estimate), a 5% bonus is awarded.
- If the project takes longer, a 5% penalty is applied for each week past the 10 week deadline.
- Payment is made in installments throughout the process after well defined intervals.
This takes time and skill in understanding the project to get right, on your part. A GC might obviate the need for these. (Or, you might structure this with the GC directly and let them use whatever systems they want with subcontractors). But, this is one example among many that some investors have found success with and reduces the risk of a situation like this recurring.
