Comparing Apples-to-Apples
When I first started rehabbing, I used to do walk-throughs with the contractors, and just ask them at the end “how much for the
work?”
After a while, I started to realize that the understanding of the quality of the work and the materials wasn’t consistent between the contractors.
So in essence, when we compared the prices of the quotes, we weren’t comparing apples-to-apples.
That all changed when we started using scope of work documents, and asked that the contractors used those when they gave us quotes.
That way, the expected quality of the materials and labor is well-documented.
Related: How to Hire the Best Detroit General Contractors
Agree on a Draw Schedule
Draw schedules are crucial, because they help both parties feel like they’re getting a fair shake when it comes to money.
When you think about it, it’s beneficial for both parties:
- For us, it keeps us from paying them prematurely, which is an easy way to help your contractor lose motivation.
- It’s good for the contractor, because they’ve probably been burned in the past, and a draw schedule allows them to be paid as soon as they finish certain milestones in the project.
Instead of them worrying about finishing the whole project and worrying about getting paid-in-full when everything’s done, the contractor is able to stop working whenever the payments stop.
Caution: Even though this might sound like a “no-brainer” to you, contractors may not be too comfortable with the idea of a draw schedule at first. Just let them know that this allows you to stay organized as a business, and more importantly, it’s a way to make sure that they’re properly compensated throughout the duration of the project. If they have even an ounce of business sense, it shouldn’t take long for them to grasp the concept.
Paying a Deposit to Start the Work
We never pay more than a third of the total cost of the project upfront.
So if it’s a $10,000 job, our initial payment deposit will never exceed about $3,000 or so.
The deposit gets deducted from the subsequent draws. So if $3,000 is due for the initial draw, they won’t get paid when it’s time for the first draw, because they’ll just use the deposit.
As we and the contractor get to know and trust one another, the amount we pay upfront for a deposit decreases.
Eventually we get to a point where we’ll pay a small deposit like $500 or so for them to get started. From that point, they’ll just get paid at the draw schedule milestones.
We let them know when we first start working with them that we’ll pay a deposit on the first couple deals till we do a few projects, but eventually there will be no deposit, and they will only get paid on the draw schedule.
Penalize for Running Over Time
We put it in our contract, and discuss it with the contractor before we hire them, that we penalize them if they run over a week late in the completion of the project.
A week is fair; sometimes things happen that are unforeseen.
But if you screened the contractor properly and you have an inspector that knows what they’re doing, none of your unforeseen issues should cause your project to extend out a week past the target date.
If it does, it’s usually the contractor’s fault.
Expect it to NOT Be Done Right
I know it sounds pessimistic, but I never expect the job to be done to my full liking when they give me the “we’re done” call.
Sometimes I’m satisfied, but usually I’m not; especially if they’re someone I just started working with.
It takes time for people to get a feel for how you like things done.
Be Patient
Unless someone just flat-out ignores what we tell them, I don’t hold it against them if they don’t get things done exactly how I want them done the first couple projects.
Don’t Pay Until it’s Done!
If you tell them from the beginning that you won’t give them their final check until it’s 100% done, stick to it.
If you don’t, there’s a good chance that they’re going to gradually start getting “laxed” on getting things done to your liking on future projects.
You need to define to them what you consider 100% done. For me, there can’t be any cleanup work left, no “nothing” if they want to get that final check.
There are some things in life that are ok to give on a little, but this is not one of them. TRUST ME.
What tips have you learned that helps you get the most out of your experiences with general contractors? Leave a comment; I’d love to hear your feedback.