Is it typical for a Contractor to request 20% or more upfront?

[Jon Mbu]

Our General Contractor is requesting a 28% downpayment upon signing the contract for rehab work, prior to any work being started and he claims that he has been doing this for decades and never had issues with that being a part of the contract.  That seems rather high.  What amount (if any) should typically be required from a General Contractor upfront?  If you are a rehabber, what was the most you had to pay upfront when a GC requires a deposit?

[Justin Thompson]

Jon,

I've had contractors request as much as 50% upfront! What I typically do if I am providing materials and they provide labor is I'll front the material cost. I make sure though I pay for the material and I am there when it is delivered. Then after the contractor has done A, B, C I have them submit me a draw. I will NEVER give a contractor money upfront. I made that costly mistake once before when I first started and the guy burnt me for almost $3k.  Now if the contractor requests money upfront and demands it... that tells me (could be wrong) he doesn't have a company that has enough cash flow to pay his workers before he gets paid.  Now if you can't front materials upfront and are relying on him to supply labor & materials then I'd find a well established company that does that regularly. From my experience most contractors can't afford to buy materials and pay their guys.  So if you can buy the materials and make them complete the labor part then get paid that's the way to go. I warn you to not give someone money before a projects started or complete.

I tell every contractor I work with, even if I am doing a rehab in all cash no bank involved, that I am required to submit a draw request to my bank before the funds are released. Make sure when you do pay the contractor they give you a Lien Release/Waiver form notarized and signed.  This way they can't come back on you in 3 months and put a lien on your property stating they were not paid.

If he is insisting on money upfront... I'd find someone else. I have turned and burned dozens of contractors because they all give you the same story.  "do you know how much I spend at xyz company or do you know how many houses I rehab... My favorite is the "I don't need your work, I am doing you a favor, I have so much work I'm overloaded." Now I have a great set of guys I can call on, no money up front and I pay them within 3 business days of completed work.  I require the work to be done and a few days to inspect it with out them breathing down your neck.  This has worked out great for me.  I'm in the process of a rehab currently... Just had roof installed, HVAC done, gutters & soffit, interior demo... I didn't pay a dime upfront. After work is completed and they have their lien release/waiver signed and a few days passed I pay them.