To the Flippers, what systems seems to work for paying your contractors?

[Dyryl Burnett]

Hello All,

I'm curious to learn ones (contract/payment) systems/approach when it comes to hiring contractors (be it a general contractor or subs) and paying them for their services. I'm in Chicago, and there are SOO MANY "quick & cheap" contractors, that its overwhelming. 

I'm looking to start out with buy and holds, but I WANT to find units that need rehabs as I want to eventually:

1. Step into Fix and Flips

2. Purchase properties that need to be rehab.

3. Create my OWN contractor staff/team. 

Would love to hear some wisdom on this topic! 

Thanks,

DB

[Will Barnard]

As far as payments are concerned, I have a pretty simple process. I never (very rarely) pay for services in advance, everything has progress payments and I see the progress BEFORE I cut a check, and the final payment is held until the job is completed to the satisfaction of the contract or by me or my project manager.

I also buy a lot of the materials so the contractors are typically labor only. Several will buy small items, submit receipts and get reimbursements. This keeps markups down to zero which helps my bottom line. Some can argue that contractors have better discounts and that may be true in some cases, but after they mark it up, bye bye to that discount. Establishing relationships with material providers is essential and establishing credit with them also can improve your bottom line. If you can get credit at lower interest rates than borrowing from hard or private money, you are ahead.