Draw Disbursement Question

[Dale Nesmith]

I just closed my first HML to rehab a property I inherited.

I picked a young inexperienced Contractor. I picked him for two reasons, he was one of the few Contractors that came back with an actual estimate, his estimate was only one that was in my budget for an extensive rehab. Other reason, was he had a genuine eagerness and excitement about the job. He even said that getting this job will really set him up. It’s $78k worth of work.

My question is how do I handle the draw? I should be getting 1st draw of little more than $18k next week. I met him at the house yesterday and it was a down pour when I pulled up. I sat in the car and was gonna wait it out. He was parked across the street. I noticed his drivers window was down the whole time. His vehicle is an older Bronco or Blazer. His window was apparently not working.

He’s licensed and has insurance.

He’s excited to jump in and get going on Monday. But, how much of this first draw do I give him to get started. I can’t see just handing him the whole $18,000 next week and hoping he gets started. I paid for permits Friday. What amount of each draw should I give out and how much should I hold until some work has been done?

I’m thinking of giving him money for materials on Monday and paying labor part on Friday if the work is completed. Does this sound like best plan? How does everyone handle it?

Thanks!