Choosing Contractors and Costs Associated

[Alfredo Alfaro]

Hello Everyone,

I have spoken to a few Contractors about their pricing and how they structure the payouts and have found a good couple that charge 50% up front to start and then 50% at finishing. 

What kind of setup for the payment structures do you have for the contractors you work with and did you start out that way or did you change the payment structure after using them multiple times? 

I don't want to come off disrespectful to them or their work but also if a rehab is going to be 50k or more, that is a lot to come out of pocket up front and with restrictions of hard money and some lenders they require work to be done before paying out or allowing a draw. 

Just looking for previous experiences or some guidance on how to proceed with contractors please. 

Any information helps. Thank you very much. 

[Andy Sabisch]

As they say, everything is negotiable.  I have some contractors that want nothing up front (usually smaller jobs), others that want 1/3 down and others it depends on the scope of work and our track record together.  Not sure there is a one-size-fits-all answer.

I will say on a few occasions when we got started we went with contractors that we had not fully vetted and price drove selection and as a result, the last we saw them was after we paid them up front.  If the contractor has been in business for a while and you have checked some references or been referred by another investor, then their terms will be at best a starting point for negotiation but typically they are how they do business.

Check with your HML to see how they would handle a 50% up front payment - they may have ways to structure the payment to make you both happy