How do you pay your contractor?

Question

Hey all! I'm about a week into my first rehab for a fix and hold. This is the biggest job that my contractor and I have worked together with and not exactly how I should approach this relationship. I have paid for most of the material and have given him one payment, but told him I prefer to pay when the job is complete. I'm curious how the more experienced flippers and rehabbers keep a good relationship with their contractors. Any insight is much appreciated!

Mike G. · Answer

We usually pay weekly depending on progress.  If you're expecting the contractor to work for a month and not get paid until the project is complete, that doesn't seem reasonable to me.

Nicole Grant · Answer

@Jeff Bridges Thank you! Thats very helpful and great ideas for how to be more organize and keep my contractor and I on the same page. We are currently going on a brief outlined bid.

Jeff Bridges · Answer

Ideally you would have a written contract outlining the exact agreed cost of all of the projects you asked him to work on. In that contract, you also specify the pay schedule that identifies milestones where, once completed, result in a specific payment  until project completion. I.e. complete kitchen, complete painting, complete bathroom repairs or however you lump them together.  If you have a 2 month project for example, most contractors will not want to wait 2 months to get paid at the end when there was significant progress in between. Perhaps you can divide all of the projects he is working on and find a meaningful portion that has been completed and pay him for that specific project based on what he quoted you for that project portion. For the value of the remaining projects, hold on to that amount and be sure to save a reasonable amount to be paid upon completion of all projects to ensure that he sticks around to finish and that any outstanding items get corrected before you hand him final payment. But since you don't have written contract, the contractor can demand payments for what he believes is work already completed and you don't have a whole lot of recourse since you didn't have this payment schedule pre-arranged... its not unusual to have 3-5 payments over the course of the project that align with milestones of project progress. so divide the entire project bid into thirds or fifths and pay out based on what your contractor agrees with and work these out in advance next time. Hope that helps...