If you ( the investor) buys the materials for a job....

[Jessica H.]

...how do you work it out with the contractor? Do you go with them to buy supplies? Ask them to front the cost and once they deliver materials and show receipt you write them a cheque? Do you have them compile a list of what they need and you go buy and pick it up? I am just wondering how you work through these details in the most effective way...also do you buy all the materials for all your contractors? Even HVAC, plumbing, electrical??? We recently got burned by giving one of our contractors money " for materials" ....sigh....thanks.

[Jonathan Mednick]

1. Go with the contractor to pick out materials and pay on your card. Pro: Use a CC that gives you airline miles and helps you learn the costs of materials. Con: Contractors don't like you looking over their shoulder and it takes up your time when you should be spending it looking for new opportunities.

2. Give the contractor gift cards. Pro: Contractor buys what he needs without your assistance and provides you with receipts. You spend time looking for new opportunities. Con: It's like cash so you've got to make sure you trust the contractor. If they have several gift cards that were not used and you end up letting him go, then kiss that money goodbye.

3. At present, I do 8-10 renovations each month. I have three contractors bide on the job and give me a total line item price for the entire job. I know what things cost so if not satisfied with a particular item, I can negotiate. I pay the awarded contractor in three equal installments and agreed upon work for each phase. At completion of each phase, I do my inspection and provided all the work was done, they get their next check. Pro: I am hands off and do not show up to the project until contractor completes the phase. Con: If contractor does not budget and forecast properly, they may end up running out of funds prior to a phase being completed. You have to plan up front with them to make sure he can get through each phase with the funds agreed upon. An experienced contractor won't let this happen. However, when I am trying out a new one and this occurs, I fire them and replace them. Of course, this works if you have more than one crew. I currently have six crews working for me with a full time project manager so we have the luxury of this option when it happens, which it did last week. We were trying out a new crew. They got through 50% of the work and could not continue. They were gone the same day and next day had another crew out to finish up the project. Didn't lose any money and did not miss a beat.

Good hunting.

Jonathan