Based on my experience in the Indianapolis area there has been plenty of different payment formats I have seen. As a previous project manager for large SFH PM companies, to being a licensed GC and an investor myself currently I'm not going to say who is right or wrong because there's many ways you can go about this.
Personally what I have found to be best for our business to build rapport is to get paid in installments for the first couple of flips we do for a new client. This typically looks like 2 weeks of work before sending our first invoice with proof of work that was completed. For example if it is a 60k job and it takes 6 weeks we will usually be able to send 3 invoices for 20k each in phases upon scopes completed. (If that makes sense). Every friday an update is given along with pictures, a look ahead to next week, any issues or any feedback. Once a couple of flips have been completed together and we have built that relationship, we typically just go to a 50 upfront 50 at completion type of deal more typical with homeowner work (Not required, but its usually easier for both sides or we just continue a pay as we go basis). Most of our work are referrals as well and have never had an issue sending or receiving payments.
I do agree with alot of points everyone has mentioned. From a PM, to a investor, to a GC company owner i see it from all sides. Just my two cents here on some comments. Not arguing because i agree with everyones point honestly. I have seen that Net 30 upon completion is typical for large pm groups that supply alot of work to subs generally for turnovers not major remodels. These jobs are 10-20k or less. Every pm group that we have done a substantially larger remodel for we have gotten 1/3 down and the rest upon completion. The Net30 has become increasingly more difficult to find due to the increase in prices from labor to materials. Some bigger groups switched to Net15 over the last 5 years even having a hard time finding subs that can float that many jobs for that long. I do agree with the point that alot of subs (especially from facebook, craigslist, etc) not being able to even pay for materials upfront or front a week or two of labor. That is a major red flag and have immediately cut all of those guys off. Typically that is the difference between licensed and just insured but not always.. It is just the industry and honestly people in general they do not know how to budget or make there money last. ( Isn't it something like 60-70% of people live paycheck to paycheck?)On the flipside you do have to think even legit successful companies also can't float every job that long. For example if payroll is 10k a week, have overhead, material bills, etc and multiple jobs waiting on payment theres potentially a six figure carry that adds up very very quickly.. To hedge that issue I think all parties can agree that verified work completed warrants payment which is why we do the installments to build that trust. At the end of the day your network is your networth. Once you find a reliable partner for these there should be no issues having that trust and expectation.
I think theres a million ways to skin a cat as they say just know the red flags either way whether you are a contractor, investor, pm group, or homeowner. Hope this helps. Again this is just my experience in Indianapolis and im not saying one way or another is right or wrong :) Nothing to really argue about here. ;) I don't know best I just know what has been mutually beneficial for all sides and no complaints have ever been made doing it this way. Something to think about potentially. We all have to make money. Treat it as business relationship where it is mutually beneficial not just some guy you are trying to control and squeeze every bit of "what can you do for me" out of. We are all here to make money at the end of the day. Understand that and be a realist. Dont screw anyone over because of your ego in trying to have full control. :)
