I bought a 3-unit residential property and met with a local contractor (insured, bonded, good references) to discuss doing the renovation of all 3 units for me. During the conversation I mentioned that I also own a single family property and he expressed interest in taking a look at it, which we did. He has now proposed to complete the renovation of my multi-family in exchange for ownership of the other property. I think it's a fantastic idea and will be profitable for me given what I paid for the other place. So, I want to do this deal, but I am concerned about how to structure our agreement.
I definitely am not signing over the deed until my rehab is completed to my satisfaction. But that brings up another issue... I want him to feel secure with the arrangement as well, so how do we word an agreement so that he also has some certainty that his work will be deemed satisfactory and I can't just say "I don't like it" and break our deal. Should it be structured as a "rent-to-own" with his rent payments being the completion of phases of the rehab work? I don't really think his progress will fall neatly into monthly intervals, so is there a better way to organize this deal so there are definite timelines and dollar amounts associated with them?
He is preparing a bid/proposal that I presume will show itemized costs for materials and labor. Of course, in his position, he will be tempted to use the cheapest materials and to work as quickly (i.e., sloppily) as possible. What do we do in the very likely event that I want to "upgrade" the materials he proposes (e.g., he proposes laminate counter-tops and I want Corian, he proposes vinyl flooring in the bathrooms and I want tile?) And how do I ensure that he will take his time and do things properly in a "workman like" manner?
Any advice would be greatly appreciated.
