Ever had any problem with a contractor? Well, if you haven’t, then you are probably not doing much serious rehab investing or you are doing it all yourself! Stop that… I’ve fired no less than a half dozen in the last year. The problem Iv’e found is that they all say they can “git-r-done” in so-n-so timeframe and it always takes twice as long, -or- they say it will cost you this much and it really ends up costing this much plus that, -or- they can’t “git-r-done” at all and you have to fire them and get someone else on short notice for twice the price. Ain’t it fun?
I’ve also tried every version of contract you can think up…cost plus, labor only (I pay for materials), labor and materials, GC, subcontract myself all trades, etc., etc.
Cost Plus means you agree to an hourly wage and you pay whatever it costs for labor and materials plus a small fee for their profit…DON’T DO IT, there is no incentive for them to be timely when they are working by the hour. If you are going to use this method, you might as well hire yourself a few handimen and pay wages, FICA and the like.
Labor Only (I pay for materials) is problematic too. In this scenario, we agree to a total for the job for the labor and I pay for all the materials. Problem is, if they get sloppy or screw something up and it has to be redone, guess who ends up paying for the materials twice? That’ right, you!
Labor & Materials is better but still not fool proof. The way it should work is they give you a price to include all labor and materials. Problem for you is, if you don’t specify very distinctly what materials you require to be installed upfront, the contractor makes assumptions (usually on the low side) of what materials he is going to use on your project. Or even worse, he makes an allowance for the materials and his estimate is usually low and you end up spending much more on materials in order to meet your standards. Be careful with this method of contracting. Usually in this method, and most of the others, there are gaps in the work that the contractor or handiman can’t perform and you will still need to hire certain parts of the work yourself, ie. HVAC, Roofing, Guttering, possibly Painting…you get the idea.
The GC method, is very similar to Labor and Materials except that the GC (General Contractor) takes care of everything including any parts that need to be subcontracted. He is responsible for all quality and you don’t have to deal directly with any of the “subs”. This method is very convenient for busy investors that can’t spend a lot of time physically at the project watching over the work to ensure everything is getting done right. If you use this method for contracting, make sure you have a qualified contractor that has lot’s of experience, you will pay a bit more, but it is more likely that the work will get done right the first time and you will have much better communication with your GC than you typically do with the other types of contractors.
If you want to “Git-R-Done” right, you have to take all responsibility into your own hands. How? Become your own GC! Hire all needed contractors, ie. Carpenter, Painter, Electrician, Roofer, etc. yourself. It’s a bit more management intensive for you, but you will have more control of the overall quality and timeframe of your project. You will quickly weed out the good tradesmen from the bad. If a contractor ever tells you that “I do it all”, that usually translates to ‘Jack of all Trades, Expert of none!”. Beware, if you hire this guy, you will likely be unhappy with certain portions of the work and the project’s timeframe will drag on and on and wear on your patience. Don’t get me wrong, there are some very qualified all-around guys out there that can do a perfectly respectable job doing it all, but when you only have one man working, it will take a while to complete. If you have the time, sometimes this can save you some money but you need to weigh the extra time against your extra costs for holding the property longer than if it were done quickly.
Some key items to make sure you do no matter how you contract your projects.
1. Always have a written contract.
2. Get proof of liability insurance and workers compensation if they hire others to help.
3. Always have a defined scope of work at contract time.
4. Always have a projected completion date in your contract.
5. Always get lien waivers after payments.
6. If you do have to fire a contractor, make sure you do it face-to-face and settle up for work completed, don’t forget to have them sign a final lien waiver for any payment you make to get rid of them. If they refuse to sign, don’t give them any money.
7. When the work is done, PAY YOUR CONTRACTOR IN FULL. Contractors are people too, don’t rip them off. If they get the job done and it is satisfactory, pay them. You want them to do your next job if they did a good job on this project. Also, Get a Warranty from them, make them put it in writing.
Hopefully you have gotten a few insights here. Keep in mind I am not an attorney so if any of these ideas don’t work for you, I can’t be held responsible for your results. Just use common sense and you will keep yourself out of trouble most of the time. Also, follow your gut feeling, if you don’t get a good feeling about a particular contractor, don’t use them, even if they are the “Low Bid”.
Thanks for listening… …Doug
