How to deal with contractors?

Contractors (carpenters, electricians, plumbers, etc.) are some of the toughest groups of people to work with. Most are very hard working and honest. However, there are some others who are crooked and will think nothing of trying to pass off shoddy work, trying to jack up the price half way through the job, not doing all of the required work, walking off of the job completely or all of the above. If you’ve ever done a rehab or even owned your own home, you know what I’m talking about. If you’ve been taken advantage of, don’t feel bad. You’re not alone. I’m right there with you. The only reason I know any of this is because it’s all happened to me… more than once.

Here is a list that I compiled of some keys to dealing with the 2nd group of contractors (that also helps a lot with the first group).

1. Get absolutely everything in writing. This includes the following:
   1. Total Cost (usually broken down into 2, 3 or 4 installments as the work progresses, depending ion the size of the job.) This means that you know and the contractor know exactly what work needs to be done for you to give them their next check.
   2. The installments section should break down what work has to be done to get each installment. MAKE SURE THE BULK OF THE MONEY IS GIVEN TO THEM WHEN THE JOB IS FINISHED.... Not at the beginning. That's probably the most important thing I could tell you. You have to look at installments as “just in case the contractor stops returning your phone calls, you can pay someone else the rest of the money you have set aside to finish the job.” If you can't, you're paying the contractor too much up front for each installment.
   3. The quality of materials used. You don’t want to verbally talk about marble countertops and have them show up with formica.
   4. Breakdown between labor & materials. Any contractor is entitled to make a fair wage. I also believe that I’m entitled to know what that fair wage is.
   5. Timeframe with financial consequences if they don't finish in the allotted time. This is very important. Every day that your property goes unfinished is a day that you have to pay interest, taxes, insurance, utilities, etc. Plus the risk that the market will turn for the worse, seasons change, pipes freeze, etc.
   6. Once you get more comfortable with what work needs to be done, I highly recommend that you come up with your own list and have them bid on your list. That way they don’t leave something off their list and charge you more for it later…. Or the famous “That’s not my responsibility.”
2. Make sure they are licensed & properly insured - if a problem happens because of their faulty work, you want to have recourse. 
3. Ask for recent references & call them. I know that you're busy, but it only takes a few minutes. If the most recent satisfied customer they give you is 3 years ago, there may be a problem. If the contractor burns you half way through the job, you’ll wish you had done more due diligence in the beginning. 
4. Inspect, inspect, and inspect. Be prepared to inspect the property a lot to make sure that the work is progressing. The other day a friend of mind was complaining that the contractors were moving at a snails pace. I asked him how often he inspects the property. He told me ever couple weeks. Big shock that they’re not pushing forward quick enough. I recommend daily or every other day depending on the job. If the property is too far for you to inspect that much, shame on you for buying a property too far to manage. If you’re too busy with other stuff, make time. This is your money we’re talking about.
5. Last, but certainly not the least. There will come a point with almost every contractor when they will ask for the next payment (or part of it) before they finish the task. I’ve had this happen a million times. Often with contractors I used before. They always have a story. Everyone does. Sometimes I cave in and give it to them. Sometimes, I remain strong. Here’s what I can tell you. Almost every time I caved in and gave them an advance before the work was done, I regretted it. All of sudden when they had my cash, I became last priority on their list. Stick to your guns and say No.

This is a tough business for smart and tough people. Know your rules and stick to them and you'll be way ahead of the pack.