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Author Topic: Why I'm bad at hiring contractors:  (Read 6180 times)

Offline Milwaukee

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Why I'm bad at hiring contractors:
« on: September 02, 2011, 10:36:51 am »
#1:  I don't listen to my dad's advice.

"When a contractor talks non stop, the work will not start or end well."

In the initial stages of meeting, discussing and planning, when everything is "Oh yeah, I'll have that looking great!  Don't worry, you're going to get the best!  I'm a hard worker!  I start a job and I finish like it was my house!". It will never be. They are selling you on an illusion because their work will not.

#2:  I never trust my gut.

I unfortunetly give the benefit of the doubt to a person when my $ is on the line. I need to end this. Tenents will walk all over me in the future if I allow this to carry on.

So long story short, I ignored all the flags. $1300 job with lots of pressure that he was "ready" and I was "holding him up". $500 down payment for materials in his hand and poof!  "oh I'm moving so it's tough. My son is in school so he needs rides. It's too hot today and tomorrow (85?) and this weekend will be too nice so I want to be out on the lake"

My friend... I don't give a ****. My cash in your hand = do what I just paid for. I'll update as the bs rolls in. One way or another I will be getting my $back or my job done.
Currently at ONE properties
Currently at ZERO cash flow

Offline jfpen

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Re: Why I'm bad at hiring contractors:
« Reply #1 on: September 02, 2011, 03:14:22 pm »
#1:  I don't listen to my dad's advice.

"When a contractor talks non stop, the work will not start or end well."

In the initial stages of meeting, discussing and planning, when everything is "Oh yeah, I'll have that looking great!  Don't worry, you're going to get the best!  I'm a hard worker!  I start a job and I finish like it was my house!". It will never be. They are selling you on an illusion because their work will not.

#2:  I never trust my gut.

I unfortunetly give the benefit of the doubt to a person when my $ is on the line. I need to end this. Tenents will walk all over me in the future if I allow this to carry on.

So long story short, I ignored all the flags. $1300 job with lots of pressure that he was "ready" and I was "holding him up". $500 down payment for materials in his hand and poof!  "oh I'm moving so it's tough. My son is in school so he needs rides. It's too hot today and tomorrow (85?) and this weekend will be too nice so I want to be out on the lake"

My friend... I don't give a ****. My cash in your hand = do what I just paid for. I'll update as the bs rolls in. One way or another I will be getting my $back or my job done.


milwaukee,
                  First of all, trust your gut! Anytime I've ever been screwed it is because I ignored my gut!!

      Here's what I do thanks to a particular member on this board. I never give money to contractors up front!!! I buy the materials and have them brought to the job site. If the contractor is supposed to do the job on Tuesday and doesn't show, I tell him he's all done and his replacement will be there on Wednesday. I tell him this up front! He knows this going into the deal. I also tell them I am holding 10% of the labor costs to be paid after final inspection. They don't like this approach at first but it works for me and I have a team of sub- contractors that will put their other jobs on the back burner to work for me. You absolutely have to stick to your word and pay them fast. I don't make them chase their money.

JP

Offline jmd_forest

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Re: Why I'm bad at hiring contractors:
« Reply #2 on: September 02, 2011, 03:16:15 pm »
You broke one of the number one rules in dealing with contractors: Providing money up front.  

I will pay for materials sometimes but for that occasion I pay the material supplier directly and the supplier delivers MY materials to MY site. The contractor can be paid in stages with at least 25% held back until ALL work is complete.

Offline Milwaukee

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Re: Why I'm bad at hiring contractors:
« Reply #3 on: September 02, 2011, 03:45:27 pm »
Well it's all great advice. Nuff said.

He dropped off some supplies he bought to the job sight today so if anything, I'm only out 90% of my money. We'll see how this goes. I will update next week or before.
Currently at ONE properties
Currently at ZERO cash flow

Offline Bluemoon06

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Re: Why I'm bad at hiring contractors:
« Reply #4 on: September 02, 2011, 05:16:39 pm »
You need to always be respectful of everybody even idiots.  But remember that all contractors are unemployable.  There are 2 types of contactors and only 2.  First is the guy that wants to be the boss.  He wants to grow his company to be Brown and Root one day.  He is unemployable because he wants to control everything.  The second type is the guy that wants to be able to go fishing whenever he wants to or make every one of his kids little league game or take a drink whenever he wants to.  No matter which type yo have no contractor wants a boss.  But when I have a new contractor I walk onto the site and ask “Who is the boss here?”  The contractor almost always says “I am” I immediately say wrong I am.  That lets him know that he has a boss at least on this job.  . 

Never give a contractor money up front.  They only need money for 2 things supplies and for payroll.   If they need supplies I go to Lowes and pay for the supplies.  I will make sure that he gets enough payment for his payroll after they have done the work.  I always pay them completely and on time but I never pay for work that I don’t accept.  This creates urgency on their part to please me and finish my job.  You have to always be in control of the contract.
Real estate to Retire you
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Offline Bluemoon06

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Re: Why I'm bad at hiring contractors:
« Reply #5 on: September 02, 2011, 08:07:07 pm »
One more thing.  Every time a contractor brings you a change he would like to make, don’t listen to him just politely wait for him to finish and then say no.  Because no change that a contractor will want to make will ever give you a better product.  Every change will be to make their job easier and give you a worse product.  Always say no.  If you do agree to a change that he is suggesting make him reduce his price in exchange.  The cost savings for the new way of doing it needs to go to you not him.
Real estate to Retire you
http://sphinxwealth.com/

Offline Gold River

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Re: Why I'm bad at hiring contractors:
« Reply #6 on: September 02, 2011, 10:03:47 pm »
Hi,

    This is one topic where investors need to error on the side of caution!

Holding money back against the contracts labor and materials is called "Retainage"! In all US states the industry standard and the law say's "Retainage is limited to 10% against all contracts" this is the way it is and anything more than 10% Retainage from draws is illegal!

In the State of California for instance the law say's a licensed contractor is entitled to a 10% down payment if requested and failure to furnish a down payment when requested voids the contract! A California licensed contractor can only request 10% for a down payment on the day the contract is signed! Most contractor license law states have provisions for supplying financial payment when requested as a part of a contract being considered binding!

In most "Contractor License Law States" if you prohibit a licensed contractor from working diligently to complete there contract according to building code and industry standards you are liable for the time delay which includes labor, burden and reasonable profits per man hour!

As Contractors we all know without being told that we work for our clients however when there is a contract signed and that contract is for a fixed price to complete a project on time and under budget it's not professional to play games with your contractor! For a six man crew a 10 minute delay is equivelant to one man hour which may cost upwards of $60 to $75 dollars an hour, and on a hard contract the contractor has the right to run his crew with all speed and efficiency to ensure his right to make a profit on his contract!

Ethical contractors with whom you have checked thier references, the state contractor board and verified there validity to be in business may from time to time request change orders which are generally in your best interests, normally contractors don't make profits in small residential contracts requesting change orders: However no contractor can see inside your walls! No contractor can ensure your architect supplied accurate drawings! And no contractor can plan for installation of all products if they were not listed on a materials sheet at bid time and are being supplied by you as the property owner!

In a license law state a contractor is entitled to labor, burden and reasonable profit in accordance with construction cost data like RS Means!

Some reasons for down payments regardless of who is buying materials is: Staging? (When I was contracting in California just getting job boxes and tools / equipment to a job site could end up taking 2 or 3 hours of driving time each way with labor to move stuff from our company yard, storage or other job site into a new project!) Street Use Permits? (We may have to physically drive into the city offices and request / file paper work and make payment which could be hundreds of dollars for a permit to park temporary rubbish box, tool and equipment bins or temporary office facilities on a public street!) Rubbish Boxes? (Most haul-off trash companies expect payment in advance to drop a 20 yard / 40 yard box at a job site for rubbish removal!)

Contractors are entitled to run there business with the intent to profit, to grow there business and to finish your project in a timely manner, be careful of friviously tying up the time of any contractor or his crew and don't make unreasonable demands on the project outside of the original contract and scope of work or beyond reasonable industry standards for quality and finishes!

The law is pretty clear in most states what you can and can not do and what the contractors obligations are to the completion of your contract in a efficient timely workmanship like manner! If you end up in mediation with a contractor in a license law state the contractor has the right to call as witnesses any city, county or state inspector and can obtain an independant construction management firm to review the documents, scope, contract, schedule and work for confirmation of industry standards, if your in the wrong be prepared to spend thousands of dollars because the contractors damages could be varied and wide in scope depending on what happened, the delays including not being available to start a new contract on time, and all associated cost's of non payment, labor, burden, profit, legal consultation, independant examination all cost money and just because you refuse to pay a $1500 dollar balance or deny access to removing equipment your liability can be significantly more than a balance!

If you supply materials make sure you specify who supplies nails, screws, fasteners, fittings, brackets, boxes, etc. I started a job once where owner suppied all materials and he was animate, in fact he outlined and initialled his request in my contract, my crew and I sat for 6.5 hours waiting for him to run around town and purchase these items, needless to say he did not appreciate my backcharge for 46 man hours at $60 dollars an hour! It was a very expensive lesson for him to learn and this project was decided in mediation as his payment for this backcharge was never paid and it went to mitigation where his total damages were almost three times the original charge as damages and additional cost's were added to the judgement of record against him!

Be very careful dealing with contractors especially in states with Contractor License Laws which I think are something like 36 states now!


                       GR
« Last Edit: September 02, 2011, 10:08:41 pm by Gold River »

Offline jfpen

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Re: Why I'm bad at hiring contractors:
« Reply #7 on: September 03, 2011, 03:50:41 am »
Good points!

     I just want to add that you also must be aware of the "grey area". By that I mean where one contractors responsibility ends and the others begins. For example, if you're doing a kitchen remodel and hire a plumber to install a sink, he may arrive and say it was the carpenters job to cut out the countertop fit the sink and his job to run supply lines, install the drain pipe, trap, etc.  He might be right. However, if you are treating them well, they will be more amenable to handling any oversights that may happen. Nonetheless, if you are acting as the GC, they want you to have your feces coagulated. It's part of respecting them.
 
     My first project was challenging. The building I purchased had fire code lien and a lead lien on it. It also had some minimum housing code violations. On top of that I had inherited a building full of bad tenants. After getting burned by one GC, I was forced to GC the project myself. I knew little about rehabbing and found my contractors either by referral or Craigslist. I told each of them that I wanted build a win-win relationship with them. I wanted the project to be completed on schedule and on budget. And in return, I would use them on other projects which I already had in the works. I let them know that I was committed to paying them quickly. And, I would also help grow their businesses by referral. This approach got me a good crew that worked together as team. It wasn't a cake walk and I did have to "renew the sense of urgency" but they did minimize the BS to get the job done. I encouraged them to get listed on Angie's List. And, if they did I would write a stellar review. Most of them did and I kept my promise. They have all gotten additional work from that one action. I also refer my guys to others at my local investors group. This approach was key in the success of that project. I didn't know my @ss from my elbow before this project and by no means am I an expert. However, if I have a problem, whether it be plumbing, electrical, fire code, or anything else, I can just pick up the phone and call one of these folks and they will do their best to help me. For that I am thankful.

JP
 

Offline Bluemoon06

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Re: Why I'm bad at hiring contractors:
« Reply #8 on: September 03, 2011, 08:38:26 pm »
Hi,

    This is one topic where investors need to error on the side of caution!

Holding money back against the contracts labor and materials is called "Retainage"! In all US states the industry standard and the law say's "Retainage is limited to 10% against all contracts" this is the way it is and anything more than 10% Retainage from draws is illegal!

In the state of Texas contrators are not licensed.  You don't have to give them a down payment.  Write your contract to allow you to pay the contrator on a graduated basis.  These payments need to be in line with the amount of completion of the job. 
Real estate to Retire you
http://sphinxwealth.com/

Offline Gold River

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Re: Why I'm bad at hiring contractors:
« Reply #9 on: September 03, 2011, 08:58:01 pm »
Hi,

    Texas issues contractors a Certificate of Authority to General Contract at the County Level! Basically a business license!


            GR
« Last Edit: September 03, 2011, 09:58:04 pm by Gold River »

Offline Bluemoon06

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Re: Why I'm bad at hiring contractors:
« Reply #10 on: September 05, 2011, 12:16:46 pm »
Hi,

    Texas issues contractors a Certificate of Authority to General Contract at the County Level! Basically a business license!


            GR

That is for specific crafts like HVAC, fire sprinkler systems, plumbing, electricians, etc.  General contractors or sub contractors for carpentry, flooring, roofing etc, are not licensed in the state of Texas. 
Real estate to Retire you
http://sphinxwealth.com/

Offline mcwagner

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Re: Why I'm bad at hiring contractors:
« Reply #11 on: September 06, 2011, 11:26:04 am »
funny... none of these posts mention anything about having an actual, written contract for the job.

if you have a contract, just enforce the contract.  period.

if it's not in writing it does not exist.  period.
Mark Wagner, CPA, LLC
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Offline Mr. Rehab

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Re: Why I'm bad at hiring contractors:
« Reply #12 on: September 19, 2011, 06:01:33 pm »
 
If most investors were truly honest they would admit that their problems with contractors begins with assumptions they have made about costs for performing work.  if you believe that your Roof should cost $4,000.00 yet your first few bids from reputable companies come in at around $6,500.00 most will keep shopping until they find someone to do it for the price they had in mind...Tghis is the beginning of sorrows..

Hiring a good crew isn't  hard....I am a contractor and I do this all the time..basic way to do it is this.

1. You get a down payment "UPON START"..  this means you get money once your guys are on the site setting up to start...

2 Make progressive payments (as many as 5-10 incremental draws this keeps the contractors cash flowing and keeps the owner from paying out more money than work completed.

3. Stop being so darn cheap!!!  Stop trying to see how low you can drive the prices down...Here a secret we contractor's all know..If the owner cuts momney out of the job, somewhere down the line someone will cut a corner on the project. 

4. Never pick up a contractors materials..if your contractor allows this he isn't a real tradesperson..I had a guy call me today asking if I would help stop a roof leak by rolling felt paper across a residential roof and pouring tar over it...He already had the material..I laughed. 


Offline Milwaukee

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Re: Why I'm bad at hiring contractors:
« Reply #13 on: September 19, 2011, 11:02:47 pm »
Well here's an update:

It took him 5 days to even begin the job.  It was excuse after excuse after excuse.

In the end he did a good (not great) job.  I am pleased but not ecstatic.



I hired another guy to do another 2 jobs immediately after 1st guy finished.  I did better so far.  He OFFERED to have me come to Menards and pick out materials and pay for them.  He then wrote up the contract and dropped off the materials.  He asked for no money up front.  He begins tomorrow since I tore out all of the old stuff today (Fence and stairway) to get a better idea of the project.

You guys always give great advice even when it isn't necessarily consistant (multiple ways for multiple scenarios for multiple people)  Thank you all.
Currently at ONE properties
Currently at ZERO cash flow

Offline luxuryjones

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Re: Why I'm bad at hiring contractors:
« Reply #14 on: November 24, 2011, 04:29:02 pm »
Definately leverage Angie's List. Good site with some reputable folks...But if you are trying to get something done for super cheap, you are going to get burned.


Good Luxx

 




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