Here we talk about the same area that has derailed so much rehab projects at one time. That is, if one contractor vanish without finishing the work (when investor pay to much money in advance), or the investor stop to perform their duties (and he stop to pay for their work to the contractor, when it was finished). With an eye to ensure that the both sides obtain all what they need, it’s necessary to draft the draw schedule and agreed it. And all before the work begins. So, let me explain.
Now, when we are talking about the important things for you (as a investor) we need to remember the draw schedule. Why? Because it can protect you impeding the advancement off too much quantity of money, that you will can pay to the contractor during the project. Imagine this situation: a contractor get all money that investor paid during the project. If you paid the full quantity of money before we complete the project, from where he will find the incentive to finish it?
I have had this problem, so this is my personal “story” or my experience. I think that most of you have had it more times too, just because we are people that want to help the another person (on my case), and often we forget our experience (or only I forget it), so, anyway, we need to talk about this.
But, going back to my own experience… Often, the contractor, with that I work, come to me and asks if I can to pay him now, because he need some money – in this situation I could give him this money. Knowing how much work they have done, I calculate that it’s, for example, about 90% of all, and I would like to pay for what they had completed. So, I rewarded them for all work that they have done, that represent 90% of work done. I did not pay the 10% remaining, until they finished the job.
Since I expressed compassion to the contactor, and defended myself with this 10%, I made one error: because I not hold back the all final draw time. I think, this is one of the most important reasons why the contract exists in this moment – I need to be ensure that I compose the correct draw schedule – that is needed to ensure that the investor owes more money to the contractor.
In the situation we talk about, the contractor has the other (or the opposite) view than the investor. So because they normally want to owe you more work – when you owe them the money. They are so tired because of the people who haven’t paid the money on the exact time. So it better to pay in advance.Therefore, you need to know that if you don’t pay them in the correct time, they can stop stop working with the project sans losing money.
So I can say that this moment is important, especially when you are signing the agreement with the contractor. You must to talk with them, telling that one of the important moments in the agreement is the possibility to arrive at understanding between you and them. Once you do this, you will can manage all your draws correctly, and build at the same time the trust with contractor, paying him on time. Thanks this decision you ensure that contractor obtains all his money at time and in full.
At the same time the draw schedule can help to the contractor, being very beneficial. They spend money and time to completion of your renovation, and often most of them don’t have an enough supply of money and need your help to feed the family, their bills, and so on.
The draw schedule also ensure the contractor that once all their tasks will be completed, they will obtain the full payment. It make you to live up all your obligations too, paying the people that works with you. So, once your contractor has finished all their work, they will obtain a full payment in time. I don’t agree with the allocation of partial payment in any circumstances. When your contractor finalize all their work on 100%, it’s better to pay it 100% of designated money, so remember about all benefits of the draw schedule, and will be reasonable. Don’t forget about the draw schedule, and don’t advance deposit when you start to work with your contractor. So, don’t forget about this, and in the future you will arrive to rehabbing success.
ARE YOU SURE THAT ALL CONTRACTORS WANT TO GET YOU?
First of all, this is mistake to think that every contractor is the same as any other, or that any contractor can’t manage well with the money. No, of course just now exist a lot of professional and good contractors, that keep their words and are good capital managers. They builded many good and strong companies and they do their job well.
Normally the language of the agreements don’t is a problem, especially if we talk about the quality contractors. And this situation pass because they take pride of their job, and vouch for the results, for the product. And, of course, they can control their money. If you represent an agreement to one contractor, because you need his signature, and he is in no hurry to do it, you need to know that you will have trouble with this person in the future.