Where do you find a contractor? Ask for references from other investors. You can also go to Home Depot early in the morning where the contractors pay. Talk to the employees about who the regulars are and talk to the contractors in line. Take a look at his work from start to finish and his references. Home Depot is a great place to find reasonable equipment that works for builders.

Does the contractor need insurance? You must make sure that you or your contractor have two types of insurance.

The two types are:

A. Workers’ Compensation Insurance: If you’re doing a lot of rehab, you’ll want to get minimal workers’ compensation insurance. If your contractor has workers’ compensation insurance, you’ll want a copy of your insurance showing you as an additional named insured. Next, you have proof of coverage. Even if you have a minimum policy that covers you, you will still need proof of coverage from your insurance company or you will be charged the cost of your own policy. If you hire a contractor who works alone, you can opt out of workers’ compensation, but you must sign a form that you get from your insurance company.

B. Liability Insurance – Again make sure you are listed as an additional insured on your contractor’s policy or have your own policy. You should talk to insurance experts to determine how much coverage you need.

C. Builder’s Risk Insurance – You may want to check if you get Builder’s Risk Insurance to get other coverage for your equipment, tools, etc.

How do you pay your contractor?

If you’re dealing with new contractors where you don’t have a track record, I recommend buying a small amount of materials and seeing that they bring them to the job. You only pay for the work that is done. The question to ask is if the contractor walks off the job and there is enough money to hire someone to finish the job. Even experienced investors, as well as new investors, make the mistake of paying too much at work all the time. Home Depot has called me to say that my contractor is bringing materials for a cash rebate. I’ve had great contractors that I’ve had a long relationship with me walk off the job. It is imperative to retain enough dollars to hire someone to finish the job. No matter how long you’ve worked with contractors, you have to inspect the work before you pay. If you don’t inspect the work, don’t go into business. Consider including a provision in your contract that final payment is contingent on passing a city certification inspection.

Should you have a contract with your rehab team?

I say yes. At the end of this article there is a sample contract. Consult your attorney for what you need in your contract.

Should you get the permits? Yes Yes Yes!!! People I see trying to bypass the system and city inspectors just end up in trouble and end up doubling their cost. The shortcut to getting the job done is to pay for the required permits.

Comments on shared personal experiences. They are not intended to be legal or accounting advice or solutions. You should always consult with the appropriate professional when making decisions.

A sample of the contract I used:

INDEPENDENT REHABILITATION CONTRACTOR AGREEMENT

This agreement is executed on the day of _________________________. 20 , in the City of ___________________, State of Michigan between ____________________, (owner) of 17177 Laurel Park N, Ste. 265, Livonia, MI 48152 and:

Contractor: ________________________________________________________

The contractor is a corporation. ( ), Ltd Liab Co. ( ) Company ( ) Sole proprietorship ( )

Address: ____________________________________________________

City, State and Zip Code: ___________________________MI______________________

Telephone fax: ( ) _________________________

Pager: ( ) ____________________ Cell: ( ) ____________________

emp. fed. Tax identification number (EIN):_________________ Soc. Seco. Nope._____________

Contactor License Number(s): __________________ License Type: ____________

Person authorized to sign and bind the Contractor: ____________________________

1. Schedule: The Contractor agrees to start the work on: __________________, 20 . The Contractor agrees to complete all work by: ______________________, 20 , subject to justifiable delays such as strikes, unavailability of construction materials, or acts of nature. Owner reserves the right to cancel this agreement and Contractor agrees to forfeit the balance of monies due under the contract if work is not completed by this date. This contract will be void at the option of the Owner, if the contractor does not start work within ___________________________ (____________) days from the date of signing this contract.

2. Scope of Work: Contractor agrees to provide the labor, materials, and construction described below in accordance with the plans and specifications referenced herein at the property described below:

(A) Workplace address: ____________________________________________________

(B) Job Description (Describe the labor, materials, and equipment to be supplied. Attach additional pages, estimates, and worksheets if necessary. ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Other Special Provisions:________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

The Contractor’s supervisor/project manager for this project shall be the Contractor’s designated agent. The name of the person is: ___________________________________

3. Contractor agrees to perform this work in a professional manner and to comply with applicable building and construction codes for residential and commercial structures. Contractor warrants that his work will comply with such codes and will pass any government inspections. (If any drawings or specifications are part of his work, they must be attached to and made part of this contract.)

4. Price: Owner agrees to pay Contractor for satisfactory performance of Contractor’s work subject to the terms and conditions of this Agreement:

Total contract amount: _________________________.

Initial Payment Amount: _________________Payable on _________________.

Additional work, if any, will be quoted as agreed.

Payments will be made only on work satisfactorily completed based on progress inspections by supervisors approved by Owner. The contractor is responsible for scheduling the time for inspections. All check requests must be submitted by the Wednesday prior to Friday payouts. In the event the work is not performed to Owner’s satisfaction and/or in accordance with the codes and standards in paragraph #2, Owner shall retain an amount sufficient to complete the work as final payment until the contractor complies with the contract. code and/or the satisfaction of the Owner. .

5. The following are prohibited unless agreed to in writing and signed by Owner and Contractor: additional services and work, deviation from work as specified herein, or assignment or subcontracting of work to be performed.

6. The Contractor agrees to indemnify and hold harmless the Owner of the property from any liability or claim arising directly or indirectly from the Contractor’s work under this contract, whether due to the Contractor, its employees, workers and agents or any other person hired by the contractor. (This includes Construction links (including mechanics and materials)). Contractor agrees to pay all fees and costs incurred in defending Owner and/or Owner. The Contractor specifically undertakes to assume and pay the liens that must be submitted by its subcontractors.

7. The Contractor agrees to obtain and pay: Workers’ Compensation Insurance for Disability, Personal Liability Insurance, Errors and Omissions Insurance and/or Contractual Insurance, Civil Liability Insurance and any other Insurance or Bond coverage, or present the corresponding waivers that are necessary or required by the Owner, the municipality and/or the State of Michigan. Copies of such documents, binders, statement sheets, exhibits or waivers shall be provided to the Owner prior to commencement of work.

8. Contractor agrees to pay and withhold as required all federal, state and local taxes on monies earned by Owner for itself or its employees and to file all applicable tax returns. Owner shall not withhold any amount for any amount of any tax due to Contractor. The contractor’s relationship with the Corporation shall be that of an independent contractor and not that of an officer, employee or agent of the Owner. This Agreement does not create any partnership, joint venture, or similar relationship. The Corporation shall have no liability to the Contractor other than the payment of his compensation under this contract.

9. Building permits will be withdrawn by: _______________________. Costs will be paid by: __________________________. City certificates will be obtained by: ___________

_________________________________.

10. No modification of this agreement will be effective unless it is in writing and signed by both parties. This agreement binds and benefits both parties, assignees, personal representatives and successors. Time is of the essence in this Agreement. This document, including any attachments, is the entire agreement between the parties. The laws of the State of Michigan govern this Agreement.

This is a legal contract. If there is anything you do not understand about this contract or the language, DO NOT sign it. It is recommended that you consult with a legal or tax advisor of your choice. By signing this agreement, it is assumed that you have consulted with your advisers or have chosen not to do so.

The parties accept the terms and undertake to comply with them.

Owner:

Date__________20___By:___________________________ Contractor:

Date__________20___By: ___________________________

————————