Contractor
Management

Vetting before bidding

• License verification — check state contractor license board. Verify license type matches work scope (general, electrical, plumbing, HVAC, roofing).
• Insurance verification — request Certificate of Insurance (COI) directly from contractor’s insurer (not from contractor). Must show: general liability $1M minimum, workers’ compensation (statutory), auto liability. Name you as additional insured.
• References — 3 minimum, call all 3. Ask about quality, timeline, budget adherence, communication, complaints resolved.
• Prior project review — visit a completed project if possible. Check finish quality, not just photos.
• BBB and online reviews — check Better Business Bureau complaints, Google reviews, Yelp. One-off bad reviews are fine; patterns are signals.
• Workers’ comp audit — uninsured contractors leave owner liable for worker injuries. Confirm policy is active at bid time.
• Lien history — check court records for mechanics liens filed against contractor’s prior clients. Pattern of liens = pattern of non-payment to subs = future lien exposure for you.

The bid process

Professional practice requires identical bids on identical scope:

1. Write a detailed Scope of Work (SOW) — every task, material specification, finish level, room by room
2. Send SOW to minimum 3 contractors
3. Require written bid line-by-line matching the SOW format
4. Review bids side-by-side; watch for omitted items or material substitutions
5. Red-flag unusually low bids — 20%+ under the others typically indicates missing items or change-order strategy
6. Red-flag high bids — ask for explanation; sometimes the high bidder caught something the others missed
7. Negotiate payment schedule tied to milestones
8. Award; issue written contract

Contract essentials

• Detailed Scope of Work — attached as exhibit. References specific materials (SKUs, brand, model) for finishes and major items
• Payment schedule — tied to milestones, not calendar. Common: 10% deposit, progress payments at 25%/50%/75% completion, 10% holdback until final inspection
• Change order process — all changes in writing, signed by both parties, with specific cost and schedule impact
• Completion date — with liquidated damages for late completion ($50–$200/day typical)
• Warranty period — 1 year workmanship typical; specific items per manufacturer warranty
• Lien waiver requirement — conditional partial lien waiver with each progress payment; final unconditional waiver at final payment
• Insurance requirements — naming owner as additional insured
• Dispute resolution — mediation first, then arbitration or litigation venue
• Termination for cause — clear grounds and notice requirements

Lien waivers — critical for protection

Mechanics liens can attach to your property when the contractor fails to pay subcontractors or material suppliers. Lien waivers from each party (general contractor, each sub, each supplier) are your protection:

• Conditional partial waiver — waives lien rights for a specific payment amount, conditioned on receiving that payment. Use with each progress payment.
• Unconditional partial waiver — waives lien rights for payment already received. Riskier for owner if payment is disputed.
• Conditional final waiver — waives all lien rights through final payment if final payment is made. Use for final payment.
• Unconditional final waiver — waives all lien rights unconditionally. Get after final payment confirmed.

Permits — who pulls them

The general contractor typically pulls permits as the licensed professional responsible for the work. Some investors pull permits as “owner-builder” — this saves money but exposes the investor personally to code compliance and shifts liability. Contractor- pulled permits are standard for professional rehabs.

Typical labor rates

• General labor / handyman — $30–60/hr
• Carpenter — $65–95/hr
• Plumber — $85–125/hr
• Electrician — $85–125/hr
• HVAC tech — $100–150/hr
• Roofer — $65–95/hr
• Drywall/painter — $50–75/hr
• Tile setter — $65–100/hr
• Flooring installer — $55–85/hr

Rates vary ±50% regionally. Northeast and West Coast substantially higher; Midwest and South lower.

Warning signs

• No license, no insurance, “cash only”
• Demand for large (>25%) upfront deposit
• No verifiable business address
• Pressure to sign same-day
• Bid dramatically below competitors
• No written bid, vague scope
• Reluctance to provide references
• Requires payment in cash or cashier’s check only
• Multiple current projects with no visible progress on any
• Poor communication in pre-contract phase

Common pitfalls

• Contractor abandonment. Mid-project, contractor takes deposit, disappears. Mitigate with small deposits (10%), milestone payments, and no large upfront.
• Mechanics lien attack. Sub or supplier files lien because GC didn’t pay. Sub-to-owner direct payment + lien waivers prevent.
• Quality issues. Final walk-through reveals corners cut — caulking missed, nail pops, paint drips, grout issues. Address with contract warranty clause and before final payment.
• Change order inflation. Unusual volume of change orders inflates final cost 20–40% above bid. Require written change orders with specific pricing per item.
• Workers’ comp ambiguity. Contractor claims employees are 1099 subcontractors; one gets hurt and sues owner directly. Verify real workers’ comp.
• Unpermitted work. Contractor skips permits to save time. Buyer’s inspection reveals; retroactive permitting expensive and sometimes impossible.
• Warranty dispute. HVAC fails 6 months post-install; contractor denies warranty claim. Written warranty terms in contract prevent ambiguity.
• Subcontractor kickbacks. GC steering work to low-quality subs for kickbacks. Investor-specified subcontractors or direct sub contracts eliminate.