How do you get what you need from your contractor?
You probably know that contractors are critical for rehab jobs. And you need to make sure you hire the right person… and after that, you need to clearly communicate your requirements. That way, the job will get done on time and on budget and meet—or hopefully exceed—your expectations.
JD Esajian here letting you know in this lesson that the best way to make sure all of this happens is to use these 6 critical documents for every rehab job.
W-9
A W-9 is a tax-related document. Contractors need to sign one of these for you every year. That allows you to send your contractor a 1099 form at the end of the year, making them responsible to pay their taxes for that year.
If you don’t get that W-9 signed – and then follow up with a 1099 form, but the contractor doesn’t pay his taxes, the IRS can hold you responsible for those taxes.
You easily simply download a blank W-9 form to use with your contractor.
Scope of Work
The scope of work establishes the details of the job you are asking the contractor to do. Include the job location and property type. Outline your priorities and general expectations like efficiency, cleanliness and professionalism.
You also want to be as specific as possible here.
This ensures that your contractor gives you an accurate quote and that you are both on the same page about the work required. List all required tasks in detail. For example, if you need a roof repaired, itemize the work:
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Remove existing roof material
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Re-plywood entire roof (1/2 inch, 4 ply plywood)
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Install new roof metal on perimeter of house, ice/water barrier on all gutter line, walls, valleys, and penetrations of roof
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Install new 15-lb. tar paper
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Install 30-year architectural style singles with ridge vent (dark color; exact color TBD)
Have your contractor sign or initial this doc to verify that he’s seen it and knows what you’re asking him to do.
Independent Contractor Agreement
The independent contractor agreement sets the tone for your business relationship.
Think of it this way: The scope of work outlines what needs to be done, and the independent contractor agreement explains how it will be done.
Establish expectations for any potential scenarios such as change orders and any legalities if something goes sideways.
Detail who is responsible for permits and how and when you will inspect the contractor’s work. Explain your requirements about how the contractor will keep the job site including mowing or shoveling if that is expected.
This document is important for tax purposes because it proves that the contractor is not an employee. This document should be specific to each job and include a start and end date for the job.
Insurance Indemnification
The insurance indemnification doc states that the contractor agrees to defend, indemnify and hold harmless the owner. It requires the contractor to carry an insurance policy and lists the types of insurance he is required to have such as a liability policy and Workers Compensation insurance.
Include a requirement that you are added to the policy as an additional insured and have the contractor provide certificates of insurance for you to attach to the paperwork.
To finalize this paperwork, make sure you have included the job address and have the contractor sign it.
Payment Schedule
The payment schedule is one of the most critical documents in terms of keeping everybody happy. Use this doc to detail what must be completed before the contractor can get paid. You might set up a weekly or bi-weekly schedule with requirements for every pay period.
If your contractor doesn’t get the work done, he doesn’t get the check or doesn’t get the full check. This allows you to be professional but firm if the contractor tells you he didn’t finish the work but he’s still asking for the check.
Final Lien Waver
Once the job is done, use the final lien waiver to confirm that the job is done, the contractor has been paid in full and you are satisfied with the work.
Once the contractor signs this doc he isn’t able to come back to you and claim you owe him any more money for the job.
Last Note
Remember, I am not an attorney. You might not be either...
So, we always, always, always advise students and clients to have an experienced attorney write or review all official paperwork used in your business to make sure you are protected.
Whatcha Think?
What really makes your relationship with your contractor work for you? Comment below with your contractor advice!
1. Draft your own contractor doc templates.
2. Consider asking other investors for feedback on your templates.
3. Always have an attorney ‘okay’ your docs.
4. Use these docs for EVERY job.
5. Review and sign these docs with your contractor before each job starts to make sure you’re both happy.
JD Esajian
, star of a popular flipping houses reality show, is head project manager of CT Homes LLC, a multi-million dollar real estate investing company, as well as a national speaker with FortuneBuilders Inc, a real estate educational training company. He, along business partners Than Merrill and brother Paul Esajian are some of the nation’s most successful investors and are considered elite experts in buying, fixing, and selling properties.