hey guys flippin landlord ninja here with two guys take on real estate today i wanted to
talk about protecting yourself from independent contractors and the seven things that i suggest
you do to make sure you're protected whether it be in your contracts or just getting forms filled out
by that independent contractor so i hope this is helpful if it is please do us a favor
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all right you're looking on your first flip which is awesome congratulations
uh and now you got to sub out some work to independent contractors there's a
few things you want to make sure you're doing and this can protect you as the investor from
overages liability all the things that you really want to be mindful of
as an investor and first starting out that you might be uh skipping over
so the first thing i'd like to talk about is your scope of work
you really want to have a detailed scope of work from your contractor
even down to the point of maybe even getting the sku numbers of each item so that there's
no question about what is expected from you and from them and so that you're all on the same page
right from the beginning so i generally like to have that all written out as well as initialed
as part of the contract so i highly recommend you take a lot of time on this part walking through
with your contractor so that you can come up with a scope together and then if they're supplying
materials they go and they get you all those invoice sku numbers of every little item that
you're going to have you get the flooring the type of paint make sure you've got the color
of the paint uh you're gonna you know door knobs everything you want to really be thorough on that
the next is your construction schedule and this is actually your payout schedule
so you wanna you know if you're giving them a deposit which of course they're going to need for
buy if they're buying the materials they're going to need that to kind of start buying materials
and start their workers working and then what are the expectations for the next draw and subsequent
draws as well as i always like to hold a certain amount at least 10 percent of the contract
at the end to close out permits as well as to make sure there's any punchless items one thing i
recommend is that you make sure you're paying out behind the contractor what does that mean
that means that they've actually completed more work than you're paying out all too often i find
that people are paying out too early or they're paying out 50 of the contract right up front and
they're gonna get left hold in the bag because some contractors unfortunately are not you know
honest and they will walk away with your money honestly this happened to my mom and my dad when
they were renovating their first house that they were building the new construction project they've
given 50 of the deposit down for the whole project and they're all excited about their
new home and then unfortunately within a month or so the contractor stopped returning their calls
and it turns out he did this to multiple people and got a flight out of there and
so unfortunately my parents were held you know left holding the bag so please be careful make
sure you're getting ahead of your contractor and that you're not going to be left holding the bag
the next thing to you know be mindful of is having lean waivers and what does this mean this
means it allows them not to tack on mechanical liens and stuff like that for your projects
so this is something we get all of our contractors to sign that they will not be able to put any kind
of lien on the property this is very standard language to having your contract you know talk to
your lawyer if whoever's drawing up your contract to make sure this is a part of the contract
then you want to make sure you get your copy of the w-9 from your contractor this allows you
as the investor to write off that expense after the irs and you know bill out them as a 1099 at
the end of the year so you're going to want to make sure you get that form filled out uh we do
that with every contractor that we worked with anyone that would pay over 600 with we're always
getting a w-9 the next thing i'd make sure is you get a copy of their insurance and not only
that though when you get a copy of their insurance you're going to want to be added as an additional
insured this protects you from liability and it's a really important thing that often i think
gets overlooked by a lot of new people they don't actually add you as an additional insurance they
might get a copy of insurance but you also want to look at that you're getting added additional turn
the other thing is honestly read that insurance what does that insurance cover
one time that uh happened to us is we actually had a roofer and he was doing a
flat roof for us and it was great you know he had insurance it said flat roofs and i didn't
read it honestly as carefully as i should have and what he did he actually did a torch down
and we had some issues with the roof when we went to actually file a claim against his insurance
it was excluded because it said basically they're in the contract there was no uh flammable or uh
torchdown essentially was allowed and so therefore we got denied on that claim uh this was something
i didn't know about so now of course every time i'm making sure i'm covered for any kind of uh
flammable or i make sure they just do an epdm roof uh if that's the case but you know even the uh the
roofer didn't even realize that that was part of his claim i'd worked with a guy for many years
so i honestly know he was being truthful and it was just kind of an oversight so once again
be careful read the insurance paperwork know what actually is included in net insurance coverage
this is also another thing that you know you're going to want to be held you know
removed from liability from on the job site you're not going to be there every day
so you can't you know control what's going on with their employees and themselves on the job site and
you don't want to be possibly sued for that so i would definitely make sure you get a hold harmless
you can have that as part of your general contract uh the next thing to protect yourself is i often
like to get instead of doing some kind of time and materials we like to do a set price this kind
of puts the whole scope in and it protects you from unforeseen costs or the contractor may be
extending their time on things just so they can drag things out we you know once in a
while we'll do timing materials generally on smaller projects but all of our larger
projects we always do one full bid price for labor and materials not time and materials
so these are the seven things that we recommend that you work with all of your
subcontractors independent contractors with this will help protect you from any possible
losses there's always obviously other little things that come up i would also recommend
you reach out maybe talk to a lawyer in your area if there's any other little language that
they want to add into their contracts or any other things that might be you might need in
your state and check with that to make sure you're covered if you'd also like to learn
more about flipping check this video out right here and don't forget see you in the next one