Today’s REI Classroom Lesson
Paying your contractor can be complicated. Holly McKhann shares how she created a solution to keep track of what work has been completed and where the money is going.
REI Classroom Summary
Know what work has been done before you pay your contractor. With full transparency, it helps keep them accountable and everyone is on the same page.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the flipnerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Holly: Hi, guys. Holly McKhann from houseflipmasters.com, your REI Classroom host of the day. Today, I’m going to share with you what I have recently just like come up with this new exciting thing and maybe some of you’ve already done it. But it’s how I’m paying my contractor.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program and your blueprint to investing success.
Holly: We used to have challenges when the contractor would write out a bid for me of how much I’m paying for different items, for instance, the electrical for the whole house. He’d want to bill me even though the electrical might go over the course of a couple weeks and I pay him every week, like, well, how much is done and how much of the bill this week is electrical and how much was plumbing and what about the drywall.
It was really complicated and we didn’t have an easy system in place for me to know that I wasn’t getting ahead of his total percentage of completion. And I came up with the solution that is working great. We’ve been doing it now a couple of months and we’re working the things out. So I want to share it with you.
What I’ve done is create a Google Sheet. So if you’re not familiar with this, Google gives you Google Docs which is essentially Microsoft Word and like Microsoft Excel and I think they have a PowerPoint one too. It’s all in Google, has different names. Google calls their Excel version Sheets. So I set up a spreadsheet and I tell him, “Okay, my bid is $25,000. You give me the line items for what every single thing is on the spreadsheet and give me the details of how this $25,000 is composed, all these details.”
And then I have a . . . How do I explain this? So I have multiple columns going across. And every week when I pay him, there’s a column and so, Sam paying him $3,000 this week. I make him go through and choose well, 500 was for electrical, 1,000 was for plumbing, this much is for drywall repair. And I’ve got a column go . . . every column going across, I have a total.
And I even have a color changing thing from green to red. So when he’s out of money allowance on that line item, it shows him. That’s a really nice visual thing. And I’ve heard them. Most of our population is visual. So this is great for who you’re working with. And every week, he has to choose how much gets allocated to everything and now he can’t get ahead of me.
I have had a couple of jobs in the past with various contractors where I paid them all the money and the job wasn’t done. So, if they’re just trying to pay their guys week-by-week and that’s how their thinking is, “Oh, I’ve got to pay my guys this week, so I better bill Holly this much for the week.” It’s not going to work for Holly if at the end I’ve paid him all these weeks because I know he’s working and working hard but the job isn’t done. And then he’s trying to bill somebody else and get money from another job to finish on this job.
So that’s definitely happened. I don’t want to see it happen to you. Try my idea. If you want to reach out to me, I’m happy to email you the actual sheet or share it to you through Google Drive. So just find me on houseflipmasters.com. I’m happy to share that template with you and it’ll make your life easier for you and your contractor. I’ll see you next time on the REI Classroom.
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