Charge the contractor a penalty when they don’t finish on time #81 - 101 Street Smart Cash Flow Accelerators

It's Lou Brown, I'm back with another 101 cash flow accelerators to help you be more successful in your real estate business. In this section we've been talking about renovations and boy I tell you what, I've done a bunch of those. I've done whole subdivisions and it's been really interesting to learn about working with contractors and getting them to behave the way you want them to behave as Austin Powers would say and they won't unless you penalize them. Well in my contract called independent contractor services agreement, it's available in volume 11 renovations under streetsmartinvestor.com. One of the things I have is a contract for the contractor and an important thing to have in there is penalties when they don't complete on time. So typically we go through a list of things that need to be done. I provide that to them. It's a contractor, it's actually all the scope of works and it depends on which contractor I'm talking to, whether it is the general contractor or it's plumbing, heating and air conditioning, electrical roofing, painting, carpentry, general.

Each one of those have their own scope of work and then attached to that scope of work is a terms and conditions or mice call it rules of engagement and one of the things that we will do before we start the renovation and before I pay them any money is we will enter into an independent contractor services agreement. In that agreement we have agreed to a certain deadline, a certain date that bow means the property will complete. Now what happens is there's a penalty after that date and so there's a daily penalty or costs for them exceeding the deadline. Well, why is that? You have to understand you have expenses each and every day. You have your cost of funds, you have your insurance and you have your property taxes, plus you have your opportunity costs. That house hasn't been sold. If the contractor's delaying that project. It is an age old situation that people run into dealing with contractors. It's very important that you have a deadline in there and you have a penalty on a per day basis. I've built that into my independent contractor services agreement. Hopefully that has been helpful to you. Like it. Love it. Share it, and I'll see you soon.