I'm investing in a new area and am developing a new stable of contractors. I had one who came highly recommended who asked for half payment up front for some electrical work. We were buying materials.

It was my impression that asking for money up front for labor (not materials) was a sign of a contractor on shaky financial ground or someone who would take the money and run. I've rehabbed a number of houses now, and the only contractors who asked for cash up front were roofers.

Is this becoming more common? My handyman who's worked for me for 3+ years asked for payment up front for the first time a month ago. I've always paid him immediately when the job is done. Is this a danger sign?

Money up front when you're buying the materials is weird. I doubt I would do that. Especially with

No if you are fronting the materials then COD after job inspection. I did prepay once and regretted it when my work was put behind the contractors other job that was being prepaid also.

the flip side of this is that the guy has been stiffed by property owners. has he run your credit? did you supply references?

Do contractors get stiffed sometime? Yes, but that is no excuse for you to set yourself up for the same scenario.

Intelligent contractors know how to structure deals to where they don't get screwed. Pay by the day, pay by the completion phase every 1-3 days, etc.

Robin,

No.

I understand he might be good, and "others pay him all the time", but not me. Been stiffed too many times by "reputable" contractors with great references. Does he pay HIS workers before they show up?

This is also a possible indicator of a rip off artist.

Too many fish in the sea (contractors) for me to bend my rule.

And this is usually a larger check and not just a loss of the cash but also energy trying to get him there and lost days of rent.

Since this is a new area and you are a "foreigner", look for a way to satisfy his insecurity about being paid. Perhaps a letter from your local bank stating you have the funds on hand?

For one I wrote the check for the whole contract but did not sign it. I handed it to him and said "bring this back when it passes inspection and I'll sign it for you." He agreed.

I told another to call the bank and ask if my check for $XXXX would clear. He did.

For another I paid him at the end of each day - just on this first project to build trust.

For a project longer than a week I'll give draws which are less that the work completed, such as 25% at demolition, 25% at rough in, 25% when completed, 25% when passed inspection. (ALWAYS hold a large amount back until passed!)

Interestingly I've had contractors who left after 75%, not interested in hanging around for inspection and the last 25%!

Stay strong!

BRAD