Sometimes, I forget that people need to be reminded of the basics in house flipping. A major rule is that you NEVER EVER pay your contractors upfront. I might pay them for materials and some laborers, but that is about it. If you pay your contractors upfront then your stuck with them for the whole job because they are not going to refund your money. But, the worst is a recent experience we had with one of our buyers of a house that we flipped. The man that purchased the house wanted a drive way, so we looked up in the phone book and found a contractor for concrete, and got a couple of quotes, and turned it into the buyer. Then, we rolled the funds into Escrow, so that we could proceed with closing the house. After that, we signed the papers and went home, but the buyer started calling us after about one week later wanting to know where the concrete guy was. We told him that since it was rolled into Escrow that we had nothing to do with having the concrete poured, and that he needed to contact him.

Turns out that the title company or the buyer released all $3,000 upfront to the contractor for the concrete job, and the guy took the money and ran. So, the lesson from the story is don’t every pay the contractors up front. If they say they don’t have any money then that should be a Red Flag that they have problems with their company. Plus a job that would take 3 days could take 2 weeks because they have already been paid, and are no longer in a hurry. House Flipping takes common sense, and if you don’t have enough common sense to not pay your contractors then you need to find another way of making money.

Our buyer still does not have a Drive Way, and is trying to take legal action against the contractor, but it has been several months now, and it will take several more months before he will get his driveway.