A lot of great advice here! Insurance is better to have and not need than need and not have. To that point, there is a HUGE difference between Full Replacement Coverage and Actual Cash Value.
When I bought my first two properties, on the same street that the author’s upstate project is on, the difference in monthly premium between Full Replacement and Actual Cash Value was about $150 per month ($300 instead of $150).
When a woman blew up her kitchen cooking methamphetamine and destroyed four buildings (two belonging to me) the insurance company paid out more than 3x as much with the full replacement coverage than they would have if we were only insured for the actual cash value of what was lost.
With that said, your contractor’s insurance protects you from the errors that all humans are prone to making, not just their “stupidity.”
As a contractor, I wish many times that I had asked a customer for references from other contractors they have hired in the past, solely to make sure that the customer has a history of paying on time and being fair.
This too would be a form of insurance to protect you against a client’s greed and proclivity to engage in unfair business practice.
Surely this may add some friction to your customer relationship, but clients who balk or walk away may not have been worth doing business with in the first place.
And ironically the clients with the greatest ability to pay also tend to be the ones most likely to not pay or withhold part of a final payment.
Charles, that is great advice to keep in mind. As for rating customers, I think you are onto something. Maybe a new app?
There are far too many clients who don't pay because they think they can get away with it. Most people have no clue how hard it is to build and have little respect for the trades or crafts of home building.
The idea of checking a potential customer's references was entirely foreign to me. I was recently speaking to an electrician with three decades of experience who had moved to the Capital Region from a larger metropolitan area.
He explained to me that the way business was done here was backwards - in the sense that customers would often want to vet their contractors (as they should) but that contractors would never vet their potential clients. In California, he told me, it was very common for contractors working on a project beyond the smallest of jobs to ask for other contractor references.
Presumably only in demand contractors who turn down as much work as they accept would have the foresight to do this - but it was a concept I had never heard of.
In larger markets it is possible to aggregate all parties to lawsuits as this information is in the public record. If a party is sued more than once that is a reliable indicator that the probability of running into issues while working with them is higher than average. If the same person or company has several (or any?) mechanic's liens filed against them for nonpayment the same principle holds true.
I read a few posts yesterday by people renting apartments in NYC complaining about the actions of one particular broker (sneaking in exorbitant broker fees, delivering apartments not clean, etc) and other members of the forum chimed in to say that they too had issues with this broker and a third person mentioned he was currently suing this broker. I was surprised to see so many people mentioning that they too knew this bad actor.
The fundamental issue is that in exchanges of small sums of money, the value of the time and energy necessary to try and recoup the lost funds exceeds the value of those funds. The juice simply isn't worth the squeeze - unless you assign some value to raising a red flag for future people that could find themselves in your situation - which is certainly altruistic but not financially pragmatic.
Contractors are notorious for closing down one LLC and creating another one any time the stench of their past actions impact their future business prospects. This is not something the majority of contractors do, but certainly something the majority of ill-intentioned contractors do with regularity.
This is why, especially in smaller markets, reputation is everything.
Did you know there is no such thing as a "licensed" contractor in Upstate New York? Anyone with a hammer and a tool belt can call themselves a contractor and the population most likely to be ripped off (elderly, or younger homeowners hiring contractors for the first time) are the least likely to check references or even know how to!
A lot of great advice here! Insurance is better to have and not need than need and not have. To that point, there is a HUGE difference between Full Replacement Coverage and Actual Cash Value.
When I bought my first two properties, on the same street that the author’s upstate project is on, the difference in monthly premium between Full Replacement and Actual Cash Value was about $150 per month ($300 instead of $150).
When a woman blew up her kitchen cooking methamphetamine and destroyed four buildings (two belonging to me) the insurance company paid out more than 3x as much with the full replacement coverage than they would have if we were only insured for the actual cash value of what was lost.
With that said, your contractor’s insurance protects you from the errors that all humans are prone to making, not just their “stupidity.”
As a contractor, I wish many times that I had asked a customer for references from other contractors they have hired in the past, solely to make sure that the customer has a history of paying on time and being fair.
This too would be a form of insurance to protect you against a client’s greed and proclivity to engage in unfair business practice.
Surely this may add some friction to your customer relationship, but clients who balk or walk away may not have been worth doing business with in the first place.
And ironically the clients with the greatest ability to pay also tend to be the ones most likely to not pay or withhold part of a final payment.
Charles, that is great advice to keep in mind. As for rating customers, I think you are onto something. Maybe a new app?
There are far too many clients who don't pay because they think they can get away with it. Most people have no clue how hard it is to build and have little respect for the trades or crafts of home building.
The idea of checking a potential customer's references was entirely foreign to me. I was recently speaking to an electrician with three decades of experience who had moved to the Capital Region from a larger metropolitan area.
He explained to me that the way business was done here was backwards - in the sense that customers would often want to vet their contractors (as they should) but that contractors would never vet their potential clients. In California, he told me, it was very common for contractors working on a project beyond the smallest of jobs to ask for other contractor references.
Presumably only in demand contractors who turn down as much work as they accept would have the foresight to do this - but it was a concept I had never heard of.
In larger markets it is possible to aggregate all parties to lawsuits as this information is in the public record. If a party is sued more than once that is a reliable indicator that the probability of running into issues while working with them is higher than average. If the same person or company has several (or any?) mechanic's liens filed against them for nonpayment the same principle holds true.
I read a few posts yesterday by people renting apartments in NYC complaining about the actions of one particular broker (sneaking in exorbitant broker fees, delivering apartments not clean, etc) and other members of the forum chimed in to say that they too had issues with this broker and a third person mentioned he was currently suing this broker. I was surprised to see so many people mentioning that they too knew this bad actor.
The fundamental issue is that in exchanges of small sums of money, the value of the time and energy necessary to try and recoup the lost funds exceeds the value of those funds. The juice simply isn't worth the squeeze - unless you assign some value to raising a red flag for future people that could find themselves in your situation - which is certainly altruistic but not financially pragmatic.
Contractors are notorious for closing down one LLC and creating another one any time the stench of their past actions impact their future business prospects. This is not something the majority of contractors do, but certainly something the majority of ill-intentioned contractors do with regularity.
This is why, especially in smaller markets, reputation is everything.
Did you know there is no such thing as a "licensed" contractor in Upstate New York? Anyone with a hammer and a tool belt can call themselves a contractor and the population most likely to be ripped off (elderly, or younger homeowners hiring contractors for the first time) are the least likely to check references or even know how to!