The first step is to find the right contractor that will work on your rehab investment property.  It’s important that you ensure you’re given the legal protection that you deserve by using these six rehabbing contracts just in case something goes wrong during the rehab project execution.

It’s quite unfortunate that some investors perceive these documents as being non-mandatory and perhaps ask themselves a few questions like, what are these six critical documents? When will the contractor endorse them? Are they specifically for contractors or can they be shared by other rehab practitioners as well?

These are essential documents that investors should have at all times crucial to the execution:

• The independent contractor agreement.
• Scope of Work.
• Payment schedule.
• Timeline for Payments.
• Insurance indemnification. 
• W-9. 
• Final lien waiver.

Now let’s take a quick look at how your interest will be safeguarded in the event of trouble during the execution of a rehab project by these six must-have rehabbing contracts.

Steps to Take

When you close on a property, the rehab contractor should sign these documents that we will talk about and return them before the construction begins. (There’s no need to sign them if you have not claimed the property).

On no account should you deliver the last document before the project has been finalized. It is also crucial that you have a real estate attorney look them over before you hand over the documents even if you are making use of a template because you don’t want to have anything omitted.

1. Independent Contractor Agreement: The roles and responsibility of the different parties in a transaction are clearly stated in this document. Getting this document sorted out appropriately ensures that the rehabbing project goes smoothly. The agreement provides for things like the permits (the contractor’s obligations), materials (The contractor buys the materials that you have chosen), engaging subcontractors, work and completion schedules, the role of arbitration, and the obligation of insurance.
2. Scope of Work: This is an important nail to hit, it goes a long way to determine your level of credibility. Despite not being a challenge, new investors can easily be swept over by it. As you develop a range of work for real estate, you must endeavor to be precise in your language, choice of words and specific deliverables, create a schedule, technological needs, overview, and materials necessary to complete a project. You must be careful while choosing a contractor scope of work template because there are a lot of outdated templates out there and nothing makes you look more amateur than an outdated template, whichever template that you want to use must be updated with the latest information.
3. Payment Schedule:This is the form the contractor is interested in because it states how the contractor will be paid throughout the project. Payment is done through benchmarks that will be chosen by you not the contractor. Both parties must agree to the content of this schedule before the construction begins.
4. Timeline for Payments:This should be broken down in the Payment Schedule. At RealSuccess, we use a color-coded system for you to keep an eye on the timeline for payments as things are getting completed.
5. Insurance Indemnification: This is a document that specifies the insurance requirements that a contractor needs before commencing work on a real estate rehab project. Though the insurance factor of indemnity is clearly stated in the Independent Contractor agreement, having the contractor agree to it in different places is a good practice. Apart from a signature, the contractor needs to include:
   • Proof of liability insurance.
   • Proof of worker’s compensation insurance.
   • Certification from an insurance company (that adds your investment company as an “additionally insured” party).
6. W-9: The internal revenue service (IRS) requires that any contractor that you need to pay more than $500 to within a calendar year be issued a 1099 form. To ensure you don’t miss out on this, you need to require your contractor to fill out a fresh W-9 form each year. Doing so will gather updated information including social security numbers or a Tax ID number. Take note that the W-9 will be filled out before the construction commences because, in the event of a misunderstanding midway the project, it is almost impossible to get sensitive personal information of this kind.
7. Final and Unconditional Lien Waiver:Remember that you are not supposed to hand over any final document to your contractor before the completion of any project, remember that what makes the project completed is that you have performed a thorough check, walk-through and signed every single deliverable indicated in the scope of work. When all these have been done, then you can hand over the lien waiver for your contractor to sign, after the signature, you can now cut him a check. When you observe these documents judiciously, you have successfully executed your rehab project as a professional irrespective of whether it is your first rehab real estate project.