Managing contractors on a flip: bids, payments and paperwork
By Austin Frangoules | Updated | 8 min read
Most flip budgets are lost on the job site, not in the spreadsheet. Write one clear scope, get comparable bids, pay only for finished work, put every change in writing, collect lien waivers and insurance, and watch the schedule like money, because every late day costs interest, taxes, insurance and utilities.
1. Write the scope before you ask for bids
A scope of work lists every task, room by room, with materials and finish levels. Without it, three contractors bid three different jobs and you cannot compare them. Include quantities where you can (square feet of flooring, number of fixtures) and who supplies materials.
2. Get comparable bids
- Ask two or three contractors to bid the same scope, line by line.
- Check the license with your state board and ask for references from recent jobs.
- Compare line by line, not just the total. A low total often means a missing line.
- Ask about schedule and crew size. A cheap bid that takes twice as long can cost more in carry.
3. Put it in a contract
- The scope and price, or a reference to the accepted bid.
- A payment schedule tied to finished milestones, not dates.
- Start and finish dates, and what happens if they slip.
- How change orders are approved and priced.
- Who pulls permits, and that the work passes inspection.
- Warranty on workmanship, and cleanup.
4. Pay for finished work
Keep payments behind the work. A modest deposit for materials is common; large up-front payments are where flips go wrong. Match the pay schedule to your lender's draw phases so your cash cycles, and hold back a small retainage, often 5% to 10%, until the punch list is done.
- Materials deposit
- $4,500 (10%)
- Demo and rough-in passed
- $13,500 (30%)
- Drywall and paint
- $11,250 (25%)
- Finishes installed
- $11,250 (25%)
Illustrative. Set phases to match your scope and your lender's draws. See [hard money draws explained](/guides/hard-money-draws-explained).
5. Paperwork that protects you
| Document | Why it matters | When |
|---|---|---|
| Certificate of insurance (COI) | Proof of liability and workers' comp coverage, so an injury on your job is not your claim | Before work starts; watch the expiration |
| W-9 | Name and tax ID for year-end 1099 reporting | Before the first payment |
| Conditional lien waiver | Waives lien rights for an amount once that payment clears | With each pay request |
| Unconditional lien waiver | Confirms they were paid for that amount | After each payment clears |
| Permits and inspections | Required work passes, and buyers and appraisers ask | As the job moves |
6. Change orders, in writing, every time
Surprises behind the walls are why the budget has a contingency. When one shows up, get a written change order with the price and the schedule impact before the work, approve it, and track it against contingency. Verbal changes are how a $45,000 job becomes $60,000 with no record of why.
7. Run the schedule like money
Every day the house is not listed costs you carry: loan interest, taxes, insurance and utilities. On the free flip calculator's default deal, that is roughly $70 a day. Sequence trades so nobody waits, order long-lead items like windows and cabinets early, and walk the job or get photos every few days.
Questions
How much should I pay a contractor up front on a flip?
As little as practical. A modest materials deposit is common. Tie the rest to finished milestones and keep a retainage until the punch list is done.
What is a lien waiver?
A signed document where a contractor or supplier gives up the right to file a lien for an amount paid. Collect a conditional waiver with each pay request and an unconditional one after payment clears.
Do I need a certificate of insurance from my contractor?
Yes. A current COI showing liability and, where required, workers' compensation protects you if someone is hurt or property is damaged on your job.
For education only. Not legal, tax, lending or investment advice. Loan programs and guidelines change and vary by lender; confirm current terms with your lender.