Ah the question today is a great one.

So what is a GC?  A General Contractor.

These guys do it all.  Hand the keys over to a General Contractor, and your home project or renovation gets done.

A  General Contractor then either does the work themselves, or puts their crew on the job, and or hires subcontractors for specialty work.  They are in charge of permits needed for the project as well.  They also will purchase pick up and deliver all materials to the job site for completion and installation by the workers.

A General Contracting team includes the Project Manager laborers and subcontractors.

A Project Manager basically manages the project and coordinates with the subcontractors.

The laborers are on site to carry out the construction process.

A subcontractor might be a painter, or an electrician.

Now that we know a little bit about job responsibilities and team structure, let’s ask ourselves a few questions.

Do you want to do the work yourself?
Do you know how to do the work yourself?
Are you able to obtain permits for parts of the project that need them?
Do you have the time to do the work yourself?

I would say that for me, I don’t want to do the work, I don’t have the time to do the work, I can’t pull the permits necessary, and honestly I am better at finding and putting deals together, rather than picking up a hammer.  Really, you don’t want to see my carpentry skills.. trust me.

So for me, I have to hire a general contractor.  I like giving the keys to someone and have them give them back to me when the job is done.

But with that comes the issues of finding the right trust worthy person or company, the costs and everything else that comes with it.

General contractors typically will bid out a job, and then once they are selected, they will find subcontractors to fulfill the work.  For instance, they know that it will cost Approximately 1800 to paint the inside of the house, so they will include 2000 to 2200 for painting, then hire the sub to do the work.  This goes for HVAC, Plumbing Electric etc.  But wait… why do they mark this up?  The answer is, well that’s how they make money, AND that’s their fee for coordinating with all the subs and their workers.  And trust me, it’s a lot of work to coordinate materials and subs.

Starting with demo, then roofing, framing, then electrical plumbing and HVAC, then drywall, the mud and taping, then kitchens baths and fixture installs, then trim, painting and all other finish work, the whole project needs to be managed so that people aren’t stepping on each other’s toes, that all materials are on site for the workers, that everything is coordinated for efficiency, and that everything stays on budget and on time.

In fact, in my opinion, a good general contractor might actually save you money AND time because they are good at all of these things.

AND a bad general contractor might flub the whole thing up, so you do have to be careful.

In general, when searching for a general contractor, that you ask around for people that have hired folks in the past and see why they might recommend.  Write down everything you can think of as far as all the work you think you need to have completed.  Get several bids and then ask those contractors for references.  Then ask to see photos of past work, ask if they are bonded and insured.  Look them up on Angies list, look them up on BBB, look them up on Missouri’s Casenet system.

After you have gone through all that and think you have found the right person, then, and I can’t stress this enough.. THEN you go through a detailed scope of work and make sure you both are on the same page for the types of materials, fixtures, finish work, timelines, payments, lien waivers etc so that you review all of the things that might be problematic throughout the process.  Make sure these are all addressed in the contract with your contractors, AND list out the process when ‘Things don’t turn out like you wanted’  Spending a little more time up front going over as many expectations as you can possibly think of will save a lot of headaches and confusion down the road.

I’ve heard some people say NEVER give any money upfront to ANY contractor.  Well, that’s pretty impossible if you ask me.  If I was a contractor, I wouldn’t work on someone’s house without money upfront.  What if I did all the work, and you never paid me?  Not worth the hassle for me, so I work out with my contractors a payment schedule that works for both of us.  If the contract is for 40k in renovations, I’ll typically start them off with a 10,000 check.  This will buy the dumpster, the clean out and demo crew, gets their permits, roof, framing etc etc etc that starts the project.  Once those things are completed, (and I’m generalizing here) then I’ll issue another 10k check to get things like roughed in plumbing, electrical, and things like that.  Then, the next 10k, and so on till the end, and then I won’t make a final payment until we’ve done a final walk-through and gone through all of my punch list items to make sure I’m totally satisfied with the work and level of completion.

Hybrid Contractor Arrangements

NOW, some people actually do a hybrid contractor arrangement, and if you know what you are doing, this might be a good scenario for you.  See a lot of people who REALLY ENJOY taking a house apart, and putting it back together again.  That’s what got them into real estate investing to begin with, so they really want to be involved in the process.   The design, the strategy, the fixtures, the baths/kitchens… etc.  So they act as the Project Manager.  They hire the subs and get the lien waivers, they hire the laborers, get all the materials to the job site, and then manage the construction process.  They track the budget, and pay all the bills, subs and laborers.  They coordinate the work and the scheduling of the subs, and are there at 8 in the morning getting the ‘guys’ set up, and check on them throughout the day and the week to make sure they have everything they need, that they are keeping in the timeline, and staying within the budget.

This is good for people that have done larger projects before, who really enjoy this process, who have several projects going on at once etc.  This is good situation for a smaller project,like a quick clean up carpet and paint light remodel job.  This is not a good scenario for people with full time jobs.  This is also not a good scenario for someone who has NEVER done it before with no subcontractor connections or experience.

In my time, I have done the whole gambit.  From doing the work myself, to acting as the project manager, to hiring a general contractor… and I’ve found the general contractor route is the best for me.  I have a great group of people I now work with, but it’s taken a while to get those people.  I’ve had to go through my fair share of people that weren’t the good fit for what I’m trying to accomplish, in order to get to the people that are the right fit.

So I hope this helps you out with giving you some ideas for your next project.  Remember, the rehabbing sector of real estate investing is sexy.  It’s fun.  It’s ‘show-offy’  It’s rewarding to see the house transform.  It’s exciting.  It can also be headaches and heartaches, so start making your connections now, and get the right people on your team, and get out there and rehab your next house.

After all, the money can be incredible when you’re done!

For now,

Nick Baur

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