Going From Investor To Contractor. Advice?

Question

So I've been hiring contractors for the first 7 rehabs I've done, and I've learned a lot about the construction process. A carpenter who does work for a contractor I recently parted ways with recently gave me a call and said "If you have any work, let me know." He's a great worker too. I've amassed a pretty good contact list of plumbers and electricians. I could use some more HVAC guys and roofers... But nonetheless, I think it's time to cut out the middle man and start making some more money by managing these guys myself. Any advice on making a successful transition? Liability issues? Any other issues with starting my own contracting company and pulling my own permits?

Matt Medvene · Answer

Chris, Coming from the Contractor side, and also serving as my own GC for my first flip earlier this year, I can tell you that as long as you are confident in the subs you are contracting then definitely go for it. You can save a ton of money and you also have much more control over your schedule. My biggest advice would be that you need to be sure to have a complete plan going into it, then make a detailed schedule that you sit down and go over with each of the subs so they know their time-frame (this is especially important because sometimes pulling permits can take a while, so you need to apply early on so they don't slow you down). If you have this schedule, getting the materials will be easy as a lot of the material and hardware suppliers (i.e. Home Depot, Lowes, Capitol Building supply (in my area) etc.) will deliver for nominal fees to your house-- you just need to schedule it a few days in advance. Doing this full time is also extremely useful given you can check up on them often. Being organized is critical, as is ensuring you identify the critical path items that drive your schedule. If you have a complete plan, detailed schedule (that you stick to!), and always have material on-site for the subs to work rather than twiddle their thumbs then you should have no problem being successful! If you have any questions don't hesitate to ask or PM me. I've also seen a ton of other investor/contractors on the site as well that I'm sure have more experience than me!

Ophelia Nicholson · Answer

I can totally relate- I'm full time and the past couple projects I felt like I was micro managing the GC , I would see and talk about even simple stuff and I'm like why do I feel like I'm the GC here- Why am I paying them and I was on the site almost the entire day, It also didn't help that I kept firing GC after GC anyway so I calculated the savings and it was thousands of dollars cheaper to just go it without one. The crew decided to stay with me so my current project I bring in specialized people like HVAC, Plumbing, Electrical and its actually working out way better than with a GC. If you have reliable people working who will work for you when you have to step out I don't see why not. Also just ask the carpenters if they will go with you to get supplies- They probably will- Do it at the end of the day so not much time in the morning to slow down the job. Worst case most stores deliver and the savings will still end up being less than a GC.

Chris Wyche · Answer

Thanks Ursula. I do this full time, so I definitely would have the time to manage. I ended up having to manage my other contractor really heavily, so I figured there would be little difference. One of the challenges I see is being able to get materials to the site. Hopefully the carpenters don't mind picking stuff up because I don't have a truck. That's something I'll have to discuss with them before hand. But yeah, I was thinking yesterday on the way home... I was trying to analyze this deal, and the numbers were tight. I'm using a new contractor now, and I didn't know how much he would charge for the job... Then a light bulb went off... Why not just hire the workers directly? I know enough subs... I think, lol. And I could always get more if I get jammed up. It would allow me to do more deals too because I could get better prices on the construction. I see nothing but upside...

Ursula B. · Answer

I hired out subs for my first (and only) flip. On top of not knowing what I was doing, it was a nightmare to manage with a full-time day job. I now have a contractor that charges more, but I don't have the headaches of being on call, being taken advantage of or having to have work done over. If I sub something out now, it's usually to a box store where I know their subs are professionals. My contractor is expensive, but worth every penny. He's on time, on budget and it's done right the first time. Good luck to you!