Rehab company VS Independent GC VS Self managing subcontractors

[Mike Hasson]

Hi! I'm wrapping up my first SFR deal, it has been a gradual learning process and I tackled one issue per month; it was very time consuming, frustrating, and I was more involved in every step than I would like to be moving forward. For my next projects I need them to move a lot faster and am just looking for some insight into some of the trade offs of using an all-inclusive home rehab company, vs hiring a GC to manage the entire project, VS doing what I did and self managing the subcontractors.

I imagine I'd pay a premium for any sort of all-inclusive service, so I'm curious - have any investors out there made any of these rehab companies work with their ROI? Or have you built your own teams gradually the way that I have been doing on my current project? Or some combination of both approaches? Any tips for success with either approach?

Specifically looking to relocate to get started in Columbus, Ohio, so I'll be starting with a new team from scratch, so I would also appreciate some recommendations of companies/contractors to work with

Thanks for sharing!

[Michael Tempel]

Originally posted by @Marc Rice:

Each of these approaches have pros and cons, even the local guys struggle to have a perfect system.

Rehab company

- This is similar to a GC, I'd more so call this option using an unlicensed GC that has access to a lot of crews. This can be cheaper than a GC but more liability due to not being insured and not knowing the quality you will get. Some people like this option if they can find a good rehab company to handle their stuff, but usually it requires some time to establish that relationship.

 Independent GC

- Will be the most expensive but should have the least amount of time requirements for you as the investor. You'll still want someone to be boots on the ground to check on status, draw requests, updates, etc. It is very hard to find affordable do-it-all general contractors due to the demand for them right now.

Self managing subcontractors

- This is the approach that myself and a lot of local investors use because we can get better pricing, have better control in exchange for a little more managing and quote shopping. The issue with this strategy is that somethings get delayed sometimes and its harder to get a lot of the smaller stuff done on the projects. It can also get tiresome negotiating and price shopping when subs are being too expensive. You always want a breakdown of labor vs material and usually with this strategy you are paying for material or directly reimbursing the subs when they submit receipts.

Property manager as project manager/project manager with subs

- This approach is good as well where you can actually pay your property manager a "project management fee" and they will oversee your rehab, get quotes, check on work, etc. This is usually great for out of state investors doing lighter rehab turns on buy and hold rentals. Theres a few in Columbus that offer this service. Sometimes you can also hire a project manager to act as the middle man between you and your subs/GC and pay them a fee. There's not a reliable service offering for this in Columbus on the smaller rehabs but in commercial real estate its called a "builders rep service" I believe.

We do renovations - full exterior and roofing as a GC and also Property management, but I think the best setup I have seen is Property Manager as a Project Manager - but please pay the project management fee :-).   We have had to do this at no charge and literally killed ourselves to do it and left close to 500K on the table.   I use other PM's acting as an asset manager and will say make sure the team has the ability to manage a crew daily, resident communication and of course bank draws from title...otherwise it can get messy quickly.