General Contractors: Hire one or be my own?

[Heather Shannon]

I am planning to buy a fixer upper and make it a B & B.  I'm torn about using a general contractor vs. doing the general contracting myself.

CONs of Hiring a General Contractor:

1. They are reputed to suck big time and not be very professional in terms of showing up on time, getting the project done on time or sticking to budget. The stress of this might kill me on a large-scale longer-term project.  In rehabbing my kitchen, the contractor was full of s@#$ and unprofessional, which was pretty stressful to deal with.

2. I just spoke with one general contractor who said their basic material kitchen remodels start at $25-30K.  I just did a kitchen remodel that I general contracted myself for $12K all-in and it even had quartz counters and marble backsplash.  I hate the idea of throwing money away.

PROs of General Contractor:

1. It will free up a lot of my time, especially if they're actually good.  I won't have to research, interview and get quotes from tradespeople myself.  I also don't know how to manage a timeline very well--what needs to happen in which order or how far in advance to order things.  Of course these are things I can research & find out . . . but with lots of time spent.

2. They can help me assess what can be done with the space & design it.  I have no idea how I'm going to figure out if walls can be moved or how the space can be best utilized/divided without them. I don't have access to 3D (or even 2D) layout software to help with this.  I'm good with spacial stuff, but just not experienced with it at all. Maybe I can hire a structural engineer or a designer for a consult?

What else should I be considering?  

Any good resources I should know about if I general contract it myself?

[Robert Leach]

Well for starters, you need to be a licensed GC to pull a permit in Chicago which means you will need to be insured and bonded. If you plan on doing a rehab project especially being used as a commercial entity in the city, you may want to rethink your strategy as the potential liabilities are substantial if you skate around permits. If you are shopping solely price in the Chicago market, I think you will continue to struggle finding a decent GC. Work is plentiful and for every investor vetting a contractor, there is a GC vetting the investor. You say you paid $12k for a kitchen, does that include an office, staff, insurance and uncle sam along with a profit margin? 

I'll break it down for you using the $12k kitchen you did from a GC perspective who is charging $25k:

Kitchen demo - labor 3 guys 1 day $600.00 plus removal and dump fee $200.00 (total $800.00)

cabinets/crown/pulls $5000.00 plus installation labor 2 guys 1 & 1/2 days $900.00 (total $5900.00)

drywall prep/repair ($100 material $150 labor)

granite counter tops in standard sized kitchen ($2700.00 material, $300 labor installed)

30 sf of back splash assume glass tile ($300.00 material - $600.00 labor = total $900.00)

sink, faucet, sink re-plumb (materials $500.00 - labor $200.00 = total $700.00)

appliances install labor only ($150.00)

Total job cost on surface ($11,700.00)

PLUS

1 estimator/sales staff to measure & bid job ($300.00)

1 office staff for accounts payable/receivable (prorated labor over 30 days $200.00)

1 office staff for material ordering, sub scheduling (prorated labor over 30 days $300.00)

1 quality control/job supervisor (prorated labor over 30 days $750.00)

incidental material expense ie: tools, screws, nails, glue ect. ($500.00)

Approximate payroll taxes & insurance @ = $1039.00

Overhead (rent, phone, web, licenses, fuel ect.) @10% of job $1479.00

Sub total - $4568.00

Projected costs $16268.00

Profits $8732.00

Approx IRS Corporate tax @40% - $3492.80

Net gain $5239.20 or a 21% margin

This hypothetical math doesn't include permits, flooring, base, shoe, casing, electrical or anything else beyond the basics listed above. If a GC isn't making 20% for its ownership, they will pass on the job quick. Keep in mind the owners have to pay personal income tax as well. 

Project delays come with the territory in a busy market and vendors are swamped too the best way to avoid these delays is to be organised and have a realistic schedule in place. Cost over runs are common with the cheap guy who probably couldn't properly bid building a sand castle. Poop in equals poop out lol...

Not trying to be hard on you here but I think you underestimate the value of a good GC.