Who uses a Project Manager?

Question

Hey BP! My wife and I have been considering hiring a project manager to manage our rehab projects and contractors. I was wondering who has utilized this resource, whether it was beneficial, why or why not, how much PM should be paid for an extensive remodel, etc...

We have managed our own projects in the past but really don't understand the details in directing contractors which may make a huge difference in the future and continuing success of our projects.

Sorry for the vague post and thanks in advance for your advice!

Rory Cummins · Answer

@David Stone In my market, most PM's would expect to make around 20-25% on the total cost of the job if it's under a $60k job and if larger than $60k or new construction, the going rates are usually more like 10-15% of total job cost. Sometimes you'll find they'll charge a flat fee that way the customer isn't getting charge any extra on the total job for upgraded materials (as an example, if your wife decide to upgrade the cost of the tile material, why should the PM make any additional money). The terminology on this is usually referred to as 'cost plus'

If cost is not a huge concern and you can afford to do the project and pay a PM in the process, then I'd say do it. It'll save you time and even money in the long run if you hire a good PM. To find a good PM / GC, try to avoid getting 5 bids and simply taking the lowest one. A lot of people make that mistake and they get what they pay for and could even add more cost to their remodel by hiring the 'cheapest' PM that did a horrible job at managing things and actually increased time and cost of the overall scope of work.

Instead, a good way to find one is to ask others in your local market who they have used in the past. Do some research online to dig up some info on them. Then, once you've narrowed them down to say 3 or 4, go ahead and have a preliminary meeting. Have them quote your job but gauge how well their communication is in the process. Did it take them 7-10 days to get your quote back? Are they easy to deal with? I would also strongly recommend to have them give you a few references of recent clients they've had in the past 12 months and then, be sure you call those people and ask how they liked working with this PM. If the PM is good, they'll have no trouble supplying some names and numbers for you to call.

If you can find a a good PM, they'll be worth their weight in gold. They'll finish the project on time or even ahead of schedule, avoid the many pitfalls during construction that can cost money and also take all the stress off your shoulders in having to organize the schedule, deal with any setbacks, meet with county inspectors, etc. so for the percentage they may charge, I'd say it's well worth it!

Hope that helps...

Ritch Bonisa · Answer

@David Stone Great question!  @Rory Cummins Great Response!  I manage projects for remote investors.  Informally, help them find a local team, connect them with great GC's, then manage the process.  We use great GC's and oversee the process, manage the flow of information and use alot of technology to keep remote investors connected to their projects.  Our system allows for whatever amount of participation the investor wants to have.

Sometimes you can look at the GC as a project manager, other times I don't think you can.  It just depends on how they actually operate.

I think there are some considerations.  If you are going to stop by the project site a lot and are apt to make changes on the fly - this usually extends the length of the project, which many times increases cost.  I would say, get a GREAT scope of work from the onset, agree on a firm action plan, and then let manager and contractor do their jobs.  Everyone should be documenting what they do and you should be looking at that documentation on a regular basis.  If you live close by or are in the area, then of course, stop in and see what is going on. Sometimes I see situations where investor really doesn't understand the process and is trying to develop a punch list during phase 1 of construction - just don't be that guy.

Other consideration is who is dealing with materials?  Who purchases?  Who transports?  All of this can be done in various ways, and yes, if you do it yourself, you can save a few bucks.  Almost every time I have seen this happen, it has caused huge problems.  I would say if you are going the project manager route, then background check them, get references, criminal history, financials, everything you can.  Get a good one, be willing to pay a little for it too.  Once you have them, let them do their job and don't impede their progress.  Place incentives and penalty clauses in your contract. Make sure your project manger is more tied to you than he is the contractor.  You need an advocate for YOU, not someone who is every contractor's buddy.  If you find a really good one - don't let him go & keep him busy!

Last consideration - make sure both GC and Project Manager are both insured.  Make sure you and your property are as well.  My brother-in-law purchased a property, played the GC role himself. He's going to live in it himself, two weeks before move-in his fully rehabbed new home burns to the ground.  No insurance.

Hope something in there can be of value to you!

Karen Margrave · Answer

The question is whether or not your projects have healthy enough profit margins for you to be able to pay a project manager. If you can't manage the projects well and end up going over time and budget, the money you save on loans, materials, subs, etc. can end up paying for the PM. Whatever you do, whether hiring a project manager, general, or subs, make sure you have a written contract that states what the terms are, and what is expected. How extensive will the work be that the PM performs, from permitting to final or ? Who will handle money? (I strongly advise that people always keep track of their own money, etc.) Who will approve all contracts with subs, check licenses, bonds, insurance, etc.? Once you know exactly what it is you want from someone, you can begin speaking to potential PM, and be comparing apples to apples. Check references! There are also some great services that will allow you to keep up on progress, change orders, etc. like Buildertrend, Co Construct, etc. Good luck.

Matthew Perry · Answer

I'd like to say the answer is dependent on size, but to me I do not see it as a such. Use a project manager. I doubt you want to be a site for the majority of the time. Leadership is more often times delegating to someone else is may cost more in your pocket but save you in the long run. I spend more time talking to my project managers than I do anyone else. I talk to them four to five times a day. Are they sometimes just status updates? Absolutely. But they provide a peace of mind that cannot be gained otherwise. I have used a project manager on a project as small as 500 sq ft condo and found that he got the project done faster, more organized, and with cost savings that I could never have accomplished. Your time in real estate development is by far and way the biggest opportunity cost and every time you are called out to a site or dealing with something else that is silly is less time your spending on finding your next project or networking to try and sell the project your currently working on. If feel like you want to be in total control than yes you probably are not in a place to hire a PM, and if you feel like the money is better suited in something else- i.e paying off a larger piece of the down payment, paying the interest on a HLM loan, or whatever the case might be ask yourself what happens when things go south and your tied up doing something else. A leaking pipe or electrical issue waits on one.

Will Barnard · Answer

I have used a project manager in the past and am also one now. My first project manager was my brother so I was lucky in the sense that I could rely on and trust him. Good PM's are hard to find but the good ones are well worth the cost so long as you are eithervlearning from them or spending the time you save finding more deals or other money making tasks of your business. This is one of several systems a flipper can build in their business model.

I am involved in many aspects of RE, but as a flipper myself, this provides my clients the experience necessary to perform at the necessary levels to keep them profitable. I can't speak for all project managers, but I am able to use my purchasing power and contacts to save them money on both labor and materials so my fees are often paid for in savings on those items plus time savings.

If you can find a lot cal PM for yourvprojects and you can spend that saved time making money in other avenues of your business, go for it!

Who uses a Project Manager?

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