Anyone acting as their own General Contractor?

Question

Just curious if anyone has had any success acting as the General Contractor in order to keep control of costs and rehab timelines.  Thanks

Terrell Garren · Answer

Competition for rehab properties has driven up the acquisition cost to the degree I think I can build new construction SFHs for about the cost of a full rehab if I GC myself.  So I'm building two new 3BR/2BA SFHs on adjoining lots for rentals.  The cost of permits and water/sewer taps has been the biggest shockers.  Otherwise the #s are working so far. To be completely honest, RE allowed me to retire at 60 and GC new construction felt like a great challenge.  I'd rather walk a construction site than a golf course any day of the week.

JD Martin · Answer

I have GC'd every property I own and a house I built. On some of them I did the majority of work myself.

That said, if you don't have skills in the trades it is questionable whether you are going to be able to actually keep costs down, and will most likely have the project drag out longer than a real GC would. I'm not advocating for GCs, it is just that like any other profession there are skills and benefits you are getting when you pay. For example,

1. A good GC will have good subcontractors. These subs may only work for this GC or only GCs and will not work with homeowners.

2. A good GC will get better pricing than you can get on any job. The difference in pricing is often their profit, meaning you're getting the skills and abilities of the GC for the same price as if you were doing the job.

3. A good GC will have all licensing, which can save you time & aggravation with the city.

4. A good GC will be able to adjust timelines on the fly.

I'm not saying don't do it yourself - I don't envision many situations where I would hire one - but you should be honest about your knowledge, skills and abilities. A lot of RE is a time=money situation.

Kris L. · Answer

@Chad Wimberly

If you aren’t a licensed GC, check state and local laws.  In Florida, you can be the GC on a property you own without being licensed , but then can not sell it or rent it out for a year.

Rich Weese · Answer

@Chad Wimberly

I haven't done this in quite a few years but I had a real process going. I built a couple rental houses in St. George, Utah using several different general contractors. It didn't look that difficult! I had already owned many rentals and had seen a lot of rehabs. At the same time I was having these homes built, I was also visiting other construction sites for single-family residences and picking up business cards of subcontractors. I also took the time to interact with them and ask if their pricing would be any different if I was building for cash and did not have to wait for disbursements from a lender on a construction loan. That seemed to get them excited. All they needed to do was complete the job, get it signed off by the inspector and then come turn in their bill and get their money!

I was also running into general contractors that were also working in other fields. I remember three specifically. One did pest control, another was a framer and another one was a Master electrician. Each of them had a general contractor's license in addition to what they were doing full-time. I asked each one of them if they would sign on as the general contractor on the building permit but then allow me to oversee the day-to-day responsibilities and hire my own subcontractors. They told me they would do it for a flat fee as long as all the subcontractors held licenses and insurance was provided. I believe the flat fee I paid at the time was $1500-$2500 per house which was much less than 15 to 25% of total costs to a GC. They looked at it as receiving additional income without needing to take time to do the work. I did give each of them the job for their specialty such as electrical, framing etc. When one decided to increase the price, I moved on to another sub that was licensed as a GC. I built for cash and did not use a construction lender. Subs knew they were going to get paid quickly. It did make a difference.

I was very successful using this process and moved on to an additional benefit. I owned multiple condominiums in Cancun, Mexico. When the subcontractors would furnish me a bid for their job, I would ask them if they would consider taking a week of use in my condominium and reduce the cash portion of their bid by the same amount. A typical bid from a drywall contractor might be $8000 of which 25% might be profit. The week in Cancun was valued at $1500 unless it was the holiday season. The subcontractor realized receiving $6500 plus the week in Cancun was better than having me go to a different subcontractor that was willing to do the same deal. If his Profit was 25% or $2000, He was still receiving some cash plus a vacation that would make his wife very happy! If I was able to propose this same deal to the wife, my success ratio increased tenfold. Most wives of contractors or subcontractors very seldom see a vacation!

I don't know what the current laws or regulations are and certainly don't know other states but this was very successful for me in Utah. I did some where over 50 bread-and-butter type homes and detailed this in a chapter of a book I wrote.

Crystal Smith · Answer

We've not acted as the "General Contractor" but we've broken jobs down into various scopes of work to control costs and rehab timelines. What do I mean by that? There are parts of jobs that require permits and inspections from a city or village. Then there are parts of jobs that do not require permits and/or inspections.  We will always give a GC the opportunity to bid the entire job but if his cost is out of bounds then we may give him the demo, plumbing, electric,framing...Stuff that may require permits,  but once everything is inspected & it's time to close up the walls or right after the walls are closed the remainder of the job may go to handymen with the same skill set as the GC, but not the license or overhead.

We generally only do this on small jobs- less than $100K. On moderate size jobs above $100K much depends on the project objective & our margins. If we're going to flip the property for 6 digit profits, we may not quibble with the GC margin. If our margins get tight though we'll do what's required to be compliant with city or village laws regarding using a GC for permitted work then leverage our network for the remainder. If we're going to hold the property for cash flow (commercial or multifamily) a GC will do the work that requires permits otherwise we will not use a GC.

So we don't act as our own GC but we do act as our one Project Manager.

Alex Deacon · Answer

@Chad Wimberly its pretty simple. Figure out what your time is worth. If you make $50 an hour at your current job or value your personal time with family and friends then find and interview a few good GCs and hire one. Then all you need to do is manage one person. If you think that by doing it your self is more beneficial then do it yourself for at least the first couple deals. You will have to manage more than one person but you will get to know the business.

Michael Kevorkian · Answer

@Chad Wimberly I manage all of my and my clients projects but technically as a Project Manager since I am not a licensed GC. I do recommend hiring a general contractor for a variety of reasons but I cannot stress enough the need to manage them and the project yourself or hire a third party to do it for you. The reasoning behind my statement is:

1. The GC will have (or should) insurance to add a layer of protection for you if the job isn't done right, someone gets hurt etc.

2. They will do their best to make as much money as possible (as do we all) and unfortunately sometimes that has shown up in cutting corners on the job. When they know you have someone watching and approving or troubleshooting the work & job, they are less likely to pull anything that would otherwise be considered wrong. When the cat is away the mice will play... remember that.

3. A general contractor is going to cost you money (and so will a PM) so be sure to negotiate a fair price and do your best to pay based on an add on to material and subcontractor costs. In Chicago my experience has shown that a typical GC fee is between 15%-25% and PM fee between 5%-7%. Find a good PM and they'll find the right GC and negotiate their fees alongside the GC so you could end up saving a lot of money and aggravation.

Let me know if you have any other questions, I'm happy to throw my 2 cents in if it's helpful.

Peter B. · Answer

Absolutely, I even go as far as to self perform portions of the project, on my apartment remodels I do a majority of the work. I have worked in the trades for 20 plus years though.

Gcd my own home. Saved 20-25%. Possibly more...

However some contractors will bake in the material cost up charge, whether they supply it or not.

Chad Wimberly · Answer

Hello Everyone,  thanks for the abundance of replies and great info.

I was considering acting as the GC myself to make sure everything progressed in a timely manner to avoid unnecessary delays, however what I should be focusing on instead is to act as the Project Manager or hire a 3rd party Project Manager.  Didn’t really realize all the other responsibilities of a good GC.

Samuel Pavlovcik · Answer

+1 to @Michael Kevorkian's response, there is definitely a value that can be found with having the right GC and/or PM that can save a lot of headache and a lot of $$ from not needing to do things twice. That being said, it also has to do a lot with finding the Right GC and not just Any GC, to make sure you are really getting the value out of it. It can also depend on how much time, effort, and experience you have in construction. The less you know about construction, the more you will likely benefit from a GC. Additionally, I know that many of the Chicagoland jurisdictions will let you act as your own GC and even your own Sub-contractor (if you don't want to pay for licensed subs) however, that is typically only allowed if you are Living in the property as your primary residence. Additionally, you definitely need to use caution using non-licensed trades, as everything will still need to comply with local codes, and just because you have an inspection done by the local municipality, doesn't mean they can/will catch everything and if you don't know what to look for you could easily get yourself into a dangerous/costly situation.

Anyone acting as their own General Contractor?

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