Hiring a GC / Whats Most Important? Price, Quality or Speed?

[Moshe Eisenberg]

Hope everyone is having the best time ever. I would like to share a thought I had about the trifecta to look for when hiring a good GC for your flips; Quality work; get the job done in your time frame and within budget. 1st, I once heard on 1 of the BP podcasts (sorry I don't remember who it was on which #) that you can find those that excel in 2, aspects and the 3rd is "okay", but you will rarely find a GC that specializes in all the aspects. So you will have to decide which ones are most important to you. I have been thinking about this and I think that Price is probably what most people look at when making a decision. After all that effects the bottom line and we are in this to make the most profit. But what if I told you that even if a GC overcharges you 15%! (On a 50k rehab that's $7,500 out of your pocket!) if that GC has experience and he excels in Speed it might make your deals more profitable, looking at your annual ROI. A simple example: you buy a 100k property, rehab for 50k, you sell the property for 200k. Your net profit is 30k. So your thinking if you can get a cheaper GC for 15% less you can make 37,500! That's better. No? Maybe. But if the more expensive GC will get the job done in 2 months instead of 3 months and that's to that the duration is the deal will be 5 months instead of 6 months look what will happen. Let's assume you put in 60k of your own cash and had the rest of the cost from a lender on 12-18%. If you make net profit 30k in 6 months that's a 100% annual ROI. If thanks yo your expensive GC your deal takes you only 5 months in total, your ROI will be around 125% annual ROI. And that's besides the savings on carrying costs for the time saved. (Of course you can adjust to your numbers but the formula is basically the same). Of course this is all good if the more expensive GC can deliver a quicker and still a quality job. But based on the little experience I have that was the case. So to sum it up. Speed could possibly overweigh Low Price. (I hope my contractors don't read this and hike their prices on me ;-) Let me know your thoughts on it. Moshe