All Forum Posts by: Kevin Keith Beck

Lisa,

If your Contractor is requesting ANYTHING upfront, they are not "hourly"

Hourly means hourly. After you work one hour I will pay you "x".

To ask for anything upfront (no matter the %), means something isnt being communicated clearly. Not a great place to start.

Not to pick on you Lisa, I see this a lot with new folks jumping into house flipping business, but it may help to learn a thing or two about how a lot (not all) contractors run their businesses. 

Let me start by saying I am a 30+ year General Contractor who has built and remodeled a lot homes and spent a good part of my "retirement" training and educating new contractors how to build better. Part of that education centers around how they treat their customers. 

Back to what newbies and others who hate working with GCs,

Before hiring a contractor you need to do your due diligence and research compatibility and successful projects they've done for others. 

Before they come out ask them questions over the phone.

REMEMBER, all contractors don't nor are they required to operate the same in every state and you should follow all lien guidelines to protect your investment. 

In my market (CA), most GCs do not work "hourly". There are too many "gray" areas that can be misconstrued like: milage to and from job site, and time spent picking up supplies.  By the way, "providing materials" is not the same as necessary construction supplies necessary for most remodels so be clear with your contractors who is bringing what to the job site. You would not believe the amount of time and materials a simple remodel can take. 

That's why most contractors insist on "Flat Bid" contracts. "I'll build you this "x" for this amount of money". I, as the contractor, need to build, buy, hire, rent, etc. anything and everything to complete the project". In these relationships, the more detailed the better.

If you're starting out or you're not quite sure about certain aspects of the remodel, ask your contractor if they'd be willing to enter into a "cost plus" contract. I've entered into several of these contracts with clients who wanted to proceed but hadn't yet determined final finishes yet. Because of these "unknowns" it doesn't make sense,  nor would it have been fair to enter into a flat bid contract. Instead I was very transparent and showed them my labor burden for each employee that would be there. Labor burden is the cost I pay that employee plus the insurance, taxes, medical, SS,..... I need to add to their hourly to stay in business AND make a profit. Most construction labor in my market runs $25-$100 an hour based on skill and task of the individual. You cant change an employee's hourly based on a task. Which leads to subcontractors. If the GC will agree to a Cost-Plus contract, the next negotiation will be about the "Plus" part. We settled for 15% attached to each invoice we received from a subcontractor. This is all negotiable.

The least favorite topic is O&P, overhead and profit. This is where I have to protect my fellow contractor. Remember, for any of us to have successful businesses we have to make sure we're charging the appropriate amount of profit and overhead so we can feed our families and be here down the road when you need us again. 

So, I our example above Mr. & Mrs. Happy Client agreed to:

Project Manager (Jeff) 65/hr (40s projected)

Lead Carpenter (Matt) 55/hr (160 hours projected)

Carpenter (Tony) 45/hr (160 hours projected)

Laborer (Steve) 35/hr (165 hours projected)

Owner (Kevin) 100/hr (5 hours projected)

Subcontractors- Cost plus 15%

Subtotal 

Overhead @ 6%

SubSubtotal

Profit @ 20%

Total

Now, any of these rates, terms, timelines, can all be negotiated. The key for us was detailed, on site meetings with PM and owners to review costs and progress. 

The KEY is communication. 

Don't let Contractors intimidate you but remember they're people too and provide a great, skilled, efficient service if done well.

Good luck to you!

Kevin Beck

Owner Representative 

Hi Paige,

Welcome to SoCal!

I'm a rehabber always looking to partner with like minded folks with similar goals.

Let's talk soon.

Kevin Beck 

Hi Elisabeth,

I'm a local Biggerpockets member too. I'm in Escondido. 

I'm a retired contractor looking for opportunities to add equity and flip or hold for rentals. Perhaps we could discuss further?

Thanks and good luck!

Kevin Beck

Hey Thomas, 

I feel the same.

I'm up in Escondido and am trying to sharpen some tools I have to generate leads. Perhaps team work?

Thanks Kevin

Ty,

As a 30 year retired Contractor who has also been a Construction Project Manager I can tell you these two job titles are completely different and require totally different skill sets and experience. 

If you're looking to get a degree that leads to a nice paying job (not REI), a four year Construction Management degree starts at 100k here in California.

If you get a degree in Architecture,  you'd still have several years afterwards working for another architect before you can get licensed.

What do want to do with your life?

Simply choosing REI as your goal isn't enough.

You should take inventory of your skills and character. Are you an extroverted leader? Than get into Project Management and bark orders at people all day.

Like creating things and design? Go for architecture.

If you like building things (that's my passion and I have NO degrees) then become a talented carpenter, then contractor. 

FYI, most Construction Project Managers do NOT work on small residential projects. These PMs are typically toolbelt belt-wearing skilled carpenters who can also lead people.

I hope this helps!

Kevin Beck 

Hello Michael,

I'm in north San Diego County (Escondido) and am also new to wholesaling.  I am starting to build out some "tools" to searching for good deals to rehab and flip/hold.  

I'm a retired General Contractor who specialized in green building and high-performance home builds and remodels.  My hope is to carry on those traits to the properties I/we flip together as a team??

If you'd like to talk further, let me know and perhaps we can help each other out.

Thanks,

Kevin

Kath,

No worries. Some folks just don't know what a 'gift horse' looks like :)

Kevin

Hey Gil,

I'm new to Wholesaling here in San Diego too. I've invested in a few "tools" to help locate motivated sellers but am more interested in developing systems to scale up.

I'm a retired contractor who is also looking at real estate as a wealth builder.

I'm looking to partner with a few folks who can "man the phones" and talk with potential sellers.

If you're interested in joining forces, perhaps we can talk further?

If not, no worries. 

Good luck and take care,

Kevin 

It's unfortunate that some investors think that their relationship with their contractor needs to be an adversarial one. 

 "I'm not paying for extras"  "I'm not paying for unseen problems that occur"

Why should the contractor have to pay for hidden things that no one could have foreseen? 

Sure building multi-million dollar projects are easy compared to remodeling because there aren't any unknowns. It's being built from scratch unlike residential remodeling when you're dealing with years of unqualified, untrained, do-it-yourselfers work that often has to be redone for safety or to satisfy newer codes.

As a 40 year Contractor, I can tell you ALL remodeling estimating is a shot in the dark. We don't have the time to do exploratory "surgery" to see what we're dealing with so we'll often "pad" our estimates just in case. It's up to the parties to discuss and determine what that "pad" looks like. If you dont, it's your fault for not being proactive.

Your goal is to find a great contractor with excellent communication skills. Hiring should be based on past work and client satisfaction. Trust will be earned by the right one and then you can stop worrying about 'what's in the walls'.

Hey Steven,

I too am currently at that crossroads.  

I took off a year to write a book and donate a kidney to a friend (recuperation was a *****). Now that time has passed and with my age, getting back into employment has proven challenging and not looking very attractive.  I think I'm like you and am hungry to make investing work for me and my goals regardless of the sage advice of others. I understand the points about being gainfully employed and having a great credit history to bolster your loan worthiness, but for me, it may be too late for that and "creative financing" may be my only option.

I'm in Escondido too and have been reaching out to other BP locals to try and get a grasp on the possibilities of making it work here, in San Diego.  Currently I am educating myself as much as possible and attending events whenever I can.  I have started to build the infrastructure and systems to 'fish for leads' via the internet (SEO), but will need others to round out the team.  In the meantime, my girlfriend is getting her real estate license so that together we can flip homes.  That's my specialty.  I'm a retired GC with tons of rehab experience and design savvy.  Our goal is to wholesale, flip for profit, and buy & hold small MF for the long haul.  We both like design and home remodeling, so that will be our primary focus once we get the biz off the ground.

If you'd like to get together and talk, I'd be happy to.  Just let me know.

Take care and good luck,

Kevin Beck