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All Forum Posts by: Christopher B.

Christopher B. has started 26 posts and replied 686 times.

Post: How much should a wholesaler profit when selling to an investor?

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

A wholesaler who regularly brings me properties made $30k off a deal on me last year. Due to circumstances I reluctantly sold it to another investor for $67k, making $15kish in about 30 days. He should make $80-$100k on the house if he does the rehab right (house is in a historic area). I didn't mind she made $30k because she left $115k of meat on the bone for me. The investor I sold it to knows what she and I paid for it and doesn't mind because we left $100k of meat on the bone for him. It was a win-win-win-win, from the seller down to the end investor. Just be conscious of the scale of the rehab, it's budget, and other risk factors and take your cut accordingly. If the investor is reasonable then having an open conversation about this isn't a big deal. Until you build that relationship I'd just give him your price and see what he says though. After trust is formed things will get easier. My wholesaler now calls me before she even formally has houses under contract and shares the address, her price, and her desired mark-up because she knows that she can trust me.

Post: Why investors should be their own general contractor

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

@Stacy G. Thank you for bringing quality insight to the forums. This topic has been on my mind frequently lately as managing my projects has become a task I don't enjoy any longer and honestly it's not one of my core competencies. I do what I consider medium to large rehabs, for example the budgets for our rehabs this year have been $50k, $60k, $180k, $75k, $70k, and $55k. I am effective and knowledgeable enough to get the jobs done operating as my own PM but see that it is holding my business back. I was in a bad accident last year that easily could have cost me my life and then my arm. It resulted in 2 surgeries and a lot of bed rest, fortunately my father is semi-retired from his own business and stepped in to help with the day to day site management for a bit.I also had a friend that works construction that worked for me for about a year to help keep projects moving forward. This event opened my eyes on many things and has been the catalyst for me to change how my business operates. 

I used to pull all of my own permits as a homeowner with my subs pulling theirs off mine but there has been a change of guard in my local municipality and the city no longer will let me pull permits unless it is my permanent residence. I've had a GC pulling permits for me for my last couple of projects and even though he is doing all the framing and trim work and the fact I use properly insured subs he doesn't like having the liability for my jobs and I don't think he'll do anymore for me. Which brings me to my current situation. I can't find a company or person locally that operates like you mention. They may very well be out there but I just haven't been able to locate them. I'd love to find an independent PM/CM to work with and I've even debated putting a PM on staff to streamline things. I would be happy to pay this person handsomely as well but I get back to the dilemma of who is going to pull that permit for me. I'm now asking myself if I should just become a licensed GC to pull permits and then hire a good PM to manage the subs or if I should just hire my own crew with a strong crew leader to handle the day to days of each project. 

My goal has always been to maintain flexibility and have as few employees as possible but I am now wondering if hiring my own PM and/or crew will be less hassle than trying to manage contractors/subs and the challenges that come with them. 

Post: Why investors should be their own general contractor

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

Thoughts

Post: Why investors should be their own general contractor

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

@Stacy G. good post and appropriate timing as I came to BP to post a question on this very topic.  So in your opinion the investor should become a licensed general contractor? Get license, insurance, etc and pull their own permits for the subs to work/pull theirs under?

I manage my own rehabs but am not licensed. It has worked out well but the licensing issue has come-up more lately and I've debated on which route to go. I've decided I want to get an in-house PM and have been debating getting my GC license to handle all permits, etc and spent time today running the numbers for getting my license and setting-up my own 3-4 man crew. Setting up a construction business with employees has been the very last thing I've wanted to do but I'm trying to be open to different perspectives as my current model isn't working as well as I'd like anymore. I would be interested in your, and anyone else's, perspective on what I've come to so far. 

I calculate that I can hire a 4 man crew at above market rates, guarantee a min 40hrs/week for 52 weeks, pay workers comp, payroll taxes, etc and still save 20-30% per project in labor costs. This figure is based on a current project and obviously will vary. Again, I've had no desire for employees and managing them so to help mitigate this problem I figure by paying above market rates I can attract a higher quality crew and reduce employee mgmt by me. For example the crew leader could have a background running jobs for a larger builder or even his own business but has gotten burnt-out managing the business side of his own company. This person will handle all the day to day coordinating of the jobs, managing the crew, procuring materials, permits, inspections, etc.  The no.2 guy could manage the crew himself but doesn't have as much experience as the crew leader and so forth. Eventually, I could bring in a PM or promote the crew leader to a PM to oversee more of the business and further eliminate me out of the day to day rehab process which is my least favorite part of this business and why I'd be happy paying higher rates to remove myself more. I've also played with the idea of reducing the hourly rate to my local market rates and implementing a profit sharing and bonus program but not sure which, if either, would be attractive enough to hire the level of crew members I'd need in-order not to babysit employees constantly. 

I know this concept isn't new but to me and the idea of implementing it in my business it is new. I'd be interested in peoples takes on this, pros, cons, experiences.

Post: What is taking everyone so freaking long???

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

If you have your own crew or can afford to hire the rockstars it still wouldn't be as easy as you think. Here's how delays happen.

Your plumber is scheduled to be at your house Thursday and Friday  to do the few minor things needed so you can start sheetrock on Monday but his other job gets delayed and can't get your house done until Monday. Your sheetrocker says no big deal, it will only take 4 days to do your job anyways and picks up a small 1 day job for Monday so he's still making money, whew that worked out. Well that job turns into 2.5 days so now he's not starting until Wednesday afternoon and a rain storm comes through on Thursday slowing down your dry time between coats.  So now your sheetrock was supposed to be done by Friday but it will be Wednesday morning when he completes his final sand. Now your schedule has been moved twice and it makes your painter weary about your timelines on this job and he has a backlog of business already so he moves the big project he had scheduled after you up because it's going to pay well and when your job is ready he sends the skeleton crew out with some new guy that creates more problems than he is fixing. These delays and the unknown finish date of your sheetrock has prevented you from locking down the trim crew and they just got a big trim job over in the lakefront community that pays double your job so it will now be 2 weeks before they cab get back around to you. You can be frustrated but not mad because your schedule changed and these guys will continue to take other work, can't blame them. 

Material deliveries can be wrong. Inspectors can ask for changes. Jobs your crew thinks will take 2 days end up taking 4. It's also difficult to load a house full of people. Subs are used to working on a busy site but some trades don't mix well and while it may be efficient for you it's not efficient for them. You don't want to do finish painting while you still have people walking through the house with ladders, hammers, and dirty hands. You don't want muddy shoes on your fresh carpet. Hardwood floors are expensive to finish and need a few days to properly cure so it's good to do those very last but you will still have punchlist items after to be done. Speaking of punchlist items, the last 10% of your project is where the cream rises to the top and it can be frustrating as heck. You need to stain and poly the transition to match the laminate. The bags of screw hole fillers taped to my 2 french doors has disappeared and nobody knows what happened to them. Touch-up paint, touch-up caulk. Seal grout. Dumpster is in the way but we need a dumpster. Registers, door stops, oops we forgot the 1" L bracket so we can screw the butcher block counters to the cabinets. WTF, the carpenter damaged my cabinets because he used a dull blade when drilling for the hardware and now I have to get the right sized washer to cover the damage. What, the included hardware for the bathroom vanity I just bought has the wrong screw size! 

On and on and on. 

Post: Knoxville, TN Full Gut w/ addition

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

@Omar Khan, that's a smart approach.  

 We just finished sheetrock and the first coat of paint. Floor repairs/install has begun with tile starting Monday. 

Why it took 4 months to get here.

1. We started off fast, the GC and framing crews blew through the 2 additions but bogged down a bit in the interior framing repairs. It's difficult to list every little detail when doing a rehab like this on a 92yr old home. I didn't have some items on the SOW, the main framing crew left, and the 2nd crew had other obligations before they could get back around. = Delays. So work very hard to make sure your SOW is detailed. Walk the project with your GC and/or subs and verify everything is accounted for before you finalize your SOW and sign contracts.

2. As mentioned in a previous post, the issues truly began when my plumber walked-off the jobsite the morning he was to begin rough-in. This still surprises me and the situation is a bit long to post here. I don't feel there was much else I could have done to prevent this event, it is obvious he was frustrated about some things or he wouldn't have walked. Lesson: keep up with your guys, take care of them, keep your good ones happy, and let them know they're appreciated. Have relationships with 2-3 subs for each trade for these situations because as much as you try contractors will come and go. This cost me 3 weeks in time and $2k in additional costs as I didn't have anyone else to call. 

3. Failed framing inspection. This is only the 2nd time I have failed a framing inspection and the first time was a small concern (extra fire blocking). There were 2 primary issues, 1)an LVL was missized in the garage by the supply house and,2) the wrong sized headers were installed in the kitchen. The GC took 50% of the responsibility and cited our contract structure as a reason he didn't feel responsible for the 2 wrong headers. He repaired the LVL's at his cost and the headers at a reduced rate charged to me. I wasn't happy about this as I felt the GC  passed the buck but with the delays my focus was to get the project to the next phase. The GC had done good work and managed the project well I felt until this point. Sometimes you want to speak your mind a little more clearly to people but have to focus on getting the best outcome in your situation. This cost another week delay and about $1500 in additional costs. Lesson learned here is contract structure and clarity on the front end. Your GC and professional trades should always be 100% responsible for passing your inspections, they're the professionals and are asking for pay as such, hold them accountable here and don't let this happen to you. Make sure it's in your contract and point it out when signing.

4. Sheetrock delayed 2 weeks. The first week is because the house was in limbo due to the failed inspection.  We couldn't commit to an exact  date as the inspector was giving us a hard time on some items so the s.rockers understandably took other work. Once ready the house stood idle for 1 week waiting on sheetrock to begin. The 2nd week of delay here was due to the skeleton crew sent by the sheetrock company. I believe this was a good example of a sub putting their more important customers, GC's, ahead of less important customers, in this case me. This will happen when you break timelines with your subs so work hard to try to meet the schedule. The sheetrock was supposed to be done in 2 weeks, it took over 3. 

5. Trim crew, an additional week delay. My trim crew is a family business and they informed me about 5 weeks ago about their planned vacation. The goal was to get the majority of the trim work completed the week prior to them leaving with 1 guy finishing up by himself while they were on vacation. With the delays we can't start until they are back which is 1 week after it will be ready for trim. 

6. The siding isn't done yet. Subs are especially hard to find here right now due to the wild fires we had last summer and I didn't take this into account. My regular installer was unable to squeeze me in as he initially thought he could due to commitments. It took me 2.5 weeks to find another installer. We will still get the siding done without further delays but it will give us less time for landscaping, etc before closing. 

This has been far from my smoothest rehab project. I expected to be done by mid June and now am projecting early August, approximately 6 weeks behind schedule. I got caught with my pants down more than once and was reminded how important it is to have relationships with multiple subs for each phase. I had become too comfortable with using the same subs and didn't have a good person to call when I got caught in a bind.  I was also reminded of the importance of clear contracts and expectations. Don't be lazy or laid back, clearly define everything about your project and discuss this with all your workers. Not all contractors are well organized but it is not because they don't want to be. The legitimate contractors you want to work with will appreciate and respect you more for being organized. 

Post: Hello: Just Introducing Myself

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

I dig your mindset, youthful enthusiasm, and professionalism. You've got a solid educational background so clearly a self starter with the capacity to broaden your mind. Start taking it all in and go work for someone that is already doing it, this will shorten your learning curve by years imo. 

Good luck and don't hesitate to reach-out. 

Post: You see this on your construction site... (picture)

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531
Originally posted by @Chris Purcell:
Originally posted by @Christopher B.:

Long as gas isn't on no big deal, couple of elbows and you're good to go. 

You serious?

And if he forgot and we closed the walls up?  Fire up the gas lines?

Why would you even risk not making this connection while you're doing it.  We're talking about natural gas

No biggie in that it can be resolved pretty easily. Hey I agree, it should have been done while running the gas lines. Stuff like this is a good example of why pulling permits and getting inspections is important. Maybe you did and the inspector missed it too, that happens unfortunately but it helps prevent stupid mistakes like this more often than not.

Things will happen, even good subs will screw things up at times.

Post: General Contractor vs hiring subs

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531
Originally posted by @Manolo D.:

@Christopher B. Imagine that, 40%. Why not charge per visit (2-4 hour blocks) with guaranteed maximum price, simple and easy. That's more of a construction manager job though not a GC, typical GC contracts you get a single price not variable, you have no control over the day to day activities nor who supplies what in materials and labor, give them scope of work, specifications, plans (if applicable), a milestone deadline, and off they go, they can only get more/less money if you change anything on SOW, Specs, or Plans. I've done some third tier GC works (it means Owner (acting GC) - GC - GC(me)), it wasn't fun.

Are you saying you think 40% of the profit is fair payment to a GC for that? I'd be happy to hand-off my SOW and budget and let a GC go to town but not for that large of a cut. I just haven't found someone I trust to do or would charge a reasonable GC fee for that yet. Maybe that's on me though. 

Post: You see this on your construction site... (picture)

Christopher B.Posted
  • Rental Property Investor
  • Knoxville, TN
  • Posts 701
  • Votes 531

Long as gas isn't on no big deal, couple of elbows and you're good to go.