BiggerPockets

i've seen it as high as 20%

It's going to vary by:

- Location (higher costs = higher markup, generally)
- Contractor (good ones are more)
- Market (are GCs looking for work?)
- Negotiation (they'll take as much as they can get)
- Scope of Project (bigger projects can be negotiated to a lower % usually)

Personally, when I used to use a GC, I would pay 12% above the labor cost as his GC fee. He also did a good bit of the work, so he made money there as well. But, he would break down the numbers for me, and if I didn't like them, I could have him use my subs instead.

I am also a GC. You've gotten some good responses in here. I would add that the smaller the job, the higher the mark up. Bathrooms and kitchens, at least in SoCal, generally have about a 40-50% mark up for grey area and profit. As the scope of work increase, the margin will decrease. I frankly think 20% is way too low because there are many other variables that could easily reduce that 20% down to 10% and at 10% you're basically working for free.

In addition to your estimation, you should have your GC estimate the repairs if you are going to be using one. Since you mention that this is your first rehab you're not likely to estimate the work correctly to begin with. Have your GC (or a few if you don't already have someone you want to work with) walk the property with you and itemize each piece of work and have him estimate it. If a his estimates seem too high, be honest and ask him why. It's likely you'll find that you didn't account for all the details. It's VERY common to underestimate rehab work because all the little things can add up. If you need to lock up the property before you can get the contractor there, get the property under contract at $xxx,xxx minus repairs. If there's a short fuse on the deal (short enough that you can't have your GC look at it) and you can't get it under contract with a repair cost clause, then move to the next deal. You'll be better off than if you rely only on your estimate and blow it. Please don't be offended by that statement, it's not meant to insult, but if you haven't done this before, you likely won't estimate repairs correctly and it could cost you big.

Now, having said that, like I mentioned before if you don't already have a trusted GC as part of your team, get some referrals and schedule a day where you have several come out and give the estimate. Make sure they are itemizing out the work so you can check to make sure you are comparing apples to apples. You don't need to play them against each other, but let them know that this is a competitive bid. If you have one that is way high or low, make sure you talk to them to make sure they are accounting for the same work as the rest. Since this is a huge ordeal I don't recommend doing this all the time, but just until you have a GC you are comfortable with. Once you have that, just invite him out to bid the property and if you want to compete him, do it once you've closed on the property.

*** OFF TOPIC RANT ALERT *** :D

I know this next bit is a little off topic, but since we're on the subject of GC's and it was mentioned earlier in the thread, I wanted to give you my opinion on something. Someone mentioned earlier in this thread to beware the guys with $40k trucks and office space. This is a pet peeve of mine, especially when it's a GC trying to convince me that he has "low overhead" to save me money. 9 times out of 10, the reason the guy isn't driving a $40k truck or doesn't have an office is simply because he can't afford it, and usually they can't afford it because they aren't really adept at running their business, which makes me suspect of their ability to run my job. Does this always mean they are a bad contractor? No, but it does make me wonder.

In my experience, the contractor that pulls up in a decent truck and has a physical place of business, is usually a contractor that has enough business acumen to run a successful company. And, if they can run a successful company, it makes me more confident that they can run my job site. I know its just appearances, but really if a guy pulls up in a beat up 78 ford and hands me a business card without an address (or worse, one printed out of an inkjet printer), it makes me ask myself why.

Now, I'm not advocating falling for appearances only, but it is a good initial indicator that the guy you're talking is a professional and not a fly-by-night. I'm also not advocating for dismissing a GC because they drive an old truck (I'm sure there are good GC's out there that do), but if they start feeding you the line about keeping overhead low and warning you about the "big guys driving fancy trucks with fancy offices", they obviously are trying to make up for their inability to sell you on the value they provide by trashing their more successful competition. If it were me in that situation, I'd be suspect at a minimum. I'd more likely thank them for their time and move on to the next contractor. Just my $.02

</rant>