Flipping Houses

Should I Hire a General Contractor or Serve as My Own?

Expertise: Landlording & Rental Properties, Real Estate Investing Basics, Flipping Houses, Business Management, Personal Development, Mortgages & Creative Financing, Real Estate News & Commentary
210 Articles Written
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Rehabbing is one of the major components of the real estate business. A property in need of a rehab is often where the money can be made. But doing a good quality rehab and bringing it to completion is not easy, as there are many potential bumps along the way. You need to know how all of those property pieces fit together, and you will need many different types of contractors to get your job done.

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Some contractors are essential due to their knowledge of potentially dangerous systems, such as natural gas or electric. But do you need a general contractor to oversee and coordinate all of this work? Or should you act as your own general contractor? There are pros and cons to each side of this story, and we will go through some of them shortly. First, let's make sure we all understand what a general contractor is and what they do.

What is a General Contractor?

A general contractor is someone who you hire to manage, coordinate, and complete a rehab project. They may or may not be specific tradespeople, but they are often a sort of “jack of all trades” who have detailed knowledge of how to complete the project. They are often responsible for making sure that the project comes in on time and within budget, and they hire and manage sub-contractors, such as electricians or plumbers. Most of the time you will pay and direct the general contractor, who will in turn pay for materials and manage the sub-contractors.

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Acting as the General Contractor

As the property owner, most jurisdictions will allow you to act as your own general contractor (this will, however, vary by jurisdiction and scope of the project, so check your local laws). Therefore, you get to ensure that things are completed on time and within budget, and you would hire and manage all of the other sub-contractors. Why might you want to do this? Here are some thoughts.

First, you can save the money that you would pay a general contractor. General contractors are not going to work for free. They will add an up-charge to all of the services they procure and oversee. This up-charge will directly affect your bottom line.

Related: The Ultimate Guide to Finding an Incredible Contractor

Secondly, being your own general contractor allows you to learn the business. One of the best ways to learn anything is to do it. There is a real advantage in this business to knowing and understanding how a general contractor operates.

Third, being your own general contractor means you will likely get hands on experience with many of the components that go into a rehab job. It is very handy for a real estate investor to have a basic understanding of plumbing, electrical and HVAC systems, as well as all of the other things that make a building function. Knowing and understanding the costs of materials, the time it takes to install them and the prices of labor will be invaluable to your real estate investing career.

Finally, you can watch over things much more closely and perhaps better control the pace of things. If one of your sub-contractors begins to slack off or not do the work to your standards, you can fire that contractor. With a general contractor, you will likely have to go through him or her. It adds another layer.

Why Hire a General Contractor?

Having read this far, you may already have a sense of why you might want to hire a general contractor. A general contractor can be a major asset. Here is why.

First, they know the codes. Hopefully you have hired someone who is recommended and has a good reputation. They will understand what permits need to be pulled and how to get code enforcement to approve the project. If you have never dealt with building codes and inspectors, this can be a major asset.

Second, they know the process to get the job done as efficiently as possible. They should understand which components need to be completed when and know how to schedule their sub-contractors accordingly.

Third, the liability is often transferred to the general contractor if someone gets hurt. Any general contractor worth his salt will have worker’s comp insurance and thus protect you if someone falls off the roof.

Fourth, they likely can get better prices on materials and labor. This is simply the nature of the business. They do more volume and already have good relationships with sub-contractors; thus, they get better prices and may actually save you money in the long run.

Finally, they can warranty their work. If something goes wrong in six months, most folks will come out and try to make it right. After all, they want more business from you, and good ones stand behind their work and reputation.

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Should I Hire a General Contractor?

There are good arguments to be made for each side of this coin. Each side presents a different set of benefits, which can be very attractive to different investors.

Related: 3 Types of General Contractors (& How to Choose One for Your Project)

I think at the beginning of an investor’s career, smaller jobs should be done by the investor. Doing this will help them learn many facets of the business. Note well that I said “smaller jobs.” I am talking paint, carpet, perhaps minor plumbing. An inexperienced investor should not be taking on large rehab jobs.

Bigger and more complicated jobs, like burnouts or additions, may require you to hire a general. These types of jobs can be very complicated, and the money you pay to a general will be well worth it. Still, I suggest you manage the manager and check up on your project frequently.

Finally, using a general will free up your time. After all, you want to be a real estate investor, not a general contractor, right? So do some minor work at first, learn the ropes, then move on and hire a GC and learn how to manage them and free up your time to find more deals and make more money.

We’re republishing this article to help out our newer readers.


What do you think? Should you hire a general contractor or do it yourself?

Please share with your comments.

 

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.
    Stephen Brown
    Replied about 5 years ago
    I really like the idea of buying a tool belt and remodeling my bathroom all by myself. However, you\’ve helped me remember that every construction problems need to follow specifications that keeps the building up to code. Since I\’m a perfectionist, I don\’t think that I could finish my bathroom in a reasonable amount of time. I\’d be so worried about following every building code to the letter! Since you mentioned that general contractors understand building codes and generally guarantee their work, it would make sense to hire someone to do the remodel for me.
    Aaron Kriegerson
    Replied about 5 years ago
    Thanks for your article about general contractors, Kevin. Your right about how general contractors can be a significant asset to your build or project. Your spot on about how they know the codes required to pass state, county, or city inspections. This can save you a lot of time and money; because, if your project doesn\’t pass inspection it can mean doing some demolition in order to fix some aspects and then rebuilding. No one wants to do that. Thanks for the post.
    brandon roberts
    Replied about 5 years ago
    I think it is super important to always hire a general contractor. Because when you do this, you know that the job will get done on time and it will be done right. If you serve as you own, and you aren’t sure what you are doing, then the job might not get done correctly.
    Jason Strong
    Replied almost 5 years ago
    I\’ve learned the hard way in life that if you don\’t know what your doing, you shouldn\’t try to fix it on your own. So, if you know what you are doing and have a good handle on how a project needs to go down, then by all means do it yourself. If you have no idea what\’s going down though, then it\’s wise to call in a contractor who knows what he\’s doing.
    Chris Wilson
    Replied about 4 years ago
    Chris I just purchased my second Bank owned property and needed some ideas. On my first property, I hired licensed independent contractors for Electrical, Plumbing, Heating and Building. All required permits were pulled by the Contractors. Most of the Contractors show up late during the day for work and left before the day ended. I checked in with them weekly on the progress of the work they were in charge off. The project took me between 6 – 8 months to complete and a little over budget. What do I need to do differently to keep the work on schedule and within the budget?
    Chris Wilson
    Replied about 4 years ago
    Chris I just purchased my second Bank owned property and needed some ideas. On my first property, I hired licensed independent contractors for Electrical, Plumbing, Heating and Building. All required permits were pulled by the Contractors. Most of the Contractors show up late during the day for work and left before the day ended. I checked in with them weekly on the progress of the work they were in charge off. The project took me between 6 – 8 months to complete and a little over budget. What do I need to do differently to keep the work on schedule and within the budget?
    Jeffrey Hare Professional from San Jose, California
    Replied about 4 years ago
    Anyone in California needs to review the Owner-Builder restrictions that apply whenever the owner decides to do the work themselves: http://www.cslb.ca.gov/Consumers/Know_Risks_Of_Owner_-_Builder/ Warnings and risks are spelled out on the CSLB web site in detail. Major cause of grief – failing to understand risk of not having proper Workers’ Compensation insurance coverage, not covered under typical homeowner policy. Common problem – hiring contractor with expired or out-of-class license to act as General. Other common problems – misunderstanding terms of contract as to who is responsible for pulling permits; contractor failing to pay subcontractors or suppliers; contractors demanding payment in advance in violation of State law. Biggest problem is lack of awareness of rules and regulations by both contractors and owners.
    Luke Smith
    Replied almost 4 years ago
    Thanks for pointing out that a general contractor is a sort of “jack of all trades” with detailed knowledge of how to complete various projects. Building a house seems like it would involve a lot more than just knowing how to pour concrete and put up walls, so having someone around who knows exactly what needs to happen when would be really helpful. I would probably choose to use a general contractor for any new construction or remodeling.
    Frank Delaware
    Replied almost 4 years ago
    There are quite a few parking lots around my house that are pretty beat up, and we were curious about how you would prolong their life. I really like that you say to make sure that you fix obvious drainage problems. I have heard that water is very good at eating away at asphalt, so that would be very nice.
    Luz Pagan Flipper/Rehabber from Highlands County
    Replied over 2 years ago
    This article was very helpful!!!Thank you!
    Vaughn K. from Coeur d'Alene, ID
    Replied over 1 year ago
    A lot of commenters seemed to have completely missed what a GENERAL Contractor is in relation to a job. A General may or may not lift a single finger doing any work. They may in fact hire every single thing done by somebody else. You are the general contractor if you hire all the workers yourself, even if you don’t lift a finger to do any work at all. The trick is the general would still be marking up all of the sub contractors prices even if they don’t do anything directly, because they have to pay for their time of lining up the contractors, and doing administrative tasks etc. Now in reality often a general will have a specialty, like say they do carpentry with their own guys, or even painting. They probably do have a few jack of all trades guys around too a lot of the time. But not always, and even if they do, they may hire out their very own specialty if their direct employees are already busy with something else. Bottom line is if you can get good recommendations on specialty contractors (painter, flooring guy, electrician, etc) then you should in fact be covered by their bond/insurance in most instances, often times they can handle permitting for their specialty as well. You will also be getting professional quality work. So most of the supposed cons of not using a GC can be eliminated if you’re getting GOOD and TRUSTED sub contractors that were suggested by somebody you know knows their stuff. BUT you will have to track them all down, get quotes, and ride them to get the project done on time and on budget. I think it really depends on whether or not you want to do enough remodel stuff to warrant learning this aspect of the business… Because you can definitely save big money if you even just GC projects and sub everything compared to hiring a GC who just subs most of it anyway! But you have to do it often enough to make the time invested be worthwhile, because there will be a learning curve.
    Chris M. Rental Property Investor from Clarksville, TN
    Replied about 1 year ago
    Thanks so much for this, Kevin. I've enjoyed most of your material. As an investor in TN also, the mkt is crazy hot right now. Tough to find lucrative deals that don't require the help of a big named GC. But, those come with a hefty price tag.
    Account Closed
    Replied about 1 year ago
    Awesome post Kevin. I definitely think that though more costly its definitely safer and less time consuming rather then doing this all on your own. You should definitely hire someone with good reviews and previous examples of their work. Always ask for referrals!
    Travis Oke
    Replied 12 months ago
    Yes it is very important to hire a professional General contractors. This is very information and helpful for the community
    Travis Oke
    Replied 12 months ago
    https://mitigationinc.com
    Pamela Sandberg Realtor / Attorney from Phoenix, AZ
    Replied 11 months ago
    It is also VERY important to be aware of your local laws regarding licensed contractors. For example: here in Arizona, there is a state law that prohibits owners from reselling a house within a year of acting as their own contractor. If you do, you have committed a crime and can be prosecuted. The purpose of this law is to protect buyers from purchasing property with work that should have been done by a GC but wasn't. Of course, this law does not apply to minor work that could be done by anyone without a contracting license.