How do I find GCs that will work within an investor budget?

6 Replies

I'm looking for a general contractor in Jersey City, NJ to do a full gut renovation for a 707 sqft rental property.

How do I get "Investor Pricing" vs "Retail Pricing" from GCs? The bids I'm receiving vary wildly.

Bid #1: $95k (includes materials and labor) 

Bid #2: $60k (includes ONLY labor)

Bid #3: $30k (includes materials and labor but has inconsistent quality and reviews)

Thanks!

@Viet Hoang For materials and labor ask for a detailed line by line breakdown of what they are doing and how much they are charging. Then you can figure out how much they are up charging for materials and you can see if you have any wiggle room on that. Also you will be able to compare apples to apples as to what they are charging for different aspects of the job. Make sure each contractor is including every aspect of the job in their quote. That 30k quote may not include a lot of what you asked for. And whoever you hire remember not to pay it all up front but in draws as progress is made.

Originally posted by @Viet Hoang :

How do I get "Investor Pricing" vs "Retail Pricing" from GCs? The bids I'm receiving vary wildly.

 Get a referral from another investor or from a Realtor.

Expect to pay full retail on the first few, because you are in fact just another retail buyer at this point, general contractors don't care about whimsical promises of fairy dust and future business and unicorns. Supply and demand heavily favors the solid GC in the current market; my retirement age GC father in law says that he's raised his retail first time customer rates 20% per year for the last 4 years and, in his words, "no one has even blinked." (That's what happens when we raise a generation of young people to think that you're "stupid" if you make an honest living swinging a hammer for a living.)

After you've worked with that GC for 3 or 4, broach the subject.

@Viet Hoang shop around some more! Ask for references as well. If you’d like my father is also a GC working in the Jersey City heights area. We recently finished on two projects, 57 south street and 289 Webster ave. Looking forward to hearing from you!

Hi @Viet Hoang I'm an investor, but also run a construction company in north Jersey. In addition to the other comments here: do you have architectural plans for this project, and have all of the GCs you've spoken to reviewed them? I'm assuming, given the scope, that this is going to be a requirement for permits/the building department. In my experience on both sides of the table, it can be very hard to both describe the scope of the project, and understand the scope, without seeing it written down (and also very time consuming for contractors to come up with an estimate without the plans). Construction drawings will fairly clearly show what walls need to be taken down, plumbing, electrical changes, etc etc. 

Assuming when you say "full gut" that you mean new plumbing/bathroom(s)/kitchen, the $30k with materials quote is essentially impossible--materials alone would probably be approaching that number. So either the contractor doesn't understand what you're doing/requesting, or they plan to change order you significantly (i.e., charge you for additional work and labor) as the project goes along.

One important thing I would add re: contractors is--because one contractor is cheaper than another, this doesn't meant that you will actually spend less money. This is true for at least two reasons: first, as I alluded to above, there are (frequently) changes to the scope of construction as the process unfolds--either because you want something different, the building department requires it, or unexpected things are found. A higher quote will sometimes accomodate this, a lower quite might not--you should have this conversation with your contractor. Second, and probably most important, there are hard, tangible carrying costs to owning a property. If you're using, say, hard money (possible double-digit interest rates), or even your own cash (in which case you're looking at the opportunity cost of not investing elsewhere), there's an easily calculable "per day" cost to owning the property while vacant or not sold (interest/opportunity cost, taxes, insurance, etc). If a contractor costs, say, $10k more, but is able to finish the job 2 months faster, that quite possibly could be "cheaper" to you than the cheaper bid/GC, when you consider the carrying costs of the property. 

GCs are pretty notoriously bad at figuring out how long something will take, though sometimes this is because of complications/issues with permitting/the city. (By way of example, I had to spend about ~4 months resolving an electrical issue at a flip in north Jersey, simply because the electrical inspector was hard to deal with--that's FOUR months of carrying costs gone because of one issue). 

Anyways: long way of saying--the bids you received may cover quite different scopes of work, timing, and tolerance for unknown/undiscovered issues. That probably more accounts for the wide variety in prices more so than a GC thinking you are a "retail" or an "investor" client (though, frankly, I haven't gone out of my way, in my capacity as a GC, to charge more or less to clients based on if they are a "retail" or "investor" client). Beyond ensuring that they are all licensed and insured, I would ask them about some of the issues I suggested above and gauge their responses.

@Viet Hoang . You pay retail pricing until you’re a proven commodity to a GC. At this point you likely aren’t, so you’ll pay that retail pricing.

“Investor” pricing only comes from keeping them very busy and being reliable about that. For a one off project you’re going to pay just as much as everyone else

It's funny that most people think that a contractor will have a special rate for them. Most small contractors that I meet aren't very well at pricing jobs and paper work. 

A lot of them basically wing it price wise. 30k for a full guy job would probably be a great example of a contractor who's just kinda winging it and probably doesn't know much about running a business. 

Sometimes when you get the cheapest guy like that you end up paying twice as much to get the work he did fixed correctly.