I need help finding new contractors/general contractors

7 Replies

I have been a real estate broker for about 7 years in Tucson, Az and I'm ready to get into the flip business. I specialize in residential real estate. After reading the Bigger Pockets book on flipping houses I decided that I might need to hire a general contractor for the first few flips at least since the repair/rehab cost is the one area that I'm really weak in. I just starting interviewing potential general contractors for my business but I'm not sure which route I want to go as far as hiring them for the entire rehab job or just hiring them to do a walkthrough with me to give me a rough estimate of the rehab cost so that I make an offer and then bring them back for a more detailed estimate if my offer is accepted. The one general contractor that I talked to a few days ago said that he would do some walk throughs with me for free however I'm not sure how it would work as far as paying him if my offer gets accepted, because I might just take the route of hiring out my own separate sub contractors or even ones that he chooses for each job needed such as tile, carpet, roof, plumbing etc. What I'm saying is that if the general contractor does a free walk through with me before I even make an offer on a house and if I get the contractor to give me a more accurate rehab estimate after my offer is accepted(during the 10 day inspection period) and is under contract how will/should I structure payment to him if I just want to use his sub contractors and if I want to do the managing part as far as scheduling and supervising/overseeing the whole project myself as I don't want to add an extra 10-30% on to my cost as my capital will be pretty limited when I start? The general contractor that I will be using will obviously need to be paid for his work as far as rough(before offer is made) and detailed estimates(after home is under contract) but if I don't use him to oversee entire project then I'm not sure what would be in it for him if I want to oversee the entire project instead. I could just try and bring out my own contractors for each possible repair but this would be a very time consuming and ineffecient way to get a repair cost and I don't want to waste a contractors time for homes that I might not even get an offer accepted on. Plus many good deals go pretty fast so you really have to move on them. Any advice would be greatly appreciated!! Thanks, Jeffrey Hayes Hayes Realty LLC

@Jeffrey Hayes You are half the right track. If the contractor offers you a free service, remember it is not free. I would suggest getting a handyman with you and pay him for the first few walkthroughs, say you pay him $100-200 for his time, in addition for the money, offer them to bid on your project, take notes on what needs to be done, get the units of measure needed (sq. ft of floor, sq yd of carpet, sq ft of countertop, ln ft of baseboard, etc - Use J Scotts book to get the Scope of Work). By your 5th walkthrough, you are some kind of an expert on what to look for, and pretty much you want to know how to do it yourself, but yes, you have to spend a little money, think of it as a cheap construction school, it will save you a lot of money later on. After you know what you want in a certain house, take your scope of work and give it to GC/subs and have them bid on it, be sure to post a lot of pictures, floor plan, and scope of work, the aim is to have a uniform bid for all contractors.

Good luck on the journey, its going to be a tough road.

This post has been removed.

Paragraphs, my good man.  Paragraphs.  

I don't have any recommendations on structuring your payment based on different scenarios but I would strongly encourage you to hire a *good* GC for your first project or two.  I consider myself to be very strong when it comes to DIY and remodeling/renovation work but even I won't be tackling my first flip alone.  

My opinion is that you're going to have enough to worry about as it is without the added pressure of supervising and coordinating the different traits.  Unless you're an expert at scheduling, coordinating and supervising different trades, my recommendation is to pass that job on to someone who does it for a living.  Yes, you'll pay a little more upfront but once you master the behind-the-scenes stuff, then you can take on more responsibility.

Disclaimer: I have zero experience flipping houses but I have 10+ years in property management and a decent amount of common sense.  Don't overwhelm yourself on the first project, even if it cuts into your profits a little.  

This post has been removed.

This post has been removed.

Originally posted by @Manolo D. :

@Jeffrey Hayes You are half the right track. If the contractor offers you a free service, remember it is not free. I would suggest getting a handyman with you and pay him for the first few walkthroughs, say you pay him $100-200 for his time, in addition for the money, offer them to bid on your project, take notes on what needs to be done, get the units of measure needed (sq. ft of floor, sq yd of carpet, sq ft of countertop, ln ft of baseboard, etc - Use J Scotts book to get the Scope of Work). By your 5th walkthrough, you are some kind of an expert on what to look for, and pretty much you want to know how to do it yourself, but yes, you have to spend a little money, think of it as a cheap construction school, it will save you a lot of money later on. After you know what you want in a certain house, take your scope of work and give it to GC/subs and have them bid on it, be sure to post a lot of pictures, floor plan, and scope of work, the aim is to have a uniform bid for all contractors.

Good luck on the journey, its going to be a tough road.

 Thanks for your advice.  I think you have some good suggestions in there.

Good thoughts on getting started.

As a GC and investor I am always surprised at how little due diligence many investors put into projects.  As was mentioned above, the time and money you will spend having a solid GC eval projects with you is invaluable.  

A few guidelines I have for doing walkthroughs.  If the property isn't under contract and I may not be bidding to get the job, then I'm charging for the walkthrough and any additional work I do.  It costs roughly $500 for me to review a property and spend a few hours outside of the site putting together rough draft pricing.  My time is valuable and I've gotten burned too many times by investors who ask me to come out and look at a project with the impression they own it and I'm bidding.  Only to find out later they just wanted help on estimating rehab costs so they can decide if they want to put an offer on the deal.  Not cool.  If I've got a chance at winning the work, then the walkthrough is the cost of doing business.

Don't under estimate the value of a good GC.  I've seen many people decide to be their own GC that have limited experience and end up getting burned and the project costing more than if they would have just paid the extra 15% to 20% to the GC.  Experienced, quality GC's will know what to look for that may not be obvious on projects and how to manage the unexpected.  Also those with experience will tell you that their time is better served finding deals than managing projects.  Subs are a pain in the a$$ unless you've got a solid GC with good contacts.  How many stories have we seen about the difficulties of managing contractors?

I specialize in working with investors and I also invest. So when I go into a property my first questions are flip or hold? What's the ARV? What's your budget? How many deals have you done? How are you financing it or is it a cash purchase? These questions may seem inappropriate but they give me an idea of what I'm dealing with not just in the job but with the entire investment deal. None of this if for me to pad my bid or try to jerk someone around. What I've learned from working with investors is that many people get into bad deals and the contractor ends up caught in the cross fire. Especially when unforeseen things come up and they always come up. So I ask these questions to guide the project correctly from the beginning.

If there's any advice I cannot over emphasize, spend as much time as possible on the front end and learn how to estimate rehab costs.  Learn to build your own scope of work and put numbers with it.  The best flips I do are with investors who spend tons of time on the front end with their due diligence, give me a very detailed scope down for me to bid and have clear timelines that are realistic.  They know what they're dealing with and have a solid plan to manage it.

Good Luck!

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.