How much to pay a GC for spec build

Question

The goal is to get my own GC license but in AZ you need 4 years of experience (hands on or managerial) to even apply. The long term goal is to do custom homes, starting with spec builds. To start, and to earn my required experience I need to work with another GC, even if I do most of the work. What is a fair offer to make to that GC, and what kind of deal should I not accept? I would be providing the capital. I’m also willing to leverage future deals as part of my offer. Any info is appreciated.

Jay Hinrichs · Answer

not sure what your trying to learn or do.. but just pay them by the door.

IE  10k 20k 30 k 50k.. each GC will have their own fee.

Myself I pay on the low end because i do all the accounting for the GC he only has to cordinate the subs ..  I pay all the subs directly so there is no up charge to me.. and I make sure everyone is paid so their are no liens.

on the 90 lot development i am 3.4 through.. I gave the GC to work under the above program a contract for 1 mil.  Plus I pay his insurance .. its taken 3 years so 300k a year and I do all the admin etc.. And he lives right across the street from the project so spends NO money on commute .. And he still has his own projects going where he makes 100 to 150k per house usually doing 2 to 3 a year.. so depending on what one thinks good income is can determine if one thinks that is worth it.  To me its worth it.

Stuart Udis · Answer

Thanks for sharing the additional context. Seems like a win-win for everyone involved.

Andy Edgemon · Answer

I would agree with Jay.  Pay by the door.  That is the best way and usually how I operate especially in the slow season to keep my subs busy.   That way it's a low cost to the investor or owner of the project and I know they will bring repeat business to me.  Second option is while finding a good GC to work with or rule of thumb I would say is make sure you don't pay over 25% of construction cost.  For jobs that I do for normal customers (not investors) I will have 20% cost plus on total price of construction from day 1 of clearing trees, prepping land, to CO.  So if total construction cost is $300K then my fee will be $60k.  Most of the time that new construction will sell for $450k+ which is why I said to make sure it construction cost, not total sale price.

Stuart Udis · Answer

@Jay Hinrichs You found yourself a sensible GC. Most chase the money and shrug off the lower risk proposition that will allow them to eat well for a few years. Tried similar propositions with GC's to work as quasi project managers who balk at the offer. Then they call  up asking if there's any work or know anyone with work because they are slow....

How much to pay a GC for spec build

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