Hoping to BRRRR. Thoughts on these GC Bids?

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Hoping to BRRRR. Thoughts on these GC Bids?

Anish Patel
Investor · San Francisco Bay Area · Member since 2019 · 13 posts · 4 votes

Hi everyone,

I'm in contract for this property with a couple business partners. Inspection came fairly clean, but as you can see there is plenty of work to be done. I'm in the process of collecting bids from GCs, but the estimates are coming in far higher than what we were originally told (we were targeting ~$100K). Here is a comparison of initial bids (I'll keep adding as others come in). Our goal is to BRRRR this property and based on an initial comp analysis, we're expecting an ARV of ~$280K+.

This is our first BRRRR (but not our first Ohio investment), so we'd love to gather input from more seasoned BRRRRers (is that a word?). How would you approach negotiating down these initial bids? Are there any line items that seem way off base?

As an aside, I'd be happy to connect with any other investors in Ohio, particularly Columbus. Would love to trade notes!

Best,

Anish

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Tony Gunter
Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
5y

@Anish Patel

There’s things missing from this. I don’t see mention nor price for any demo work. I see nothing mentioned for permits cost, or any other project overhead like portable toilets, dumpster, dumping fees, site security, and more. I hope this isn’t the SOW you intend to use to base a contract on. Who is supplying the build contract? If the contractor doesn’t have a contract ready for you to sign tell the good bye. They are probably equally prepared to do your job. Sorry, not intending to sound too harsh btw.

Aside from the SOW being weak, the cost of +/-$82/Sqft is within the realm of reality. There’s simply not enough information provided to say more than that. Your planned budget is also irrelevant. The property dictates what has to be done. It’s the most common pitfall for all this stuff, missing (underestimating) your rehab estimate.

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  • Ryan Mainwaring
    Rental Property Investor · Blacklick, OH · Member since 2016 · 286 posts · 253 votes
    5y

    Congrats on your first BRRRR. Couple questions and notes:

    • Have you or other investors worked with these contractors?
    • Electrical, Plumbing, and mechanical work seem high for completely gutted house.
    2Reply
  • Anish Patel
    OP
    Investor · San Francisco Bay Area · Member since 2019 · 13 posts · 4 votes
    5y

    Hi Ryan,

    Thank you. I have not worked with these contractors, but other investors have. They were among a curated list of my investor-focused agent. The first bidder was also recently used by an investor on this forum on a successful BRRRR.

    Thanks for the gut check on those items. Where would you expect those numbers to be, roughly? I know everything is quite expensive right now, but any base metrics would be helpful.

    Cheers,

    Anish

    1Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    5y

    @Anish Patel

    There’s things missing from this. I don’t see mention nor price for any demo work. I see nothing mentioned for permits cost, or any other project overhead like portable toilets, dumpster, dumping fees, site security, and more. I hope this isn’t the SOW you intend to use to base a contract on. Who is supplying the build contract? If the contractor doesn’t have a contract ready for you to sign tell the good bye. They are probably equally prepared to do your job. Sorry, not intending to sound too harsh btw.

    Aside from the SOW being weak, the cost of +/-$82/Sqft is within the realm of reality. There’s simply not enough information provided to say more than that. Your planned budget is also irrelevant. The property dictates what has to be done. It’s the most common pitfall for all this stuff, missing (underestimating) your rehab estimate.

    4Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    5y

    @Tony Gunter

    I had to become a GC to figure this stuff out to my satisfaction.

    3Reply
  • Anish Patel
    OP
    Investor · San Francisco Bay Area · Member since 2019 · 13 posts · 4 votes
    5y

    Not harsh at all - this is exactly the type of feedback we're looking for. Thank you for calling out all the other items. I wasn't sure if it was typical for those pieces to be embedded into the estimates are broken out individually (as I type this out I realize we should just be asking for everything to be broken out). 

     Also, great to know that $82 / Sq. Ft is a realistic number. The initial high-level estimates we received all hovered around $100K, but none were directly from a GC. Should be receiving a couple more bids today. 

    Really appreciate your response!

    1Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    5y

    @Anish Patel

    I can only speak for myself, of which I’m sure many are very thankful, but here goes…

    My SOW on a property that size would probably span 12-20 pages. I’m including everything, because if it isn’t on the SOW, it’s not included, period.

    If I’m meeting with someone and they want a “bid”, the first thing I’m going to ask for are drawings, their SOW, and their materials schedule. Which often induces the “deer in the headlights” expression.

    If you can’t hand me those your not ready for a bid of any type. You still have design work to do. I charge for that, because I will easily put 15 hours or more into developing those three ítems.

    The way you are doing it you’re going to get a contractors interpretation of what you want. You are doing yourself a disservice as well because you aren’t offering an apples to apples to the contractors. They are left to fill in the gaps. Not trying to beat you up, it’s the “you don’t know what you don’t know” conundrum.

    4Reply
  • John MorganPro Member
    Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
    5y

    Those bids are all ridiculously high. Maybe try getting a bid for one or two things at a time. If the contractor does a good job, keep using him. If not, move on and try another one. The problem is good labor is hard to come by. Once you find a good one, don’t ever penny pinch or get too picky with him. My guy is pretty good and I’ve stayed with him for a few years. I trust him so much, I gave him my credit card to buy whatever materials he needs at Home Depot. And he tell me to pay him whatever I want after he finishes. Lol.

    2Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    5y
    Originally posted by @Anish Patel:

    Hi everyone,

    I'm in contract for this property with a couple business partners. Inspection came fairly clean, but as you can see there is plenty of work to be done. I'm in the process of collecting bids from GCs, but the estimates are coming in far higher than what we were originally told (we were targeting ~$100K). Here is a comparison of initial bids (I'll keep adding as others come in). Our goal is to BRRRR this property and based on an initial comp analysis, we're expecting an ARV of ~$280K+.

    This is our first BRRRR (but not our first Ohio investment), so we'd love to gather input from more seasoned BRRRRers (is that a word?). How would you approach negotiating down these initial bids? Are there any line items that seem way off base?

    As an aside, I'd be happy to connect with any other investors in Ohio, particularly Columbus. Would love to trade notes!

    Best,

    Anish

    My initial thought is that everything on the bid list looks normal (however much more expensive then I would pay). However I am local to Columbus and can use that to leverage cheaper contractors.

    I have done full guts for anywhere from $20k-$60k pending on size and area of place. 

    Im currently working on my 3rd BRRRR in the city. My first and second BRRRR got me over $200k in equity!

    2Reply
  • Allen L.
    Rental Property Investor · Chicago and mainly invests in KS remotely · Member since 2018 · 360 posts · 314 votes
    5y

    Wow, really high bids. Definitely get new ones. 

    You might already know this, but in terms of managing a BRRR with 100K+ construction budget, I suggest

    1. break down into phases, 20K per phase

    2. Only give deposit for material during the start of each phase

    3. Plan to be 20% over budget and change orders, things from city inspections etc

    4. Collect all invoices for the phase at end of the phase

    My higher level opinion is to hire people for their trades, and take those out of the GC bid. Have the PM manage the tradesmen. You can likely save quite a bit by not having the GC manage the mechanical work. Use the GC to pull the build permit and interior and exterior remodels.

    A lot of people don't immediately recognize this, but the best BRRRRs are typically from destressed owners, not destressed properties. All of my larger rehabs have been less impactful at building wealth than light cosmetic rehabs. Holding cost and unforeseeable expenses kills... Holding a large construction project for 4 months for what? I can BRRRR 2-3 properties using the same funds on lighter rehabs.

    3Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y

    As @Tony Gunter pointed out, that is a horrible SOW. You will run into trouble right out of the gate with no specifics. So I too hope you are going to develop, or have the Contr develop, a document detailing exactly what they will do. I prefer - and I think it is more productive and less prone to errors - to have the SOW broken down by trade, not by rooms. Mine were not as long as Tony's, but for a project like this would run over 10 pages, easily (including the $$ pages)

    Aside from that, this looks like a reasonable working budget, although it is incomplete for all 3 bidders. I would think around $100 SF is what to expect - to get GOOD quality workmanship.

    A big ? is regarding your numbers for Plans and Permits, they can/should be much higher than $500...and without these being accurate and tight, your Contrs really cannot give you a solid number that will not change as you go. Right now they are all kinda guessing....

    All project's Achilles heel are the Change Orders....they will eat up your extra $$ and will aggravate the Contractor. And then you will start blaming him and there goes your project...... :-)

    Hope this helps.....happy to send you what a proper Proposal, Contract, or CO looks like if you want to do it that way. But maybe you had planned on kind of a 'down and dirty' project? (No offense).

    3Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    100% on point @Tony Gunter

    @Anish Patel this is a very incomplete SOW and will leave you disappointed...I see this happen all the time...you'll get 60% through and have no way to finish the project...if you have never done a renovation of this size/scope it's not a good starting point...

    The only way to do something like this is have someone very experienced with a project like this build your scope (an awesome agent, GC, or an architect)...an architect will design the project, estimate the costs, pull permits, advertise the work, manage the contractor bids, and administer construction...we usually pay around 10-11% of total project costs in design fees....honestly, it's the best money you will spend.

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    4Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y
    Originally posted by @Allen L.:

    Wow, really high bids. Definitely get new ones. 


    My higher level opinion is to hire people for their trades, and take those out of the GC bid. Have the PM manage the tradesmen. You can likely save quite a bit by not having the GC manage the mechanical work. Use the GC to pull the build permit and interior and exterior remodels.

    Those bids are not that high in reality. You get what you pay for.

    I don't know a GC that would go for a deal like that. He loses control of the project and increases his liability greatly. If you find a GC that will do this, then run, because he is either a rookie or desperate for work, neither of which you want to get involved with.... Once again.....You get what you pay for...

    2Reply
  • Bruce WoodruffPro Member
    Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
    5y
    Originally posted by @Brandon Sturgill:

    100% on point @Tony Gunter

    @Anish Patel this is a very incomplete SOW and will leave you disappointed...I see this happen all the time...you'll get 60% through and have no way to finish the project...if you have never done a renovation of this size/scope it's not a good starting point...

    The only way to do something like this is have someone very experienced with a project like this build your scope (an awesome agent, GC, or an architect)...an architect will design the project, estimate the costs, pull permits, advertise the work, manage the contractor bids, and administer construction...we usually pay around 10-11% of total project costs in design fees....honestly, it's the best money you will spend.

    Well said!!!! The only thing I would take issue with is having an Architect manage the entire job, including the GC. Talk about ruffled feathers! If anything he may want to find the GC first, and use that GC's Architect. IMHO, most architects are not very knowledgeable about project management or building in general, they've never built a house....they are better off just drawing the plans. 

    3Reply
  • Anish Patel
    OP
    Investor · San Francisco Bay Area · Member since 2019 · 13 posts · 4 votes
    5y

    @Tony Gunter - great insights. As an out-of-state investor, I'm struggling to understand how to develop drawings, a detailed SOW, and materials schedule. I was thinking I could collect 5 bids from multiple GCs, gather input from PM / agent to figure out what's missing needed, pull together a frankenstein SOW, and send those out to the GCs that I'd like to move forward with. Is there another approach you would recommend around how to approach this as an out of state investor? @Brandon Sturgill - seems like your answer to this Q is using an architect?

    @John Morgan - I like your suggestion to start with smaller jobs and finding people I like to work with before moving onto bigger projects like this. Thank you for that guidance.

    @Steven Foster Wilson - Congrats on the successful BRRRRs. Awesome stuff

    @Allen L. - great advice. Have you actually found GCs that are willing to comply with those requirements? Not asking for you to share any names, but just curious if I should actually expect to be able to find GCs that check all those boxes.

    @Bruce Woodruff - thank you for the insights. I will follow-up with you directly on your offer.

    @Brandon Sturgill - thank you again for the help. Trying to learn from mistakes, just not my own mistakes. 


    0Reply
  • Allen L.
    Rental Property Investor · Chicago and mainly invests in KS remotely · Member since 2018 · 360 posts · 314 votes
    5y

    @Anish Patel I think where you can start is with a GOOD local PM company. Pick a corporatey one, I find corporate style property management companies are a much stronger value add than picking a PM based on personality or likability. They have a list of contractors to work with that *very likely* won't screw them over, and to be honest, in your situation I am mostly scared for this OOS. When I first started OOS this was the biggest challenge, and it is only resolved with a strong knowledgeable PM and maintenance staff that can evaluate the work done. Now I'm not afraid to seek vendors based on price, because my PM will not let me pay if the work is not up to standard. I would even say 130K for your project is ok if you find good PM and use their resources instead of trusting a GC on his word for his work. Regarding the PM managing the tradesmen to save on cost, I am referring to a skilled PM (which may involve maintenance evaluation), not just any bum that owns a PM company.

    1Reply
  • Tariq B.
    Investor · Laurel, MD · Member since 2014 · 251 posts · 140 votes
    5y

    @Anish Patel 6K for hollow doors? Wow. Get more quotes.

    0Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    5y

    @Anish Patel

    I would not work with an architect. They are great at design, but they still have to get a GC to price it.

    I would interview 3 general contractors in the area that market themselves as “Design & Build” firms. Go into the meetings with your pain points clearly outlined as well as what your trying to achieve. Ask to see a couple of their SOW’s, drawings.

    These are the ones that can best evaluate and outline the “As Built” conditions for the entire house and give you a SOW for the entire property. It’s never the cosmetic things that blow a budget. It’s structural issues.

    You can ask them to do this and to include their bid. The thing is, you have to pay for all this.

    I would try to strike a deal with the winning firm that you’ll pay ___ for an initial estimate to assist in making your purchase decision, and then pay ____ to work up the detailed SOW after you buy it. This may seem like a lot of “paying”, but wait until you underestimate a place by 50%. Then these cost will look cheap in comparison. If you want to work with professionals, go find them and pay them. Its not a secret.

    1Reply
  • Casey Williams
    Tomball, TX · Member since 2020 · 6 posts · 0 votes
    5y

    @Tony Gunter

    Do you have an example of a SOW you could post or send for reference? It would be greatly appreciated.

    0Reply
  • Blair Gummere
    Contractor · Westlake, OH · Member since 2016 · 3 posts · 1 vote
    5y

    These prices seem really high, especially on the hvac and plumbing. I would guess these were being  subcontracted by general contractor and are marked up a good amount. Maybe try to get these things taken care of with a company that specializes in them and then get quotes for the rest of the rehab. 

    0Reply
  • Blair Gummere
    Contractor · Westlake, OH · Member since 2016 · 3 posts · 1 vote
    5y

    These prices seem really high, especially on the hvac and plumbing. I would guess these were being  subcontracted by general contractor and are marked up a good amount. Maybe try to get these things taken care of with a company that specializes in them and then get quotes for the rest of the rehab. 

    0Reply
  • Brandon SturgillBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2013 · 3k+ posts · 1k+ votes
    5y

    @Anish Patel...personally, yes, I would look to hire an architect...small and local...at least check in on availability and rates...and during the conversation, ask if they recommend any good GC's locally.

    This is a complex project...the property you are looking at has a long history

    There have been dozens of individuals that have passed on this one for a reason...every time it hit the market it sat for half a year....just something to think about...

    If you are taking on this project, you need a A-team to pull it off...not saying that you can't make this work, but plan wisely.

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  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    5y

    @Casey Williams

    Yes. I’m seeing how might be best to do that given the BP platform limitations. I hate the mobile app. Quirky Stone Age app.

    0Reply
  • Jordan Williamson
    Rental Property Investor · Cape Coral, FL · Member since 2012 · 427 posts · 186 votes
    5y

    Not gonna lie. I see all the feedback your getting, but to me, all those bids are WAYYY high at least for my area.

    0Reply
  • Anish Patel
    OP
    Investor · San Francisco Bay Area · Member since 2019 · 13 posts · 4 votes
    5y

    This community is absolutely incredible. Thank you all. As an update that is probably not a surprise to you all, we dropped out of contract. Realized we need to walk before we run. Will be referencing this thread as a bit of a bible for the next BRRRR opportunity that comes our way.

    0Reply
  • Tony Gunter
    Investor · Canton, GA · Member since 2014 · 728 posts · 501 votes
    5y

    @Anish Patel

    Probably a smart move.

    The danger for newer folks is there typically is little room for error in this market. While “analysis paralysis” is not desirable, neither is a “one and done” venture ending disaster.

    Back up and take another stab at it 👍

    0Reply
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