Thanks in advance for your input. I'm search very hard to find my first property to rehab and sell. I have a couple rental properties and consider myself pretty handy in terms of installing flooring, minor electrical, painting, etc and I enjoy coordinating repairs and getting out there and meeting people that do this type of work. That being said I have a full time job and have a wife that is looking forward to painting and picking out fixtures and such when the kids go back to school in the next couple weeks.
I had a GC give me an estimate on a potential property and the price came out to around $30k that includes roof, entire HVAC, bathroom, kitchen, flooring, drywall and paint. I did not get a breakdown of expenses and looking to see if he will do that for me. I don't want to waste any more of his time and I'm not going to move forward with him.
My questions are:
What is the typical GC profit margin?
What would be the typical savings on this type of work be if we managed getting the right people in to do the big work and us painting and doing the small stuff (fixtures, new outlets and switchplates, door handles, etc) ourselves.
I know time is of the essence and we would be hiring out the big stuff anyway. Would the savings of managing the rehab ourselves (especially when my wife is available and experienced working with some people vice hiring a GC to do it be worth it? What about when using a HML and you're right about at the 65-70% ARV - rehab. Toying with the idea of covering the rehab with my cash and using hard money for the purchase.
Thoughts? Thanks again.
15 percent is a common profit margin for a most custom home builders in my area using a cost plus contract to build. Budgets
edit- 15 percent is a common profit margin for most custom home builders in my area using a cost plus contract to build.
When we figure our houses ( and we are a little different because our GC is a part of our company which is GREAT!) The construction budget is about 50/50 materials and labor. The problem with trying to sub everything out on your own is it always takes longer. while you may save a little bit of money we have found that the time we gain from using a GC is a cost well spent. What i didn't understand when i first started and saw the huge construction budgets is that the actual GC doesn't really make that much off the job anyway maybe $2,000 at the most, and most of the time about $1,000. We have found it is a cost well spent.
Would you tell the GC what your profit margin is when you sell?
I've always used the same handyman with a 2 man crew. He pretty much took care of everything minus major electrical or major plumbing. I wouldn't use him for HVAC or the roof either, unless it's just a leak. I've always found a licensed contractor for those major jobs myself, but had the handyman coordinate the work and instructions as a GC would. If you feel comfortable with a handyman with enough experience, you may be able to get away by going that route and have him act as the GC in the process. I've found this to be a huge cost savings.
Good point @Joe Gore. Everyone knows that everyone makes profit. Pretty sure they can go back and look how much I bought the property for and then look to see what it sells for. Then they know MY profit (with some estimation of holding costs), if they so desire. Having never used a GC, I'm just trying to get an idea of pros vs. cons of using a GC with respect to my money!
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!