First Rehab Project....Does this GC bid seem like a good deal?????

First Rehab Project....Does this GC bid seem like a good deal?????

Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes

I have ran my own numbers and I feel like I am getting a really good deal here, but I would like you seasoned rehabbers to let me know your take on it.

To give a little background....This is a lower end neighborhood, so I will be using lower end items of course.  All of the things that are being bought will be new though, if that makes any sense.  

JOB ITEMS:


I. LIVING ROOM $117.33
*1. Carpet
2. Ceiling fan
3. Remove Chair Rail
4. Paint
5. Mini Blind
6. Clean brick fireplace
7. (5) outlets, (1) 2 gang switch covers


II. STUDY/OFFICE $306.24
1. Replace french entry doors/glass
2. Replace closet doors
*3. Repair lower left wall
4. Door trim
*5. Paint
6. (4) outlets & (1) light switch covers
*7. Floor
8. Ceiling fan
9. (2) door knobs


III. KITCHEN $2618.56
*1. Repair floor & washroom
2. New "over the range" microwave
3. New faucet w/ sprayer
4. New countertop
5. New door (3 hinge)
6. Wash closet door
7. Trim washer conn. Box
8. Drop light fixture
9. Fluorescent light fixture wash closet
10. Dishwasher
*11. Paint
12. Mini blind
13. Luann panel on cabinet
*14. Repair wall corner
15. (7) outlets, (2) switch, (1) 2gang switch covers
16. Paint light rings & register
17. Drawer handle
*18. Paint on cabinet doors
19. Pantry door knob

IV. MASTER BEDROOM $237.06
*1.Repair holes/patches in wall
*2. Paint ceiling white
*3. Paint walls
4. Mini blinds
5. New double French doors
6. (4) holes in wall
*7. Floor tiles/keeping tile
8. (2) door knobs

V. MASTER BATH $460.06
1. New faucet w/ pop-U
*2. Paint ceiling white
3. 1st closet door
4. 2nd closet door
*5. Paint walls
*6. Patch walls
*7. Paint trim
8. Door knob
9. (3) switch, (1) outlet, (1) switch covers
*10. Tiles at closet doors
11. Paint cabinet
12. Shower head & hardware
13. Mini blind


VI. 1ST BEDROOM $260.88
*1 Carpet
2. Closet door
*3. Repair holes in walls
*4. Paint
5. New ceiling fan
6. Mini blind
7. (4) outlets (1) switch covers
8. New door
9. New door knob & closet knob


VII. 2ND BEDROOM $247.89
*1. Carpet
2. New door
3. New closet door
4. Repair ceiling
*5. Paint
6. New ceiling fan
7. New door knobs
8. (2) closet door knobs
9. (4) outlets, (1) switch covers
10. Mini blinds


VIII. OUTSIDE $2,346.24
1. New shutters (8)
*2. Paint
3. New Lg. 3 part window
4. New fence in back
5. New gutter above front door only
6. Powerwash brick & siding
7. Missing facia siding
8. Post on back
9. Inside corner siding
10. New screen door back
11. New screen door front
12. Rear outside light fixture
13. New front entry light fix.
14. New post on front porch
15. Screens for windows for front
16. Garage door trim
17. Garage door repair
18. Garage door opener


IX. GARAGE $21.65
*1. Paint walls
2.door knob


X. HALL BATH $422.17
*1. Paint ceiling
*2. Paint wall
*3. Demo floor tile
*4. New floor tiles
5. Reinstall appr. 35 wall tiles
6. New light fixture
7. Replace (2) window panes
8. New a/c vent
9. Ceramic soap dish
10. Toilet /toilet seat
11. Ceramic towel rack
12. Outlet/switch covers
13. Tissue holder
14. new door
15. Door knob
16. Shower head & hardware


XI. HALLWAY $119.08
1. Door on closet
2. Light fixture
*3. Carpet
4. (2) closed door knobs
5. Door bell


XII. DINING RM $178.61
*1. New flooring tile
2. Drop down light fixture
3. Replace (1) mini blinds
4. Outlets/switches covers
*5. Paint
6. Ext door knob & deadbolt


XIII. ENTRY $106.08
*1. 5'8"x4'8 1/8" floor
2. ceiling light Fixture
*3. Hole in wall
*4. Paint
5. Ext. Door knob & deadbolt
6. Closet door knob
7. One 2gang switch cover
*8. Ceiling repair



$2,461.32 *price covers items below
ALL INT. PAINT
ALL EXT. PAINT
WALL/CEILING REPAIR
ALL FLOOR TILE & LABOR
ALL CARPET & PADDING & LABOR
WALL TILE


MATERIAL $9,903.17
LABOR $10,000.00

TOTAL $19,903.17

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Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
11y

@Hattie Dizmond - I'm with you.  I can't really tell you much about the estimate without knowing the dimensions of rooms.  In general most contractors are going to run 1/3 materials & 2/3 labor & profit for a general reference point.  Some mark-up materials and some don't.  Some will take a loss on some line items and make it back on others.  We do that as well.

Not sure I'd want to install a $30 ceiling fan anywhere!  The units we use are usually $110 to $150 depending on what it is.  Always spend a bit more and I always upgrade fans to units with remotes.  I also upgrade door knobs and locksets.  Going cheap will cost you at some point.  

Again, I don't know the market there but this seems like a contractor desperate for work which isn't a recipe for success.  You may want to have another chat with him and offer to pay him a bit more for better quality materials...especially if this is a rental.  

Most contractors...including us, are going to require a partial payment upfront to start a job like this.  We usually do them in 2 to 3 stages.  If the references check and they have a decent storefront presence - office somewhere other than home, labeled truck, professional business card and relatively clean record with the local BBB....then you are good to go with them. I hear from so many investors who used someone off Craigslist and ended up calling us to clean up the mess....so be careful!

See this reply in the discussion

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  • Flipper Mostly · Redwood City, CA · Member since 2012 · 107 posts · 26 votes
    11y

    Looks like a pretty decent deal to me, just don't pay them before doing any kind of work and be there to inspect as much as you can :-)

    Also try and get as many details in as you can that covers each item and each detail to that item to be done so that everything is clear before they start work, then its a good idea to use that to verify their work is done as requested. 

    Consider adding a bonus $ if all work completed in a certain time, otherwise contractors can work on their own time and if busy, they are known to juggle a few jobs at the same time and your place gets left untouched for days.

    Everything as clear as possible results in less problems with your contractor later.

  • Investor · SC · Member since 2014 · 11 posts · 5 votes
    11y

    @Jamie Wooley 

    After a quick look this bid seems like quite a good deal to me, especially for the total number of rooms you have listed here.  The other big factor to weigh in would be the total time for the rehab to be completed.  Sometimes the cheapest isn't always the best when it comes to time and quality.  Remember to get a few references for this GC from recent clients to get a good idea of how quick the work will be done.

    If you're planning to flip this property always keep this in mind:  Time = Money

    The longer you have to hold this property the less profit you will make on the back end.

  • Real Estate Consultant · Alpharetta, GA · Member since 2014 · 661 posts · 400 votes
    11y

    @Jamie Wooley

    I think the bid overall looks good. It's not great and its not bad. I think it is a fair bid. I think you will be happy with it I would if it was me. 

    The only thing I see is it doesn't look like you have any money for EMP's? 

    Are they all good? Do you have someone else doing them?

  • Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes
    11y

    @Colby Jacobs

    Thanks so much for looking at the bid, it really helps to have another opinion.  

    The eta of the work being done is 4 weeks...Does that sound reasonable?

  • Contractor · Raleigh, NC · Member since 2014 · 651 posts · 510 votes
    11y

    @Jamie Wooley 

    It's hard to say without more specifics but if anything: it seems low. 

  • Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes
    11y

    @Andrew Cordle

    What are EMP's?

  • Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes
    11y

    @Art A.

    Yes, I thought it was a great bid.  They currently do not have a steady stream of work and are dying to get my business so they could have all of my rehabs.  If they keep giving me prices like this and their work is what they say it is and what their references have said I feel very lucky.

  • Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    @Jamie Wooley 

    Based upon an estimate I just completed, that seems really low. 

    Part of that may be that we don't know how big the property is.

    But, let's look at this example...

    VII. 2ND BEDROOM $247.89
    *1. Carpet
    2. New door
    3. New closet door
    4. Repair ceiling
    *5. Paint
    6. New ceiling fan
    7. New door knobs
    8. (2) closet door knobs
    9. (4) outlets, (1) switch covers
    10. Mini blinds

    Putting the very cheapest plush carpet (pad & labor) in a 10x11 secondary bedroom is going to run you about $150. 

    Ceiling fan $30

    Door knobs $10

    Closet door knobs $8

    Elect covers $5

    Bedroom door $30

    Closet door $30

    Mini blinds  $15

    That's $278 just for materials, forget about the labor, painting & ceiling repair.

    It may be an estimate they are willing to stand behind, but it's an estimate that would scare me.

  • Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
    11y

    @Hattie Dizmond - I'm with you.  I can't really tell you much about the estimate without knowing the dimensions of rooms.  In general most contractors are going to run 1/3 materials & 2/3 labor & profit for a general reference point.  Some mark-up materials and some don't.  Some will take a loss on some line items and make it back on others.  We do that as well.

    Not sure I'd want to install a $30 ceiling fan anywhere!  The units we use are usually $110 to $150 depending on what it is.  Always spend a bit more and I always upgrade fans to units with remotes.  I also upgrade door knobs and locksets.  Going cheap will cost you at some point.  

    Again, I don't know the market there but this seems like a contractor desperate for work which isn't a recipe for success.  You may want to have another chat with him and offer to pay him a bit more for better quality materials...especially if this is a rental.  

    Most contractors...including us, are going to require a partial payment upfront to start a job like this.  We usually do them in 2 to 3 stages.  If the references check and they have a decent storefront presence - office somewhere other than home, labeled truck, professional business card and relatively clean record with the local BBB....then you are good to go with them. I hear from so many investors who used someone off Craigslist and ended up calling us to clean up the mess....so be careful!

  • Rental Property Investor · Arlington, TX · Member since 2012 · 788 posts · 640 votes
    11y

    @Jamie Wooley 

    Bid seems on the low end.  Make sure to confirm insurance and referrals.  If you can I would view an existing project they are working on. 

  • Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    @Andy Luick 

    Yeah, the quote we just got was from a close friend who has a contracting business.  Stellar references great quality of work.  But, even with him being a close friend, it's 40% to start, then the remaining 60% on milestone payments. 

    And...you're right...$30 was for a ceiling light fixture.  It was $100 for a small ceiling fan, which even makes this quote a little more crazy.

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    11y
    Originally posted by @Hattie Dizmond:

    @Jamie Wooley 

    Based upon an estimate I just completed, that seems really low. 

    Part of that may be that we don't know how big the property is.

    But, let's look at this example...

    VII. 2ND BEDROOM $247.89
    *1. Carpet
    2. New door
    3. New closet door
    4. Repair ceiling
    *5. Paint
    6. New ceiling fan
    7. New door knobs
    8. (2) closet door knobs
    9. (4) outlets, (1) switch covers
    10. Mini blinds

    Putting the very cheapest plush carpet (pad & labor) in a 10x11 secondary bedroom is going to run you about $150. 

    Ceiling fan $30

    Door knobs $10

    Closet door knobs $8

    Elect covers $5

    Bedroom door $30

    Closet door $30

    Mini blinds  $15

    That's $278 just for materials, forget about the labor, painting & ceiling repair.

    It may be an estimate they are willing to stand behind, but it's an estimate that would scare me.

    Hattie,

    You are reading that proposal incorrectly.  the items that have an asterisk next to them have their material costs lumped into one big number near the bottom of the proposal.  so the number immediately before any section of that proposal is strictly for materials that do not have an asterisk alongside of the item.  So exclude carpet from the material total for this one example you are quoting, and the numbers aren't looking as low as you thought.  And that number above any section is materials only, no labor. Only the labor total is given, at the bottom of the proposal.

    I had to look at that proposal a few times to figure out how to make sense of it BTW ... but it seems to be reasonable for the scope of work being given.  And the time given should be doable, but i would not be surprised to see it take longer (seems to always just work out like that).

  • Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    11y
    Originally posted by @Andy Luick:

    ...

    Not sure I'd want to install a $30 ceiling fan anywhere!  The units we use are usually $110 to $150 depending on what it is.  Always spend a bit more and I always upgrade fans to units with remotes.  ...

    Nothing wrong with $30 ceiling fans IMO.  They might not seem as pretty, but they last long enough to get your money's worth from them, as long as you don't have a destructive tenant.  And if you have a destructive tenant, the remote from your more expensive fan won't hold up anyway :)

  • Investor · Dallas, TX · Member since 2014 · 2k+ posts · 1k+ votes
    11y

    @Steve Babiak 

    Great catch!  Thanks.  I looked all over for the tag to the meaning of that *, but I didn't see it. 

    I don't know about the size of the house, but it still feels really thin on labor to me.  Maybe I just have really expensive contractors. :-) 

  • Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes
    11y

    Thank you all for your comments and opinions as they are important to me with this being my first rehab.  One of the first questions I asked the owner was what quality of light fixtures and fans he used to come up with the bid and he said that he used the "home depot middle of the line quality" to do the bid.  The same was asked for the carpet and tile and he said a little bit better than the standard low grade, which is great with me considering it is a low end neighborhood.  So we are not talking about $30 dollar fans here, I don't know where that came about.  Like I said before, they want my continuous business so they made it very clear from the start they would shoot straight and do quality work so we could have a long term relationship.   

    (The owner of the company is actually a preacher as well which may not mean much to some people but I feel I am a pretty good judge of character and he and his team seem very honest and so far have been great to deal with)

  • Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes
    11y

    The size of the house is 1516 square feet BTW.

  • Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes
    11y

    Does anyone know what EMP's stands for?

  • Jerry W.Pro Member
    Moderator
    Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
    11y

    @Jamie Wooley , I bet most of the folks have more experience on hiring contractors than me, but if I can get a contractor for the same price as materials I am usually happy.  This does not count for things like new kitchens, but for the kind of work you are having done that is a good ratio.

  • Investor · Dallas, TX · Member since 2014 · 142 posts · 44 votes
    11y

    @Jerry W.

    Thank you very much!

  • Real Estate Broker · Redwood City, CA · Member since 2014 · 679 posts · 888 votes
    11y
    Please let us know how it works out at the end. Not sure if the quote covers both labor and material or just labor. The price is so low that I can only assume it covers labor and part of material. I am a GC and this price is barely enough to pay the workers. I am in CA. Watch out for change orders later on. Good luck.
  • Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
    11y

    @David Song - exactly.  A 1:1 ratio of materials to labor & profit isn't going to cut it.  I can't speak for every part of the country but the only way this is going to work is if the contractor either doesn't know what he's doing or is using completely illegal labor.  I have an Atlanta client who also had an investment house in Phoenix.  He got the inside & outside of the house repainted for $2,000.  It was a 2,400sf home.  All of the labor was illegal.  He wanted to do the same thing here in atlanta and, even with illegal labor here, he couldn't get anywhere near that price.  We ended up passing on the job.

    I would get several other bids to gain a better understanding of your local market.  I've been a contractor for nearly 3 decades now.  I think you are asking for trouble on this one.  This may not be the case with your contractor but when people live 10 to an apartment and don't pay any taxes....they can work pretty cheaply!  Depending on the market and how hungry a contractor is, you can get some pretty good deals this time of year.  However, there is a huge difference between being hungry and being stupid.  Let us know how it works out!

  • Real Estate Investor · atlanta, GA · Member since 2013 · 456 posts · 237 votes
    11y

    @Steve Babiak - Whether you land a destructive tenant or not is all part of your screening process.  Ours is a different process and a completely different type of rental/renter.  We end up going with higher end fans, hardware, faucets and finishes because we've determined that a better looking product attracts better quality renters.  I think that holds true in any market.  Investors often error on the side of cheapness and it costs more later on to correct.  Our shared housing program pretty much prevents a tenant from tearing up the property and we keep unfettered access to the houses at all times.  We do get a lost remote here or there but it too is rare.

    What you use in terms of finishes is dependent on who you are renting to...Section 8...sure go for the basics as chances are they will tear it up at some point.  Most of our Atlanta & Nashville renters are professional people...even the blue collar workers we attract are of higher quality than the folks we used to rent entire houses to.  We recently started adding built-in USB chargers to all bedrooms and you can't imagine all of the positive feedback from something that adds $120 to the rehab.  It's huge.

    Jamie - LUCK!  You'll get through this first one and start to sort out your team from there.  You're in Texas so there's probably still a ton of cheap labor there.  Unfortunately, you'll only discover that one project at a time.  Even when you do develop a relationship with someone...it can go sideways very quickly.  I have a client who had a long term relationship with a GC where they had done dozens of fix and flips together...this last one, he delivered complete trash and after spending $120k on a project budgeted at $65k she still has a fixer upper on her hands! It's always caveat emptor.  At least you got a written bid, you'd be amazed at how many investors work off oral agreements...talk about asking for trouble.

  • Developer · Decatur, GA · Member since 2011 · 1k+ posts · 1k+ votes
    11y

    @Jamie Wooley EMP is probably for earnest money payment.  The amount you pay up front is a risk with the low bidders.   They draw you in with the low bid, the rehabber enthusiastically pays money for the materials and a bit of labor, then the contractor disappears.  

    The bid is very low in my opinion.  I'd pay for all the materials directly and pay contractor upon completion.  You'll want to hedge your bets on this one.  A milestone payment for 1/3 labor halfway thru the project would be a decent compromise.

    Last but not least, always get more than one bid.  Even if you're very comfortable with the contractor.  Each contractor will see something the other didn't, educate you more on the process, and dispel an assumption the last guy made (that would cost more money).  AND, it keeps everyone from bidding overly high because they've captured your loyalty. Consider it free training.

    Good luck!  Hope it goes well!

    Rick

  • Blacksburg, VA · Member since 2014 · 5 posts · 3 votes
    11y

    I agree the bid seems low; that is roughly $13/SF. However, that doesn't always mean it should be a warning sign. Sometimes contractors are just really hungry and are willing to 'buy' jobs. If that is the case here, and this contractor seems to have a track record for providing the type of quality and service you are expecting, then I would suggest to proceed, but cautiously.

    As an architect, my clients ALWAYS use extensive language in their contracts and in specifications that protect them, regardless of the nature of the contractor. I do a lot of public work, which typically means the jobs are hard bid rather than negotiated. It also means that the owner usually has to accept the lowest responsible bidder, even if they don't particular like that contractor due to past experience. As such, they use many different tactics to protect their interest. I don't have much residential experience yet, but I have always wondered why the residential industry seems to get by with promises and hand shakes rather than contractual language to protect the various parties involved.

    I say all that to so say, as long as you are smart about the contractor you are hiring and how you go about the process, you should be fine. Get references and follow up on them. I would recommend a 5% or even 10% retainage, depending on the legality of this in your state. Nothing is worse than having to hire a second contractor to finish the last 10-20% of a project because the first one skipped town after getting enough of the fee to move on to the next one. Good luck!

  • Blacksburg, VA · Member since 2014 · 5 posts · 3 votes
    11y
    Originally posted by @David Song:

    Watch out for change orders later on.

     This. This times 1,000. We have all seen the picture where the contractor supposedly has two boats. One is an inflatable dingy with a 10 HP outboard motor. It is called "Original Contract". The other boat is a huge yacht that most of us can't dream about. It is called "Change Order".

    I love working with contractors. Any chance I get to get out of the office and onto a job site, I jump at the opportunity. Most of them are great people doing great work. However, it is always wise to protect yourself from the few bad apples...

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