Hiring a Project Manager

5 Replies

If you were to hire a Project Manager for just one flip/rehab - either because that's the only project you had going or you just wanted to a "first date" to test their skills how would you structure their pay? Let's say this PM would be acting as your General Contractor for the job and would oversee any and all subs.

Would you agree to a flat fee based on the project and/or a percentage of the profit or a percentage of the agreed upon ARV.

How would you handle the purchasing of materials... give them a Home Depot gift card, temporary access to your credit card, go with them to the store, have them purchase and reimburse them? 

Would you structure their payment to be half at starting, half at end of rehab. Or would you expect them to not get paid until the property is sold.

Would love to get lots of feedback and ideas please.  

@Christine Lovett   First off as the purchasing of materials goes, the way we do it is when one of our workers buys materials we have him call us when he gets to the register and we verify the amount and give the cashier our CC number.  Easy process.

The PM's job is to manage a rehab, is this correct? He is not going to be a partner on the project? If this is the case what you sell it for or what the ARV is means nothing to the PM. If you bought it wrong and can't sell it and he is not a partner, what does he care? He manages the project within the budget you outlined, he gets paid.

We have done this in the past for people here in Connecticut, where we basically GC the flip for them.  Our rate is always based on a percentage of the rehab budget because again we are managing the rehab as a PM.

On projects where we joint venture and partner with rehabbers, we obviously structure the deal differently.

@Christine Lovett   Also depending on who the rehabber is and our relationship we have with them is how we will go about proposing when in the process we will get paid, but we always get paid on a percentage of the rehab estimate.

@Christine Lovett  my project manager works solely for me and isn't the GC. The project manager would hire a GC. This is because I need someone who is my wingman covering me in my project. The GC is the contractor on the project and while that person should be considered to be a reputable or reliable one in real estate investing it's just good practice to have someone covering for you (investor). I pay my project manager 5% of the SOW as a fee to oversee the project, visit regularly, send me photos, etc.

I pay for materials over the phone as a standard process in order to avoid material upcharge, avoid paying an upfront fee to contractor, and helping the contractor not having to finance my own project. This is separate in my business from the project manager. The project manager is someone who is working for me at the project.

The project manager gets paid at the end of the project on the final draw. If you do pay some upfront fine that might work for you but you need to make sure there is a good amount at the end so the project manager has good incentive to finish out the project. Just like a contractor I don't pay them everything upfront and I hold a fair amount until the project is completed.

Good luck!

Christine,

As a contractor myself, one of my main responsibilities as a GC during a remodel for a client is the management of the project to ensure it's built according to the contract and SOW. I would encourage you at this point when you are just starting out to focus on finding and developing a relationship with a good GC who would do all that for you as the normal part of their job duties. I agree with the strategy of JJ Pawlowski of having a project manager working for him but he is down the road a ways from where you are. After you get to the point of having multiple projects I think it would make sense to at that point hire a Project Manager but at this point why not keep the 5% and let the GC do his work?

Also, as a fellow Californian, by law the GC can only collect $1000 or 10% of the contract amount at signing WHICHEVER IS LOWER, they can also not bill you for work not done.  I understand you are talking mainly PM in your scenerio but just keep that in mind when you are hiring GC's. 

Thank you all for your feedback. My husband is the Project Manager for our company since he has completed over 100 rehabs for another investor before we started our own company. We have current projects that keep him busy but during any possible downtime I want to ensure that he stays busy .... aka out of my home office. My inquiry was mainly in case I wanted to "pimp" him out to other local investors.

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