General Contractor or Manage your own Sub-contractors

10 Replies

Hello, I'm an investor from Tulsa Ok and I have a question for the rehabbers out there.  Does it work better for you to hire a GC to oversee the project or do you have better luck hiring subs and managing it all yourself?  Which way is faster?  Which is less expensive?

@Steve Rhine This is an age old debate! And a great debate at that.

I have done both. I would weigh the pro and cons of each side. I don't believe one is necessarily faster. 

My deciding factor would be based on your book of vendors. If you currently have an established book of vendors that you have worked with previously, AND you have the time, I would say to GC the project yourself.

If you do not have the time or book of vendors I would suggest to utilize a GC to manage the project.

@Steve Rhine In our experiences it is more expensive to have a GC manage, but a good GC will likely get the project done faster than you will trying to manage the different moving parts of a project on your own.  Why?  They just have more experience and connections, that's all.

Now the key is to make sure you hire a GOOD GC.  Things can go terribly and be more expensive if the GC isn't good and/or experienced with rehabs.  So if you have to pay a little more for a guy with experience and a track record in your local market I would do that.

The problem I see with investors sometimes is they try and micromanage every single expense associated with a project and while they are busy crunching numbers they don't take a practical view of the time and stress they save by spending a few extra dollars and hiring better people.

I use a GC who performs 75% of the work in house. The rest we sub out. I'm probably paying a premium doing it that way, but it's worth it because he coordinates just about everything for me so I can keep doing my full time job during the day. Also, I can call him for just about any maintenance issue and he has someone out in less than 24 hours most of the time. 

The problem you'll run into is that all contractors seem to be short handed on reliable help. Supply houses are the same way. Customer service has been on a steady decline lately. You call and ask for a price, then never hear back unless you follow up multiple times. They're all overloaded with work. Most projects are a few months out right now.

Don't let any of those issue distract you though. Get out there and get some. Good luck.

Jim and Michael make great points!  I manage rehabs, so I find GCs for remote investors and then manage the process.  I think a GC is typically a little faster.  Yes they have the contacts, but they are also more focused on the project from the time side.  If an investor works another job or has other projects, this needs to be taken into account. Meaning, if time = money, then a GC is generally better. I think it's the little things that add up on the time issue.  

What I see that can become an issue is when investors want to do things like do part of the work or buy all the materials.  These things actually make it harder for the contractor to perform his job.  I think it is best to be all in or all out.  You even get issues like investor buys materials to control costs, but in reality many contractors can get materials at discounted rates, and yes then mark them up a little. Then there is delivery of materials, if materials are provided by the investor, then contractor is not willing to pick up or return things. What if more materials are needed?  Also the more investor involvement the more often the materials can change from the original plan.  Saw one where the windows changed 5 times.  Right, wrong, or indifferent - it drove up cost and stretched out the completion date. I would say too that when an investor takes total control of the material side, then they might expect to see higher labor charges.  

If you find the right contractor I think it makes a lot of difference.  A bad contractor can really put the hurt on you.  Might sound like I'm looking at it strictly from the contractor view, but in my line of work the investor is king.  Completion dates are a big deal and costs matter.  

I actually think it's important to distinguish between the do-it-yourself flipper and the flipper that hires it out.  I've done it both ways.  Both are great ways of doing it.  In my experience the problems occur when you try to mix the two methods.  

This is the age old question and there is no universal right answer for everybody. My first many flips I acted as the GC and hired each sub. That said, I already had experience as a spec builder, land developer and landlord so I was not exactly green. I think hiring out your own can be a great learning experience and give you a solid foundation to build your business. But it also comes with risks such as screwing up the order, not having good subs, potential to hurt your timeline, etc. Having individual subs (and several for most line item tasks) is beneficial to keeping your timeline and ensuring quality control.

Hiring a GC to do it also has its benefits and negatives. It will likely cost you more and you have less control, but often times, a good GC can get you materials and supplies (with their markups) for same price or less than you can because of their purchasing power. (All bets are off during this supply chain issue and massive inflation situation.).

It all comes down to your skillset and objectives. If you have extensive construction knowledge and access to good subs and the time to manage the project then you can save substantial money. If your knowledge base and time is less you will probably end up better of you are using a contractor.  If you are doing multiple projects at a time you will either need to use a GC or project manager.