Thinking of self managing rehab property

Rehabbing & House Flipping
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Thinking of self managing rehab property

Brian Buckley
Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes

I just met with three different sets of general contractors to get an idea on the costs associated with the rehab, and I wound up with three completely different estimates. Contractor A gave the property a good walk through, but seemed more of a handy-man fix it kind of guy, but didn't write anything down and didn't give me any idea on price. Contractor B had the type of vehicle you might expect an established contractor to have, spent a substantial amount of time in the place, but missed things that seemed obvious to me, and I don't have much experience in the construction field. Contractor B gave me a ballpark of 70-100k and when I mentioned flooring options he told me that he "forgot" about flooring. Contractor C looked at the property for less than 5 minutes, didn't seem interested, but told me he used to flip homes until the market softened and now works for banks handling their REO rehabs and at a minimum it would cost 125k. A little background on the property, its extremely old, unknown the year it was built, but it was the house my grandfather grew up in and was left to a cousin who unfortunately couldn't maintain the property. Everything would need to be gutted and the layout redesigned, floor joists are an issue that need to be corrected, as the floors are sagging and there are cracks in the beams, soup to nuts the house needs it all except for a roof which was recently done and the siding just needs to be patched up. I'd probably agree that it would be on the higher end near 125k, but I'm the type that likes to deal with someone who writes things down and calculates, not just winging it on site after barely inspecting it. I'm considering hiring all the trades to come in myself and not pay someone for managing the work being done. I have time on my side because I believe I can work out seller financing with the executor of the estate and then use my own cash to rehab the property. It is a tremendous undertaking, but I didn't get the sense from these three contractors that they'd have my best interest at heart at the end of the day. I don't mind paying a premium for work, but none of them won me over on their business acumen. Shopping for skilled labor in my opinion would allow me to limit my exposure to bad work, and then I can take it one step at a time. Sorry for the long post, but interested to see what everyone in the BP Community thinks!

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Bob Okenwa
Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
9y

@Brian Buckley

Most people here would say to interview a MINIMUM of 3 GC's before making a decision, but I'd suggest you try to find a few more. The thing with self managing is that you seem to be someone who is a fan of the details (as am I) and you'd probably want to interview a few subs for each trade as well rather than just accepting the first guy you find. If that's the case, you'd need to interview 3 tile guys, 3 drywall guys, 3 electricians, 3 plumbers, etc. to be as thorough as possible. If you have patience and the proper amount of trade-scheduling skills, then being your own GC can work. Also keep in mind that in some states only a licensed GC can pull permits and I can tell you're going to need quite a few permits and you'd also need to be present for inspections since you are managing the project. Good help is hard to find and you may need to look a little harder or make sure you have all your ducks in a row to manage a project of that scope. A 125k project requires a ton of material, people, and moving parts. Best of luck with the project.

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  • Bob Okenwa
    Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
    9y

    @Brian Buckley

    Most people here would say to interview a MINIMUM of 3 GC's before making a decision, but I'd suggest you try to find a few more. The thing with self managing is that you seem to be someone who is a fan of the details (as am I) and you'd probably want to interview a few subs for each trade as well rather than just accepting the first guy you find. If that's the case, you'd need to interview 3 tile guys, 3 drywall guys, 3 electricians, 3 plumbers, etc. to be as thorough as possible. If you have patience and the proper amount of trade-scheduling skills, then being your own GC can work. Also keep in mind that in some states only a licensed GC can pull permits and I can tell you're going to need quite a few permits and you'd also need to be present for inspections since you are managing the project. Good help is hard to find and you may need to look a little harder or make sure you have all your ducks in a row to manage a project of that scope. A 125k project requires a ton of material, people, and moving parts. Best of luck with the project.

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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y
    Bob Okenwa I am very detail oriented and I'm not opposed to paying a GC 125k, but for that price tag I want to see exactly where my money is going. I'm definitely going to look for more contractors, because full on gut renovations would be new to me. I was really hoping to find at least one that I would've considered for the job, but none of them seemed to make sense for me. Outside of getting involved in the local REIA, any suggestions on finding good contractors? The property is located in New Jersey, FYI. I was contemplating asking people at a Home Depot pro desk to see if they have any suggestions for reputable people.
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  • Bob Okenwa
    Real Estate Agent/Investor · Peoria, AZ · Member since 2016 · 2k+ posts · 2k+ votes
    9y

    @Brian Buckley

    I've heard the same tip of asking the pro desk and also others have mentioned calling/visiting supply shops and asking there as well. A further reach would be internet research and calling and chatting in basically a phone interview with a GC to see if he's worth working with. Word of mouth is always the go-to answer for finding GC's but that's not always readily available. REIA is always a good way to get contacts and you can always toss out your ideas on BP and see who responds. I've heard of those who have stopped by home renovation sites and have gotten info for GC's and also heard of people asking subcontractors who the good GC's are as well.

    As far as the details, I assumed you think in a manner similar to myself and I'd be hard pressed to give a contractor that kind of money if I felt an inclinations they too were not attentive to details. Being a GC is a detail-oriented job and if you get a bad vibe that someone is overlooking things you would not, keep looking.

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  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y

    I'm in the process of looking for GC's to build relationships with for my rehabs as well. All of the advice that I've received was to get referrals and recommendations. Ask everyone you know involved with real estate if they know any honest, reliable and time efficient GC's. Ask lenders, real estate agents, appraisers, title companies, mortgage brokers, whoever. Good luck!

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  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    @Brian Buckley you are going to need to put together the list of what the house needs. Relying on the GC to do it opens you up to change order after change order. Get some assistance from someone local who can help creat good scopes and then have the Contractors bid that.

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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y
    Bob Okenwa great ideas, I'll keep you updated on the process. The project might not be financially feasible, but I'm going to crunch the numbers and do my homework before I come to any decisions. Brian G. I'll certainly ask around to anyone who cares to listen, and then even to those who don't haha. Good luck on your search as well!
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  • Adam Abdel-Hafez
    Contractor · Atlanta, GA · Member since 2015 · 236 posts · 91 votes
    9y
    Well, first thing is you never let a contractor make the scope of work unless you trust them or were referred by somebody that he does that kind of stuff for. You will always get different estimates if you do not provide the scope of work for them. Unless you have some experience in construction, I think you are way off on how difficult this will be for you. A $125k rehab is a very extensive rehab, which is a very rough start for a newbie. It's not just about the time spent on the project, it's knowing how to schedule subs, what materials to buy, how to get those materials to the job site, permits, budget, etc.
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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y
    Brian Pulaski I think you're absolutely right. I'll take all the measurements myself and spend a weekend at Home Depot to price things out to give me a better understanding of supply costs.
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  • Brian Garrett
    Real Estate Investor · Palm Beach County, FL · Member since 2017 · 3k+ posts · 2k+ votes
    9y
    Originally posted by @Adam Abdel-Hafez:

    Well, first thing is you never let a contractor make the scope of work unless you trust them or were referred by somebody that he does that kind of stuff for. You will always get different estimates if you do not provide the scope of work for them.

    Unless you have some experience in construction, I think you are way off on how difficult this will be for you. A $125k rehab is a very extensive rehab, which is a very rough start for a newbie. It's not just about the time spent on the project, it's knowing how to schedule subs, what materials to buy, how to get those materials to the job site, permits, budget, etc.

    So how are you suggesting someone that has never flipped or rehabbed a house before to do so if they cannot rely on and ultimately trust the GC that they hire?

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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y
    Adam Abdel-Hafez please don't think I was insinuating the job of a GC is an easy one, I was merely saying that it's very difficult to find someone I trust to handle that position. My initial instinct is to hire a GC, because I do know that it's a huge undertaking, but as such, I need someone I can feel confident in. I understand that issues arise, and I'd calculate that into my own figures, but I've heard horror stories of people being sold lies.
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  • Scott Upshaw
    Bridgewater, NJ · Member since 2015 · 100 posts · 31 votes
    9y

    Im a GC in NJ. like the last poster said...a 125k job is a pretty serious reno for a noob. Likewise..a seasoned contractor can look at a property and ball park you a number as we have been doing this along time. Walking into a job site and taking extensive notes to draw you up an itemized proposal takes quite abit of time to do for a job hes probably gonna get nickle and dimed to death for. If you need any help, feel free to reach out to me and ill give you any advice i can.

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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y

    @Scott Upshaw trust me I understand that GC's get the run around from their clients, and I'm sure they're nickel and dimed quite often.  I think my mistake was going into it with the expectation that they'd walk the property with me and go over what needs repairing and what the plan would be.  I wasn't looking for a line itemization down to the light switch, but more or less a bulk item idea.  As an example, the property doesn't have a driveway, but its something I feel is important to the property, yet the highest estimate spent the least amount of time and asked the least amount of questions about what I'd like to do with the property.  I'm going to just take it upon myself to make an itemized list of the work I think it needs, count every door and window, take measurements and then price out as much as I can estimate, allowing me to be more prepared myself.  Thanks for your replies everyone.

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  • Adam Abdel-Hafez
    Contractor · Atlanta, GA · Member since 2015 · 236 posts · 91 votes
    9y

    @Brian Garrett I never said to not trust your gc, I am saying that the client needs to make the scope of work. I have done rehabs and created scopes of work for clients, but these are investors I work with on a volume basis and know well. We both trust each other, so unless you have that then you should be creating the scope of work. I would suggest you get your real estate agent, friend, etc help you with creating a scope of work. You need somebody to help you through this process because creating a scope of work is not if you are inexperienced.

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  • Adam Abdel-Hafez
    Contractor · Atlanta, GA · Member since 2015 · 236 posts · 91 votes
    9y

    @Brian Buckley I think that sounds like a good plan. I would recommend purchasing both of J Scott's books on rehabs. It will give you a general idea of the process and how to estimate costs. 

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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y

    @Adam Abdel-Hafez I'll check J Scott's book out.  I actually just ordered RSMeans Contractor's Pricing Guide.  Are you familiar with that at all? 

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  • Adam Abdel-Hafez
    Contractor · Atlanta, GA · Member since 2015 · 236 posts · 91 votes
    9y

    I would not look much at Rs means, that is more retail/commercial pricing and what you're looking for is investor pricing. 

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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y

    Thanks, I'll cancel my order then haha!

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  • Brian Pulaski
    Flipper/Rehabber · Montgomery, NY · Member since 2016 · 2k+ posts · 1k+ votes
    9y

    RS Means isn't bad but pay attention to the adjustments in the book. You need to adjust based on location. It is not the most accurate unless you know how to use it, and then it is very "budget".

    To anyone asking what to do if you don't know how to do scope of works... ask someone you trust with no vested interest in the house. You need to know or have an idea what needs to be done to the house you are purchasing and having rehabbed. You don't need to know every detail, but you need to explain what your expectations are to be completed. 

    The issues arise if you expect the GC to tel you what the house needs is where does he draw the line. Maybe in his mind it needs more than you would want, or less. What happens if he puts in $5000 worth of recessed lights in every room, and your expectation was to leave what was there...

    It's all things that you will learn as you go, but my suggestion is get some help from a trustworthy person on the first one.

    1Reply
  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y

    @Brian Pulaski Great insight!  I think that was my problem; I went in with the assumption that the GC would go over the scope of work in more detail, but I guess as the potential client I should have a better idea of what needs to be done and then guide the rehab from there.  

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  • Peter Hanna
    Spring, TX · Member since 2015 · 7 posts · 1 vote
    9y

    @Adam Abdel-Hafez, I see a chance to learn here, so... I've got a lot of experience with PM in corporate life, from location, build/construction oversight all the way down to electrical and technology deployment, etc., etc. Is real estate PM substantially different? Perhaps that can't easily be answered, if no one is familiar with the side I have worked AND residential real estate projects to be able to compare and contrast. I've been looking for this information all day, actually, as I'm considering using my experience in REI. But I can't really get a feel for the differences, as such I cannot figure out where my "gaps" are to get busy researching.

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  • Doug W.
    Flipper/Rehabber · Alexandria, VA · Member since 2014 · 461 posts · 262 votes
    9y

    Why do you want to take this on and self manage it if you, admittedly, "don't have much experience in the construction field"? Going to Home Depot and pricing materials won't mean a darn thing if you don't know how to figure out how many 2x4's, joist hangers, 4-gang work boxes, romex (12/2, 14/3, 10/2, etc.), recessed light cans and trims, tile (type, color), sheets of subfloor, roof shingles, yards of concrete, sheets of drywall, cabinet boxes, sizes of windows, etc. etc. etc. 

    I don't think it is fair to expect any general contractor to walk into a space and tell you what to do with it plus provide a price for such. You need to tell him/her what you want done.

    If you cannot come up with a detailed scope of work on your own (try starting with the one that comes with J. Scott's rehabbing book) plus detailed floor plan drawings then have you considered paying a architect to draft drawings which a structural engineer can then turn into proper building plans? Until you have these details to give to a GC I would expect your quoted prices to still be all over the place (though I still think that would mean you are missing a coherent plan of what you want the finished product to be). Actually.... even with the plans, etc. your quoted prices will still likely be a wide range. 

    Another option is to partner with an experienced rehabber on this one. You negotiate the deal with the seller and provide the rehab financing. The experienced rehabber can handle the construction and sales side. Split the profits 50/50. 

    Please understand that I am not trying to be rude. A huge rehab like this shouldn't be approached lightly. 

    On another note: I have no idea what it is like where you live but the city or county should have the age of the house in the public tax records. 

    Best of luck to you if you take this one on. Keep us posted. 

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  • Mark LangdonPro Member
    Investor · Whippany, NJ · Member since 2010 · 356 posts · 104 votes
    9y
    Keep getting more quotes and stick with using a GC. This project is too big to handle on your own for your first time. Sooner or later you're going to find someone that you're comfortable with and yes you need to write the scope of work as detailed as you can room by room. I wouldn't recommend it going it alone for someone who doesn't have a lot of construction experience. Another good idea would be to partner up with somebody who is in investor. You won't make as much money but the risk drops way down and you're gonna learn a lot so next time you can do it on your own if you choose to.
    [email protected]973-464-3839
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  • Eric Teran
    Architect · Alexandria, VA · Member since 2016 · 317 posts · 371 votes
    9y

    @Brian Buckley you have a good size project that seem to be more than paint and replacing finishes. A GC will only bid on what you tell him. That is why hiring a good Architect (full disclosure, I'm an Architect) with detailed plans is the best way to go. Yes it will cost you money but the GC will know exactly what to bid. As some other posters noted it takes time for a detailed bid. However, once you have chosen one you can ask for a detailed breakdown so that you will have this info for future projects. 

    If you hire an Architect you can do it several ways.

    1. Pay someone to do basic drafting. You can fire a college kid to do this.
    2. Hire someone to get you permit approved plans. You will need this if you are tearing down walls. This shouldn't cost too much. A few thousand.
    3. Hire a good Architect. They will get you permit plans but more importantly they will provide detailed drawings. For example, what is the proper waterproofing technique at the window sill over stone for your climate? How much insulation do you need? How do you want the deck beam be attached to the post? They can draw all these details. This will cost you more up front but the GC will be able to give you a more detailed an exact bid. You will also then have plans that you can go to the site and see if the GC is doing it correctly. I would think this would be around $15k. 
    4. Really pay a good Architect. An Architect should provide CA (Construction Administration) services. This is when they do site visits to observe the work of the GC. Depending how much you want to pay they can go once a week or biweekly or whenever or if there is a problem that you see. 

    Enough about Architects. As far as doing a detailed list don't waste your time if this is your first. @Doug W. is correct in that there is too much to know and you will go crazy at Home Depot trying to figure it out on the spot. Not even framing contractors do there own takeoffs. They will usually send it to a place like 84 Lumber or lumber supplier who does it for them. You can do the finishes like picking toilets and carpet but structural/framing and so on is complicated. Are you going get into the details of figuring out how many nails you need for a shear wall? FYI, usually it is one every 16" but you get that from the structural engineer of building codes. 

    I don't want to discourage you to be the project manager which you should be! You will learn a lot! However, for your first project of this size look into bringing in a team. Be it partnering with another rehabber or hiring an Architect who can give the GC detailed plans. More detailed the better. 

    I can send you some plans (I've provided all 4 of them as described above) for your reference to see the difference.

    The more you pay up front the more you will save in the end. 

    Good Luck.

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  • Kuba F.Pro Member
    Real Estate Investor · Los Angeles, CA · Member since 2013 · 2k+ posts · 694 votes
    9y

    @Brian Buckley 

    Friends don't let friends do gut rehabs on their first flips.

    It's been said before, but maybe worth saying again: it's very ambitious for your first one, and I would discourage you from trying.  If you're planning on a 125K rehab, on a gut it's very possible  you'll end up spending 50-100% more, especially if you become your own GC.  Shopping for skilled labor will not limit your exposure to bad work either.  How will you know it's bad work? The older the house, the more risk, and as soon as you start opening walls you're in for a world of hurt.  

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  • Brian Buckley
    OP
    Real Estate Consultant · Brick, NJ · Member since 2011 · 91 posts · 7 votes
    9y
    All really great points and I appreciate everyone's insight and advice. This project won't be a consideration for at least another month, if not more, so I've got time to interview more contractors before I even consider an actual offer on the property. I'll keep everyone posted if and when I do!
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