So lately the general contracting company I am a partner in has been doing some bids with people that are new time investors that may be jumping in with very high expectations in the beginning that flipping a house is very easy to work and is 100% hands off. My personal view of this is if you do the upfront work to build a solid foundation for the project then from there on out it will be easy as long as nothing unexpected goes wrong with the project. So I decided to write this little guide on how best to set up your projects and what a general contractor does and does not do when it comes to your project.
To start you should know exactly what you want or have some reference pictures of what you would like the finished project to look like so your GC can find similar products for you.
- You should know which type and color of wood flooring, carpet, and tile.
- You should know where that flooring will go.
- Know which light fixtures you want and where you want them
- Know what color you want to paint the walls, ceiling, and trim of the interior
- know which color you want to paint the exterior walls and trim
- you should know what you want for fine detail items such as the mantel of a fireplace.
In order to help you select these items, I recommend looking at houses near yours that sold quickly such as having gone "contingent" within the first week of listing and copy these finishes. It's a lot easier than it looks. For example, pull up the picture of the kitchen cabinets and www.homedepot.com or www.lowes.com and begin searching for similar tile or paint color comparing the two pictures you have up.
After you put that up and you know what you want to be new just simply begin laying your scope of work out in categories. The best order I feel to put the categories for the interior and how I put mine is in the following order Demo, Framing, Rough Electrical, Rough Plumbing, HVAC, insulation, Drywall, Interior Painting, Cabinets/vanities/ counter tops, Flooring (flooring before cabinets if you're not using a floating floor such as true hardwood), Finish plumbing, finish electrical, and finally carpentry (doors, windows, trim).
As far as the scope of work for the exterior there is no particular order you need to go in since it will be up to the general contractor to schedule those for you. But if you're running your own sun contractors I prefer to do the roofing and gutters first then the siding while the interior demo is taking place so I can use the same dumpsters to get rid of everything instead of being charged a haul away fee or getting multiple dumpsters.
The scopes of work should be done during the closing process in order stay ahead of the game. Once you have closed it is time for you to get your drawings done by an architect. I recomend you order them so the drawings are done faster because there may be less revision done compared to asking your GC to meet with the contractor at the site. Now in Cincinnati an architect or engineer has to do the drawings if there is any major work begin done such as removing load bearing and non-load bearing walls or adding them. Depending on your architect and the complexity of the project this can take anywhere from two weeks to a month with the permits taking a week to two weeks. If your general contractor calls every few days to the building department to check in it seems like they are done sooner.
Now that your drawings are submitted and your permits issued you can begin the demo. Your GC will order the appropriate sized dumpster with any permits needed and either have you call to pay for it (more common) or invoice you for the two items. In Cincinnati, if a street permit is needed because there is less then a ten foot wide by twenty-foot long area to put the dumpster it takes about 48-72 hours to get the dumpster delivered. Tha is okay though because the crew can start demo in one room and begin to store the materials inside if it is raining in a room they have already done and then move the materials to the dumpster once it arrives.
After that, your GC most likely will ask for a deposit for all or the first phase of materials and can continue to require a materials deposit for the other phases. He or she will also most likely bill you after each step you laid out in your scope of work. So this means you do need to front the labor and materials cost and be reimbursed by your hard money lender, otherwise, your contractor will become frustrated waiting to get paid while you order the inspection and then wait to get the money for you to pay them. It also means to keep your contractor happy and willing to work with you on another project you will have to take almost weekly draws compared to say three. So if you're looking at a $30,000 rehab you would have to order and schedule the first inspection to take place on the last day of the proposed rehab since it will then take a total of one to two weeks to get the money into your contractors pocket. So I recommend having approx. 33% of the rehab funds in your bank account before embarking on this real estate journey.
Well, that's the gist of it, once you do this upfront work you can then just sit back and write checks and order inspections while your GC runs the project for you, barring any major issues such as crumbling plaster come up. So to recap it is your responsibility to pick out the finishes, write the scope of work, order the architect, fill out all lender paperwork, and request the lender inspections. It is up to your GC to order the permits, coordinate dumpsters, coordinate subcontractors they are using and pay the subcontractors, and order the inspections done by the city or the county.
Do you use a general contractor to run your projects or do you use subcontractors and do all the scheduling and ordering your self? What other tips do you have to work with a general contractor? Head over to my blog to see a sample scope of work/schedule. I like to combine the two to save on time.
Great post! Very informative.
I'm very happy to see you recommending having a significant portion of the rehab fees early on. As a GC, draws on construction loans are often the bane of my existence. My guys need to be paid every two weeks, some subs need to be paid weekly or upfront. By the time the draw finally comes in I am on fumes with everyone beating the door for the next portion of works payment.
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