Help selecting a GC - frustrated with lead times and lack of info

5 Replies

Hi,

I'd love some input from experienced investment property owners on selecting contractors.

At the beginning of June, I bought my first duplex here in central PA. Nice stable neighborhood, and a property which has not been kept up or improved over the years. As a result, rents far below market. I bought with the intent to upgrade one side at a time and bring rents to market, and the purchase price reflected that. All good so far.

One of the tenants moved out in July, so it's renovation time. I expect the project to be about $50,000, so it's not a small job -- kitchen, bath, floors, plumbing, windows, walls, ceilings. I've been surprised at the difficulty of lining up a general contractor, and even more-so at the difficulty of getting meaningful info out of them.

After touring the unit with 4 or 5 GC's, here's what I've got:

From all but one, I have confidence they can do the job, but they are booked up and can't begin work until Oct/Nov and in some cases not until January. This would mean I can't rent the unit until spring of 2020. Also, they have not been very responsive, and have not yet provided anything tangible to me in terms of estimates. They all seem busy enough that they have a take-it-or-leave-it attitude for new work.

One contractor has been very responsive, eager for the work and is able to start in 2 weeks. However, this is a relatively younger guy with a small team. He's clearly trying to build up his business whereas the other guys are already established. He has walked through the unit several times, visited a kitchen supplier with us, and done some legwork with the town on permitting. He believes he can have the project done by end of October. I am getting some references out of him shortly.

Also, I'm not getting more out of all of these guys than rough verbal quotes, so I can't even price compare between them.

I'm torn here -- I either have to wait on one of the more-established GC's and thus sit here with a vacant unit well out into 2020, or take some risk on the eager-but-less-established guy and potentially be renting 6 months sooner.

Any advice or comments from your experience? How do you select your GC?

Joe

Good question @Joe T.

We are currently undergoing our first rehab. We are having issues with a GC who comes unannounced and doesn't come when says he will. Every question is met with a defensive response as though I am doubting the quality of his work. I hope he will keep to the agreed upon timeline, but I have my doubts.

One of the most often asked questions on BP is who are the most important team members. Many chime in that a competent GC is tops on the list. Now I see why.

@Joe T.

This is such a great topic. I went through this on my first few BRRRRs.

First of all, I’m not surprised that 4/5 were basically indifferent. Most of the really well established guys are booked months in advance and can charge top dollar based on quality and/or reputation. Also most of them work exclusively with homeowners who pay 2x (or more!) than investors. So you’ve automatically taken a back seat.

Also I’m not surprised that no one is giving you a firm price. A lot of GCs will feel you out for your budget in order to try and make as much as possible. It’s the same thing a good real estate investor does when trying to get a good deal! Always try to make the other guy make the first offer.

So, how to find a great GC. I believe two things: 1. Envision yourself in 2-3 years and what your team looks like. Ideally you have one or two awesome GCs that you always work with. What does that relationship look like? To me, it’s someone you trust, similar mindset, high integrity, responsive, good attitude, gets job done on time, high quality, etc

2. Now flip it around: what kind of person would that perfect GC want to work with? Responsive, decisive, understanding (but not a pushover) respectful, pays on time.

Too many investors look at contractors as a commodity...something that can be easily replaced. I think you have to look for long term relationships.

Finally, to answer your question. If it was me, I’d choose young and hungry any day of the week. They will get the job started much faster, they are juggling less projects (you might be his only project!) and therefore you can command more attention. They will be more responsive with text messages and phone calls. They are more teachable/moldable - you can have them tailor their product (quality, payment schedule, work schedule) to suit your needs. Most importantly, these types of guys will be better suited to grow WITH you.

Is there a chance it doesn’t work out? Sure. But you won’t find an already established contractor who is going to do 50 projects with you over the next 10 years. But there is a young, ambitious contractor out there who will.

The best way to find contractors is to talk to architects, designers, engineers, realtors and other investors.

Also check MLS for flip properties and new construction specs for sale.

Make sure to get 3 or more current project in process refinances, 3 or more current past clients, visit some job sites in progress to see how they look.

You can tell a lot about a contractor by how clean and organized the site is and the quality of the subs a well. You also want to talk to the subs to make sure they always get paid on time by the builder.

Last is proof of insurance sent directly by their insurance company.

This is normal in this market...need scale to get attention.  And if you think you are frustrated now, wait until the work starts.

Talk with other investors, get everything in writing, inspect frequently, don't expect things to be done your way, add cushion ($ and time) to your budget, and don't sweat the small stuff.

How detailed is the Written scope of work You prepared?  I agree though, go with the younger hungry guy....he’s trying to build a business and this stuff is pretty simple.