Which General Contractor to Go With?

Rehabbing & House Flipping
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Which General Contractor to Go With?

Hoang Bui
Member since 2019 · 26 posts · 4 votes

So I recently acquired a triplex on an FHA loan, and I am planning to remodel the unit where I will be occupying. I received three quotes for my remodeling project, but I am having a bit of a tough time trying to decide which one to go with. I was hoping someone on Biggerpockets could give me some pointer.

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Scope of work:

A 3-bd apartment, 1200 sqft. Main tasks: 

1. Painting - repainting everything (trim, wall, ceiling). Three colors: White trim, neutral paint color for the wall.

2. Flooring - new flooring throughout. House is old, and the floor is a bit uneven. ~1320 sqft.

3. Remodeling kitchen. New cabinet throughout. 

4. Repaint bathroom + repaint bathtub + change out the toilet.

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GC #1: 

Reference: Was referred to me by my previous landlord who also owned a few rental properties. 

Experience: This guy had done several projects for my previous landlord. She was happy with his work. I think her apartments were nice. He also worked on a number of bigger projects. 

Quote: Gave me a quote of ~$13k.  

Pros: He seems to be genuine. Willing to work with me on a number of things. Even told me that if I wanted to save, he could tell me where I could do the work myself to save on costs. Did ask me upfront where my budget lies. 

Cons: Timeline is a bit later than expected, and also takes about 3 weeks to get everything done. He seems to be a bit disorganized, and could be a bit wishy washy. I wasn't able to get a good breakdown of the estimates between labor and costs. 

GC #2:

Reference: Found this guy through my meetings with local real estate investors. 

Experience: Remodeling his own owner-occupied apartment. Has been running his own business for the last few years. 

Quotes: He gave me the most inexpensive quote at~$12.5k,

Pros: Very professional. Good communicator - seems to be easy to work with. He does have a website online where he showcased his past work, and his rating online is 5/5 (although they are all for small handyman projects). Was able to give me the specific breakdown for costs and labor. He promised that he could get things done in two weeks, and can start fairly early.

Cons: The guy is young compared to the other guys. A feedback that I got from another local investor is that this guy gives the best price, does the work really fast, but can be a bit sloppy. However, I was told that he's willing to work with you, and you will need to be vocal about it.


GC #3: 

Reference: Was referred by my current landlord. 

Experience: This guy owns some real estate investments locally, and has his own crew. He also does a few flip a year. 

Quote: He gave me the priciest quote at ~16.5k (albeit the flooring option is a bit more expensive, so all in all, it might be the same). 

Pros: He and his guy seem to be knowledgeable. Was able to give me a lot of advice during the visit. Can start right away. Seems to have a lot of connections and resources (told me that he will introduce me personally to his sales guys at the local appliances store for better discounts)

Cons: He wasn't able to give me the specific breakdown either, just a big quote number. Feel like they were not as thorough in terms of scope of work when visiting the apartment.

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Matt M.
Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
6y

@Hoang Bui

Why do you need the breakdown for labor and materials? Contractors hate that.. me included. If the whole job is $X, and you are ok with that, what’s the difference?

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  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y

    @Hoang Bui Sounds like the 3rd contractor is the best choice overall.

    No matter who you choose make sur to get a detailed scope of work so everyone knows exactly what’s expected.

    2Reply
  • Hoang Bui
    OP
    Member since 2019 · 26 posts · 4 votes
    6y

    @Greg Dickerson Why do you think that the 3rd contractor is the best one? Based on his experience?

    0Reply
  • Greg Dickerson
    Developer · Charlottesville, VA · Member since 2018 · 4k+ posts · 4k+ votes
    6y
    Originally posted by @Hoang Bui:

    @Greg Dickerson Why do you think that the 3rd contractor is the best one? Based on his experience?

    Yes sounds like you think he has the most experience and best time frame.

    1Reply
  • Marcus Auerbach
    Investor · Milwaukee - Mequon, WI · Member since 2010 · 5k+ posts · 7k+ votes
    6y

    @Hoang Buityping up a written estimate line by line takes hours, especially if you don't have a computer job. And then you have clients who start to pick appart your estimate, and choose you for the bathroom and the other guy for the kitchen. 

    Reality is, it is almost impossible to accuratly estimate every line item, and so the hope is that one goes fast and easy and that makes room for the other one, which turnes out to be an unpredictable desaster.

    I would go with #1. Good communication is key. And he is realistic about the timeline. And not available tomorrow is also a good sign.

    4Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    @Hoang Bui

    Why do you need the breakdown for labor and materials? Contractors hate that.. me included. If the whole job is $X, and you are ok with that, what’s the difference?

    8Reply
  • Dutch Langley
    Flipper/Rehabber · Matthews, NC · Member since 2019 · 198 posts · 239 votes
    6y

    I would choose #2.  Communicate upfront and inspect to take care of any potential "sloppiness issues".  I've had many experiences working with newer contractors...great opportunity to "train" them a bit on your expectations and create loyalty.  I have one in particular that we actually helped put in business about 7 years ago, and his company continues to do most of the work for us to this day.  Also...unless the materials are an allowance that you are choosing, we don't separate out materials and labor cost.  If it's a flat fee to paint including materials, it's a flat fee...I don't like to waste time calculating every gallon of paint I might order.  I never do time and materials except when we do consulting or building forensics work.

    1Reply
  • Thomas FranklinPro Member
    Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
    6y

    @Hoang Bui Your Scope Of Work should be extremely detailed and broken down into each a every task that needs, to be performed such as flooring replacement, a breakdown of what will be done for kitchen remodeling, bathrooms, etc. In addition, timelines, for completion, should be assigned, to every task. Furthermore, materials and labor costs should be separated, for every line item contained, in the Scope Of Work. This will ensure that the General Contractor is not price gouging you on materials. Finally, I would have what I term an “Accountability Clause” included, in your contract. For example, if the General Contractor fails to complete the total project, by the agreed to deadline, for completion, you will deduct x percent, from the Contract Price. If the General Contractor does complete the total project, by the agreed to deadline, for completion, you will pay x percent, as a performance bonus. Finally, you should breakdown the Scope Of Work into phases and pay when each phase is satisfactorily completed and has passed all County and or Municipal Inspections, as applicable.

    3Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    6y

    Here is the problem with this question, you gave 3 contractor options and you have had someone state they would go with each of the three. Not very helpful in the grand scheme. I suggest you take into consideration these items: cost, timeline, quality. It is typical that a good contractor can give you 2 of the 3. If you want it fast and cheap, you likely will have to expect less quality. If you want it good, and fast, then expect to pay more for that, etc.

    In the flipping game, time is your enemy so paying a contractor more to get it done faster with good quality is often the best move financially, but not always. Then there are the other factors like organization, communication, friendliness, etc. This is a choice where you need to use your people skills and go with your gut on that decision.

    Good luck and if you make the right decision or the wrong one, either way it can be beneficial to you as the right decision makes you more money, the wrong decision gives you a better education.

    Podcast Guest on Show #130
    6Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    6y

    @Hoang Bui For what I've learnt so far, I always go with the GC who can finish on time and on budget. Nothing matters to me!

    Number #3 is looking like your guy.

    All that said, it will be interesting to tag everyone in a few months to let us know "What actually happened" lol. 

    Good luck on your deal!

    2Reply
  • Hoang Bui
    OP
    Member since 2019 · 26 posts · 4 votes
    6y

    @Matt M. @Marcus Auerbach If you don't get the breakdown, how do you make sure that you are not getting overcharged on materials? In your opinion, how do you screen for a good GC then, especially for someone without experience? For me, at least, breaking it down gives me an idea of what the process is like, and it's a way to hold somebody accountable for the project. 

    @Dutch Langley Do you think that you need at least some experience in order to manage newer contractors? I do think that this is an opportunity to develop relationships with this guy, but not sure if I could manage him without the experience myself. 

    @Thomas Franklin How would you respond to the responses above where contractors do not like breaking down the estimate. This is a challenge that I am running into as well. It's not easy to get contractors to break down the estimate for you. 

    @Will Barnard This actually makes a lot of sense. Definitely gave me a lot more to think about. Thanks! 

    @Ola Dantis What do you think about quality? And will do!

    0Reply
  • Thomas FranklinPro Member
    Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
    6y

    @Hoang Bui The following is a list I highly recommend employing, when interviewing General Contractors. I have created this list, from years of experience. 

    1. How many homes have you rehabbed and/ or renovated? What was the magnitude, of your projects?

    2. How many projects is your company currently undertaking?

    3. Do you work with Investors that need to adhere to strict timelines and scope of work?


    4. Do you have multiple Sub Contractors, for similar trade skills, such as plumbers, electricians, flooring crews, painters, etc.?


    5. Would you be willing to provide a copy of your GC License, your Certificate of General Liability Insurance, and your Certificate of Workman's Compensation Insurance?


    6. Are you bonded?
    NOTE:To be “bonded” means the Contractor must purchase a Surety Bond, which serves as a form of Insurance to protect the Contractor’s Customers if he or she fails to complete the job properly or fails to pay for permits, subcontractors, or other financial obligations.

    7. Are all of your Sub Contractors Licensed and have Workman's Compensation Insurance? Would your Sub Contractors be willing to provide such information, or would you be willing to sign a waiver stating "All your Sub Contractors have Workman's Compensation Insurance?"

    8. Do your Sub Contractors have the ability to verbally communicate, with English Language Only Speakers?

    9. Do you pull all necessary permits?


    10. Do you provide a written warranty, for all labor? If so, what is the length, of the warranty? (a minimum of 1 year)

    11. Do you provide all applicable warranties, for materials?

    12. Who is in charge of the job site, to ensure timelines are met and the Scope of Work is properly completed?

    13. How do you handle dirty work such as debris disposal and clean up?

    14. Would you be willing to receive four draw payments that would correspond to four phases of the rehab project?

    15. Would you provide references, from past clients?

    6Reply
  • Thomas FranklinPro Member
    Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
    6y

    @Hoang Bui If a General Contractor is not willing to itemize, how do you know the work to be performed other than generalizations? Also, by separating labor and materials, you minimize the possibility of a General Contractor marking up material prices. Typically, a General Contractor buys materials wholesale and marks them up without the client knowing. I have renovated hundreds of homes and several large Apartment Buildings. 

    This is my third post, in this thread. In the beginning I made several mistakes due to inexperience, poor project management, a lack of initial due diligence, etc. You can accept the lazy way and maybe you will be successful. 

    3Reply
  • Joe Caiola
    Member since 2019 · 2 posts · 1 vote
    6y

    @Hoang Bui - I just finished building my first spec house from the ground up, and worked with over a dozen different sub contractors. You've gotten a lot of great advice from members above. One of the most important things I would do is have an agreement signed between both you and the GC. You wanted very detailed things drawn out and agreed upon up front. 

    Arguably most important, the amount of payments (aka - draws) due over the course of the project. I'd recommend something like 10% down up front, and then a certain percentage for the completion of each project. For the smaller things (like the bathtub & toilet), they can get baked in to the painting payment. The contract should also include their business name, License number, and workers comp number. Some people might say it's overkill, but this will show them you know what you're doing.. 


    Tough to say not meeting these people, but I wouldn't go with anyone "wishy washy". If you go with option 2, make it a point to be on a site a little more to oversee their craftsmanship. If you go with option 3, I'd let him know he was the most expensive bid, and that you're expecting great work - and also poke your head in regularly.

    1Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    @Hoang Bui

    Overcharged in materials? Are you asking for every sku# so you can price all the items?

    0Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    @Thomas Franklin

    Keyword wholesale prices. So if you hire me to paint for you, and I pay $25/gal from Sherwin Williams and charge you $30, retail is $40. There are a lot of times I mark up materials and it’s still cheaper than if you went and paid retail.

    1Reply
  • Andy Patel
    Los Angeles, CA · Member since 2019 · 14 posts · 3 votes
    6y

    From my experience going with the cheapest estimate never turns out beneficial for anyone. Its a huge benefit to have a referral so that you have a resource to provide info. Speed, communication, reliability are all important characteristics in a good contractor. The biggest hurdle I've faced in my ten years is going with someone new who is flakey and wasted your time especially when you have interest payments. For newer contractors I highly suggest getting them to itemize their bids and breakdown where the total derives from. Once you work with them for a while this won't be necessary but from the beginning it is essential. For ex: interior paint cost-, exterior paint cost.. by doing this you get what they charge you based per sqft and then you can compare apples to apples with our Gcs.

    1Reply
  • Thomas FranklinPro Member
    Real Estate Investor · Miami, FL · Member since 2010 · 939 posts · 739 votes
    6y

    @Matt M. For starters, why is there a need, for a markup? Is it for gas, vehicle wear and tear, etc.? If your answer is yes, then you are not running a legitimate business, in the eyes of the IRS and you do not have an EIN because the aforementioned are LEGAL Corporate Business Deductions (at the Federal Income Tax Level, in one form or another, presuming one has a good CPA. From an ethnics and integrity perspective, you are still ripping off your clients whether the markup is 50 cents or Five Dollars. The question that comes to mind is if you are cheating clients, on materials, what else are you clients being cheated out of...workmanship, fraudulent documents, quality of materials, etc.? If you are going to markup your Material Prices, I encourage you to disclose it upfront. I myself would never accept double dipping!

    3Reply
  • Matt M.
    Specialist · Easton, PA · Member since 2018 · 1k+ posts · 2k+ votes
    6y

    @Thomas Franklin so let me get this straight. Every time you hire a contractor, do they provide you copies of their invoices and only charge you what they paid? Double dipping? So if I made $1000 on a job, I’d pay taxes on that $1000, if the job came to $1050 because I marked up materials, I pay taxes on $1050. So you still wouldn’t be happy paying that $30 for a gal if paint thru me making $5, you’d rather pay the store $40? Or me getting a water heater from a plumbing supply for $400, charging you $450, and if you went and got it yourself it would be $500. To me, there is such thing as wholesale for a reason. 
    You rent a house for $1000/month, but that house only costs you $750, can I tell you I’m only paying you what you pay?  

    0Reply
  • Anthony Rosa
    Rental Property Investor · New York City · Member since 2019 · 703 posts · 538 votes
    6y

    Are your quotes based on a true apple to apple comparison?  Did you specify the make/model number of the materials - flooring, kitchen cab, counter top type, paint manufacturer, tile work. How will the floor be prepared prior to installation? How many SF of sheetrock need to be replaced (thickness, type, and cement board). What type of tile (porcelain, ceramic, marble, size of tile)? They can break down the demolition, prep and install procedures and list the material type and then the total cost for each phase. 

    I wouldn't worry about them separating the labor costs because you are getting a labor/material packaged price with an estimated completion time whether he/she works with a 2 or 10 person crew. Besides, with breaking down the labor cost the contractor will think that you want a discount if they finished the job early.

    1Reply
  • Hoang Bui
    OP
    Member since 2019 · 26 posts · 4 votes
    6y

    @Anthony Rosa This is where I am actually struggling with. Honestly, my knowledge on this is so limited that I don't even know how to navigate or ask questions. So I have been trying to ask questions around materials to have at least apples to apples comparison between GCs. So for someone who just started, where would you recommend as a source of learning/sanity check? 

    0Reply
  • Chris Rogers
    Contractor · NY (long island) · Member since 2018 · 11 posts · 1 vote
    6y

    @Hoang Bui

    Truth is, you get what you pay for. Maybe sloppy guy is good enough for a rental but a guy working by himself may get held up on projects. Sounds like the third guy is actually a GC while the others seem like handymen or carpenters. You also didn’t mention anything about licensed or insured guys. Who has coverage or the ability to pull permits if need be?

    0Reply
  • BOB CRANEY
    HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes
    6y

    @Hoang Bui

    As an inexperienced investor you are in need of a contracting lesson from those who have done it successfully before. You need to be able to control what is being bid and how it’s being bid. Starting with a detailed scope of work that breaks down all labor and materials required to complete the job, will make sure any general contractors you get quotes from will be bidding on the same exact work. I did remodeling for several years and was always happy to see when a prospective client I met with had a firm grasp of what they wanted to do and materials they wanted to use because it meant they had actually put some thought into the project.

    You can google Remodeling scopes of work to find lots of examples and you can cut and paste ideas to create your own. Anything not specified in the contract or the scope of work will be open to interpretation by the contractor and not usually to your benefit. An inexperienced client will claim ignorance when something they thought was included in the fixed price turns up as an extra. Clients need to think thru a project completely or they will get hit with change orders that will be at a higher margin than the base contract.

    An easy way to have your contractors price materials for a project is to give you a retail $$ allowance for the item you can choose from one of their preferred suppliers or any where else you want to find it. An example might be an appliance pkg where an allowance of $1200 for a refrigerator, $800 for a range, etc, or with flooring it might be a square foot allowance of $3.50 for porcelain tile.

    As far as draws go, try to make sure that any schedule of draws actually corresponds to the way the construction is being done. It’s ok if your paying for something like cabinet materials before they are installed because they often have to be ordered ahead of time, but I would not expect to pay early in the draw schedule for labor that will occur halfway or at the end of the project. If you have the time, ask around at a Real estate meeting or local online group and see if there are contractors getting good recommendations and go see jobs they have completed or are Actively working on. Legit contractors have lists of satisfied clients who are happy to talk about their experiences.

    0Reply
  • Andrea O.
    Rental Property Investor · Sykesville, MD · Member since 2018 · 18 posts · 20 votes
    6y

    @Thomas Franklin I expect a contractor to add a reasonable mark up to products procured for a customer’s project.  This is why vendors offer contractors a discount.  In no way is this dishonest or illegal.  Contractors have time and accounting costs relating to purchasing and running receipts through the business.  They need to deal with damages and missing pieces and returns.  No one realizes the time, hassle, and responsibility of dealing with material purchasing until they manage a project.

    @Hoang Bui In my experience, there is no contractor worth hiring that likes paperwork or who has the time to provide an itemized proposal.  Gathering a few quotes has you did for identical scope of work is the best way to assess whether pricing is fair.  Good luck!

    4Reply
  • Ondrej Brown
    Rental Property Investor · Cleveland, OH · Member since 2019 · 150 posts · 47 votes
    6y

    @Ola Dantis Right lol

    1Reply
  • Ray A Delfi
    Rental Property Investor · Poughkeepsie, NY (Hudson Valley Area) · Member since 2019 · 188 posts · 102 votes
    6y

    @Hoang Bui I heard something awesome on a podcast today. There are three things to look for in a contractor, but you can only pick 2 and if you find all three send me his number!

    1:Price

    2:Quality

    3:Time

    1Reply
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