What's the going rate ?

Question

What's the going rate in hiring a General contractor to rehab a 1450 sq ft house? A flat fee or a percent? I need all the help I can get on this one. Thanks in advance.

George P. · Answer

depends on what you are getting done. it's one thing to install cabinets and paint. it's another to add a bath and an addition.

J Scott · Answer

There are two common ways to pay a GC:

1.  Fixed Bid:  The GC will provide a big upfront and will include his fee in the bid.  In my experience, percentages generally range from about 7-20% of the rehab cost, depending on the scope of GC management and the size of the job -- larger jobs tend to pay smaller percentages.

2.  Cost Plus:  With this model, you are paying the cost of the rehab plus a fixed fee to the GC.  The cost of the rehab is not a fixed bid, but instead, you pay the actual cost of the job, whatever that may be.  The fee to the GC could be as little as $500 or $1000 for small jobs or as much as $10K or more for large jobs.

In general, #1 is going to be preferable for less experienced investors, as the price is fixed up-front so you know what you're paying.  If the GC underbids the job, he eats the overages, not you.  The problem is, a GC can pad the bids and materials, so while he's telling you that he's only making 7-20% in his fee, he may be making a lot more without you know.  In return for the security of the fixed bid, you're likely paying more.

In general, #2 is more cost-efficient for the more experienced investor, as you'll pay the actual labor and materials costs (no possible markup by the GC) and the GC will just get a fixed fee.  The downside is that you won't have a fixed bid upfront, so it will be more difficult to pin down your costs when you're doing your initial analysis.  But, if you have some experience with cost estimation and if you're willing to take the risk of poor estimation and overages, you should be able to save considerable money this way.

Personally, I used #1 when I was starting out, and now solely go with #2.

Jack Bobeck · Answer

Maher Bateh I do what Ben Leybovich suggested. I give my contractor a list of all the things we (my partners and I) would like to have done, based on what our realtor says add value in the flip, and get a quote based on those items.

Jack Bobeck

Ben Leybovich · Answer

Write your scope of work and have it priced out line by line.

Ned Carey · Answer

Generally you get a quote and write a contract based on the quote.  Some will charge hourly plus materials.  - Ned