Is my contractor ripping me off

St. Louis, Missouri
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Is my contractor ripping me off

Mian Rizwan
St. Louis, MO · Member since 2017 · 32 posts · 5 votes

Hi, recently came across a bid for office renovation. Contractors seems like a nice guy but following items in bid doesn't make any sense

-Project Management - 4275 $

-Coordination with trades - 2250 $

- Foreman - 1775 $

-Overhead 10 % =  10,082

- Profit 7% = 7058.03

Does this sound like a usual practice ?

My project cost seems to have exploded :(

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Matthew Paul
Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
7y

A contractor can not "rip you off" by charging a high price .  You can agree to the price and hire them , or you can decline and hire someone else . Contractor prices are not regulated . We charge what the market will bear . Most contractors have more work than they can handle , so therefore prices are higher 

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  • Tim Johnson
    Lender · Grand Rapids, MI · Member since 2018 · 703 posts · 446 votes
    7y

    what the scope of the project.

    Likes a good amount of work based on overhead number.  A lot moving parts involved in contracting.

    Are you getting an onsite project manager?

    Rates seem a little high but don't really know the scope and how detailed the project is, could be in line or way over kill.

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  • Jay M.
    Contractor · Fairhaven, MA · Member since 2018 · 167 posts · 159 votes
    7y
    Looks like he's around 23% profit and overhead.  A little steep buy in this economy not quite rip off territory.  They shoot for 18%-22%. 
    3Reply
  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    7y

    Yeah, the first two items are typically part of overhead.....as stated,  not crazy at 23% OH/profit.

    0Reply
  • Kyle Godbout
    Investor · Omaha, NE · Member since 2015 · 366 posts · 184 votes
    7y

    @Mian Rizwan

    How does this bid compare to other bids you have received?

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    7y

    I expect GCs to typically tack on 20% to a job cost.

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  • Mark Fries
    Contractor · Jacksonville, FL · Member since 2017 · 1k+ posts · 2k+ votes
    7y

    @Mian Rizwan

    Not too crazy, maybe a tad high

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  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    7y

    A contractor can not "rip you off" by charging a high price .  You can agree to the price and hire them , or you can decline and hire someone else . Contractor prices are not regulated . We charge what the market will bear . Most contractors have more work than they can handle , so therefore prices are higher 

    4Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    7y
    Originally posted by @Matthew Paul:

    A contractor can not "rip you off" by charging a high price .  You can agree to the price and hire them , or you can decline and hire someone else . Contractor prices are not regulated . We charge what the market will bear . Most contractors have more work than they can handle , so therefore prices are higher 

    there is an inverse relationship with investors and contractors.. investors want cheap contractors want to make a living .. 

    and your dead on.. that's why you have bids.. 

    I was building some new construction a few years back on the Oregon coast.. and I got a framing bid on a 2200 sq ft house that was not complicated and I got one bid at 52k.. I wrote the contractor thinking maybe that was for lumber framing and siding.. NOPE just framing labor  LOL.. when I said really .. we pay 5 bucks a foot in PDX for framing labor he said that's what we charge.. so he was looking for one off homeowner who simply did not know any better.. but on the Oregon coast we did have to pay 7 bucks.. I had that happen in Charleston also got bids at 20 bucks a foot just for labor and we have found a great crew at 8 bucks.. but its all regional. 

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  • Mian Rizwan
    OP
    St. Louis, MO · Member since 2017 · 32 posts · 5 votes
    7y

    Thanks guys for all the valuable advice

    And yes, I don't have other bids to compare. Will get them before agreeing to anything

    It's for an office - city is asking me to make the building ADA complaint by fix up outside concrete ramp, remove another small ramp, build a new ADA washroom and open up the small hallway

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  • Ronald Starusnak
    Property Manager · Syracuse, NY · Member since 2016 · 601 posts · 384 votes
    7y

    Jay is spot on, for me to come in and drywall one room and be worth my time you're looking at $3,000-$4,000 (which is ridiculous). Contractors are busy and they will charge accordingly, it really shouldn't matter how much they're making on profit either. You either like the whole price or you don't. Don't pick the contractor bid apart trying to get a better deal, you're just going to train your contractor to be less transparent. I don't even break my bids down for the open market people because they try to cut out sections of the job to save money when I specifically bid the pricing for each line item in consideration of acquiring the whole project. It becomes frustrating, just had that happen with a guy I met on BP. 

    I gave him an estimate for certain things, for example we put $5,000 kitchen and he went and spent $4,500 on kitchen materials (not exact numbers) and our profit was gone, the whole job was picked apart like that and we lost money trying to keep the friendship and working relationship going and the job didn't turn out like it should have. Long winded but the point is, don't look at the break down unless the contractor is specifically offering it for you to pick apart. You like the number or you don't. If the numbers work they work, if they don't they don't. 

    1Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    7y

    @Mian Rizwan It seems a little high. That said, is this GC really good at what he does and will he finish on time and on budget? This can really get painful if you have a ton of project cost overruns in the backend, which may eat into your profits. 

    Hope it works out for you. Good luck Mian!

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