Residential Ground up contractor

10 Replies

Im doing my first ground-up project (2 houses on a lot) as an "investor" with a JV partner "builder" in SoCal. Its started out very promising.... but of course, its become a very frustrating experience when the vision for projects don't align... and project direction mismanaged and is starting to get compromised. Im noticing too many things going wrong to list.

That said, Im very hands-on investor... I've done plenty of rehabs for my buy and hold portfolio... Never flipped a house before, hence why I took on a JV partner doing flips. But now, Im finding the need to just take full control of this project. Of course, Im getting some resistance... Even the contractor hired by my JV partner is a bit arrogant and seems to be avoiding my calls... Not sure if its politics, but I get a feeling he does not want to speak to me directly. I would always have to go through my JV partner, I'm a bit baffled about why this is... Its been a very inefficient and frustrating process.

That said,  this was a big learning experience for me...  I realized I can do this on my own.  There's not much difference with rehabbing to keep vs flipping.   Ground-ups is a bit more taxing and a bigger learning curve but Im always up for a challenge.   So, Im thinking I would just buy out my current partner... set up a new team and just completely take over the project.   But of course before I can do that, I need to set up a new team in place.  Can anyone here recommend a residential ground-up builder/GC working in Los Angeles, SoCal? 

@Alvin Uy what exactly is not going right with the JV partner? in your other thread, you've mentioned she runs a construction company. Have you signed a detailed RAA of what she and you bring to this project?

Originally posted by @Victor S. :

@Alvin Uy what exactly is not going right with the JV partner? in your other thread, you've mentioned she runs a construction company. Have you signed a detailed RAA of what she and you bring to this project?


Well... we are 50/50 on finance and profit on this. She was in charge of construction, but my wife (realtor) and I are in charge for the design and sale of the property. A very simple arrangement under an JV LLC.... and so we thought.

The rub is in the way the construction and how the project is being managed and handled.  There's a long list of things that is not going right...  Mostly, her lack of communication, decision making, and project management style are not line with mine and my wife's ( i.e. her GC has an expired license and refuses to speak to me directly because I wasn't the one that hired her.  Her architect is cheapest she found but obviously is not very good and on top of that doesn't speak English that well... so now is charging on revisions).   There's just a lot of confusion.   Im finding she is not as experienced at this ground up/flips as she claimed she was.  Im finding myself double checking her work.  She's a terrible project manager (that would have fired I by now).  Also, it come to believer her GC is really driving the bus... and not her.  This is why things are not ran efficiently, the project is costing more than anticipated... a lot more... which now leaves us virtually $0 budget towards the design and finishings which is what really sells the property. 

When I call her on it, she's of the mindset that as long as the house has the same square footage and bedroom/bathroom count as those that just sold, it should sell for the same.   My wife and I specialize/live in the area and do not agree with this thinking because it is definitely not the case...   especially when it comes to selling a property that is over $1.8M in a very trendy / artsy community.  Its really gotta look the part.   Big lessons learned here.

 

def sounds like she has to go. how far into are you currently? (how far behind, etc) i'd see if you can hookup with local guys from bp and see what advice they can provide. 

Originally posted by @Victor S. :

def sounds like she has to go. how far into are you currently? (how far behind, etc) i'd see if you can hookup with local guys from bp and see what advice they can provide. 

 Yeah...  I can't really get rid of her at this juncture since she has money tied up on this project as well.  Also, She brought me onto this project as the back up "investor".   Im in way too deep now too financially... so I have to see this through.  The good thing is, I have taken over control of the project so to speak since I posted originally... I guess we'll see how this goes. 

Originally posted by @Victor S. :

@Will Barnard might have some words of wisdom, as he deals with new construction in CA. 

Thanks for the shout out Victor.

Partnerships can be tricky and even under the best intentions, things can go south quickly as you have now experienced. I have done many partnerships and only a couple turned out good, one of which I had 100% control of and the partners were financial only. Too many decisions to make where disagreements come up.

Your updated post stated you are now in control of the project, that is good but you didn’t post details on how or what you have control over. At any rate, it sounds like getting rid of the partner is your best option (if it is an option). Finding the right GC or subs is never easy and finding one with good project management skills is even more difficult.

Speak to a few other local builders and get their input on who they use and what experiences they have had. Referrals from experienced and successful investor/builders is key for you.

Originally posted by @Will Barnard :
Originally posted by @Victor S.:

@Will Barnard might have some words of wisdom, as he deals with new construction in CA. 

Thanks for the shout out Victor.

Partnerships can be tricky and even under the best intentions, things can go south quickly as you have now experienced. I have done many partnerships and only a couple turned out good, one of which I had 100% control of and the partners were financial only. Too many decisions to make where disagreements come up.

Your updated post stated you are now in control of the project, that is good but you didn’t post details on how or what you have control over. At any rate, it sounds like getting rid of the partner is your best option (if it is an option). Finding the right GC or subs is never easy and finding one with good project management skills is even more difficult.

Speak to a few other local builders and get their input on who they use and what experiences they have had. Referrals from experienced and successful investor/builders is key for you.

Hi @Will Barnard. Thank you for your response.   Im a big fan of your work.  I've also been following you and taking notes.   

Unfortunately, getting rid of my partner is not that simple or an option in this juncture. This is her project and I was the "investor".  We were 50/50 on the financing, so she also has a lot of money tied-up on the project (mostly due to mismanagement).    She also happens to be the sister of one of my closest friends so its just going to complicate things (another big lesson learned here).

That said, after speaking to my partner over the weekend, she is open for me to run the show.  ( I should really say my wife and I are now in control... just in case she reads this. LOL )  For starters, we have taken over project management and the release of funds for construction.  This week Im trying to get this project back on tract, starting with getting the building plans approved. There are some issues with the getting permits.

I would like to get another GC... but not sure I can find another GC without doubling the construction cost / budget.  If you have any recommendations and suggestions, I would be happy to listen.


     

If no construction had been performed and the project is still in plan check at LADBS, then you may very well be able to lose the contractor but your signed agreement with him or her will stipulate (or should) what you can do at this juncture. If the contractor is part of the problem, you should be able to convince him or her to mutually release each other and he or she should refund any monies paid but not performed to this point. Getting rid of the GC early and before construction begins is much easier than after you are deep into the project.

Originally posted by @Will Barnard :

If no construction had been performed and the project is still in plan check at LADBS, then you may very well be able to lose the contractor but your signed agreement with him or her will stipulate (or should) what you can do at this juncture. If the contractor is part of the problem, you should be able to convince him or her to mutually release each other and he or she should refund any monies paid but not performed to this point. Getting rid of the GC early and before construction begins is much easier than after you are deep into the project.

Great advise.  

I should clarify... building 2 houses on the lot (LARD2).  Front house is already in progress full demo to the studs has been completed (with some minor framing/foundation work also in progress).  Back house is still in plan check, but ground has been prepared and ready for excavation/foundation.

I see. I would definitely look at your contract verbiage and see what recourse or options you have if your intent is to fire or nicely part ways with the contractor. Having options is always better than no options and ending the transaction on the best terms possible is also the best approach to settle.

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