Investors struggling with their GC—let’s talk.

Lender · Atlanta, GA · Member since 2019 · 239 posts · 41 votes

We’d like to hear from investors who are currently facing challenges with their general contractors. What are you being charged? Are projects finishing on time and within budget? And more importantly, what are the real, underlying issues you’re encountering on the ground? Comment Below

Sims Ventures.

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Caleb Brown
Real Estate Agent · Kansas City · Member since 2018 · 4k+ posts · 3k+ votes
2mo
Biggest gripe I see is GC's disappearing or change orders that should have been budgeted in from the start.
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LaMancha SimsBusiness Member
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Lender · Atlanta, GA · Member since 2019 · 239 posts · 41 votes
2mo
Are there really GCs out there charging investors 15%, 20%, or even as high as 35% of the total project cost as their fee, while the investor is still footing the bill for materials, labor, and everything else on the project?
I am trying to understand why are alot of these younger and/or new investors are failing faster now?
Sims Ventures.
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Stuart UdisPro Member
Attorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
2mo
One of the biggest issues is lack of contract management. That's the backbone of any construction project. Aside from the contract's content which should cover insurance, scope of work, timelines, payment terms, change orders, risk transfer mechanisms, and many other items, the mere process of negotiating and executing a contract provides an opportunity to evaluate the relationship. There have been many instances I've chosen not to work with particular contractors of vendors merely due to how they communicated during the contract execution phase.
Unfortunately, many investors feel they are under pressure because they are using high interest loans or are racing against an imaginary clock to BRRRR properties because some guru is telling them they need to own XYZ number of doors and believe moving fast will reduce their carrying costs. In most instances, those decisions cost the investor more time and money because of who they choose to do business with. Sometimes a slower methodical process at the start sets construction projects up for better success.
Not only does it protect the investor, but also the lender whose collateral is impacted by inferior construction and even lack of insurance and risk transfer mechanisms. I am actually surprised more lenders don't pay closer attention to contract management as part of their own construction lending administration process. It's easiest for the lender to hold the investor accountable. Don't abide by the rules, don't get funding, simple as that but don't see that happening anytime soon.
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