All Forum Posts by: Aaron McGinnis

J Scott -

Similarly to include floating on the internet on a rainy Monday afternoon. I was actually thinking about looking at houses today, but dang if this weather doesn't make my coffee pot look a lot more pleasant!

In my equation, I'm the strategic manager. I have someone else, who is more a craftsman than myself, handle the tactical management of the rehabs.

Joel -

(This is a bit rambly, and I apologize in advance.)

It really depends. Is your friend licensed? What's his experience, and how recent is it? Is he used to doing the kind of work you're asking him to do?

The amount I'd pay for someone to be on site like that really varies by the type of work being done and what exactly their role will be.

If all they're going to do is watch work getting done, that's one thing. If they're going to be carrying a toolbelt and making things 'go-faster', then that's something more valuable to me.

Are they going to be handling money? Accounting? How is the guy at excel? Is he detail-oriented enough to account for every penny that passes through his hands?

More importantly, do you want the same guy who handles the day to day jobsite to be the guy who handles the money? Most GCs that I've met want to do both the day to day management and the money management... something that has never made me comfortable and has gotten me into trouble 99% of the time.

On a personal note - IMHO, be careful working with your friends. From a management perspective, never hire anyone you couldn't fire and walk away from without it tearing you up inside. The day you pay someone to do a job for you is really the last day you can truly be bosum friends with them. How will it effect your friendship if you have to upbraid the guy some day, or dock his pay for a job done poorly? How will he take it when you have to remind him that he IS, in fact, replaceable?

I may love a man as a brother - but if I hire him, and then the time comes that he needs to get on down the road because he's hurting my bottom line, then I will not hesitate to tell him to get on down the road.

I do very large, studs-out type renovations. I've tried management a variety of ways. We've used an external project manager overseen by an internal liaison. That didn't work so well, as we had multiplication of efforts and just too much cost associated with the whole thing.

Then we tried an external GC. The GC had a foreman who did the day-to-day. That worked really well, but also cost mega bucks. The biggest advantage was that the GC dealt with the permit requirements and the whole thing went really seamlessly.

So finally what I have ended up with is that I act as the project manager with a foreman (who is also my lead carpenter) on the ground handling day-to-day business with the subcontractors.

I outsource someone else's GC license in order to get permits pulled, although I'm about on the brink of getting my own GC license so I can pull permits directly.

What we ultimately learned was that there's really 2 layers of management needed in a large rehab.

You need a foreman, period. Someone must be on-task to watch the day-to-day proceedings, and he needs to be there all the time. He also needs to be skilled and working. This person will probably be the highest paid individual on your on-the-ground construction team.
(In business terms, this is the tactical manager)

Beyond that, you need someone to manage the project at a strategic level. Watching the tactical manager is part of that person's job.
He needs to be the one to account for all receipts for every nail, board, and tile that goes into the job.
This is the guy that needs to make payroll every week. Pay the subcontractors directly. Manage the t-accounts and ledger on a real-time basis to make sure that everything is going correctly.

Also make trips to the job site at least a 3 times a week to drop in and ensure that everything is on schedule and looks correct, and is proceeding according to the time schedule and the physical layout specified.

In other words, the guy who sees beyond the day-to-day tactical execution of the project and ensures that strategically, everything is going smoothly. This is really not an easy job. You need someone who has a very strong ability to think like an accountant but who is also able to effectively audit what's going on with your carpentry crew, sheetrock, flooring, etc. etc. etc. ad naseum.

In smaller jobs, both of these positions may not really be needed. If all you're doing is painting walls, installing flooring, and new countertops, then you may nott really need all that management... or those guys may not be doing as much as they would otherwise be doing.

However, when you cross over into really large projects where you've got multiple different trades in and out, lots and lots of material purchasing going on, a dozen different checks flying around at any given time, and above all else a house plan that needs to be translated into bricks and sticks correctly THE FIRST TIME, then having that much management becomes, IMO, essential.

So to answer your question, I outsource my foreman and act as my own strategic manager. It took a long time for me to be competent to do the job, but ultimately it's the only way I can satisfy my need for control while not having to be at the job site 100% of the time.

First of all, I wouldn't want the same crew to do my plumbing AND my wiring.

Those are both mechanical issues, and, IMO are dedicated trades. What you're talking about is beyond "Fix this leaking toilet" and "Fix the outlet that's wired backwards"... wiring an entire house, plumbing an entire house, these are not simple tasks... and you don't want a jack of all trades, master of none-type crew mucking about with your mechanicals!

Personally, I'd seek out a licensed master tradesman for any and all plumbing, HVAC, and electrical.

Now to directly answer your questions -

I would NEVER. EVER. consider paying my plumber and electrician an hourly rate. ESPECIALLY not for a new construction job (which is what you have) where all the framing is exposed.

I would make them quote the job using cost in place. I want my plumber to account for every socket, every light fixture, every switch, the service panel, etc. and tell me what each one will cost. The cost is then the cost.

Ditto the plumbing... add up the number of fixtures and give me a per-fixture cost (A sink is a fixture. A WH is half a fixture. 3 exterior hose bibs are a fixture in sum. Etc.)... I pay about $300 per fixture for my plumber. Of course, I have a real good relationship with my tradesmen and never, ever give them **** (pardon my French) about getting them paid for work well done.

For a job of this size, I'd say you're going to need a day to day foreman... otherwise scheduling and keeping your crews from stepping on each others' toes will start getting dicey.

Even if you make up an electrical plan (which I would do) and a plumbing plan (Which I would also do), you still need oversight on the job to make sure that human error (Murphy lives!) doesn't creep up and put a toilet in the wrong dang place.

In fact, for most of the work you're needing done I wouldn't pay anyone hourly. Sheetrock gets quoted by the board, not by the hour. Tile is by sqft, so is flooring, so is paint.

About the only people I'm willing to pay hourly are my demo crews and my carpenters, and that's primarily because those are two things that are very hard to estimate by the job... sometimes a piece of lumber just needs to be haggled with for a long darn time before it gets 'just so', and a master carpenter won't be able to leave it alone until it IS 'just so'

Candidly, there's simply no good way to answer this question. Prices will vary considerably based upon who does the work and where you're located.

If you don't already have a good relationship with a plumber, electrician, drywall guy, painter, floor guy, cabinet manufacturer, countertops, tile guy, trim carpenter, and insulation company... I'd either walk away or find a more experienced renovator to come in and help you out with the project.

I know this isn't very helpful, but you're basically asking for a full-blown quotation on an interior finish job.

To put it in another way - the house you're describing sounds like it's past foundation, framing, roof and sub-floor. In other words, less than half completed.

I am also interested.

Contractors are a toughie for me. I tend to be extremely "Hands on" in virtually everything I do, and always was fascinated by the ways houses worked (Ever seen anybody geek out over plumbing? That's what I did the first time I had to replace a hot water heater. By the time I was done, I had decided the whole house needed to be utterly replumbed. But that's another story.)

Looking forward to learnin' from everyone!

Howdy folks! I'm Aaron.

I'm an investor turned Realtor specializing in Gwinnett, Georgia. I live here, work here, and grew up in the area. I'm an escapee from cubicle America and love this market.

I took a BS from Oglethorpe University in Business and Computer science, minored in Japanese Language and Culture, and concentrated in Economics.

Right now I'm living in a rehab-in-progress (A gem of a place near Lawrenceville that looks like a pepto-bismol salesman painted it and had two bathrooms upstairs that resembled ol' faithful when you turned the faucets on).
All that really means is that my wife and I are knee-deep in sheetrock, power tools, and have a backyard full of busted bathroom covered by a tarp. I remind myself on a daily basis that the end result of this ought to be a great little net profit.

Pleased to meet everyone!

Aside from the above - "Be careful working with friends"...

Before you get going, you definitely want to incorporate!

Bear in mind that an LLC is a corp. with a defined finish. "We will buy, renovate, and hold 100 houses for 10 years". (Now granted, most of the time this little rule gets ignored...)

If you want a PERPETUAL organization which can exist with or without any individual, get a real corporation. Issue stocks. Run your business like a business... Have clearly defined rules about how the business is to be run, and then stick to them.

I think the most important thing is to make sure that you are protected from your friends, and your friends are protected from you. A corporation accomplishes this by insuring that the business is separate from each of you and can be liquidated in such a way that there cannot be any arguing over dollars and cents.

No doubt, a license is a heck of a tool! Opening houses for yourself, MLS, and the associated abilities are all useful to an investor.

Now, on the flip side - consider the costs. Speaking strictly for Georgia, there are a LOT of costs associated with having a license. Education, MLS, Realtor fees (Most Brokerages require you to join your local Ripo... I mean Realtor organization), brokerage fees (no joke there. I know people who spend hundreds a month on brokerage fees), and a whole host of other fees I'm probably forgetting about.

The best part is that it's very hard to accurate estimate what all the fees will be until you actually get into the business - they vary from place to place and from brokerage to brokerage.