All Forum Posts by: Jeffrey Stasz

Yes you should comply with local laws when running a business. 

Not only is house wrap required when going over a stick built house it is imperative! stucco is not particularly water proof and will fail quickly if not properly installed.

Typically we lay down a heavier stucco specific house wrap and even then I am constantly worried about the stuff. 

It's great for covering masonry but over wood I find it's too difficult to find subs who can nail the installation. 

If this is a house you're planning to sell you have two options: 1. Redo the stucco properly (or go to a different siding) 2. Assuming you get a CO, plan on being sued by the buyer in about 3-5 years for shoddy construction. 

This is published information: 

http://www.building-cost.net/

@Christopher B. fair enough on the organization point. I think it really depends on the project. If it's a 30k rehab you're really hiring a series of skilled handymen rather then a true GC. When you get into ground up construction or commercial you start dealing with a different animal all together and that's the core of my business. So when I see folks on these forums assuming all GCs are crooks it just does not comport with the world I work in everyday. That's especially true when the investor is doing a 40k - 100k ARV flip and looking at GC's in states where the entire project won't even cover a GC's insurance bill.

I think for new investors the best advice is to look for a GC that is early in their career and focused on growing the portfolio and creating the next Gilbane. You will get a level of service and skill for a couple of years that are pretty hard to match. 

The hard truth: flippers are almost always the least profitable and most difficult clients. And once a construction company gets to a certain size we are more likely to just take the entire investment in-house and compete directly.

I'd encourage everyone to look at JDS or Gilbane Development to get a picture of what I'm talking about. In my view there are only a couple of places to add economic value in real estate. Construction happens to be the largest opportunity and so it can be hard to compete against a vertically integrated developer. 

As for finishes and design. I'm not sure it's right to assume the investor has a better sense of design or better tastes then the builder. The builder is often seeing way more product and designs then a typical new investor. So it comes down to a matter of reps. 

I think one of the best ways to find good contractors is through the NAHB chapters. 

@Hunter Harms i'm going to pick on you just a bit. But I think you've surfaced an attitude that is both prevalent and pernicious. This is going to be harsh but it's not personal and hopefully it will give you some insight into the business side of contracting from an actual contractor. 

First to answer your question: Yes it's a good idea to know what you're going to build before you build it. However, without more construction experience it is highly unlikely that you will be able to develop a comprehensive materials guide. There are a ton of ancillary products that you don't even know you don't know about. Things like subfloor adhesive, joist hangers, tie downs etc. Also, you're probably sourcing your materials from big box and the real pros usually don't go to big box. We have commercial credit accounts with local suppliers and often have pricing that's specific to us. So you could you provide me with a list of SKUs from Lowes or HD and I am going to politely smile and turn down your business. I don't have time to deal with poor quality product and unprofessional service common to big box. 

Next make sure that your state even allows you to act as a GC without a license. In SC for example a GC has to sign off on any work over a certain dollar amount. There is a homeowner exemption but it prevents you from selling for a period of 5 years. This is WAY more common then you think so just cover your bases. 

Now, the core of your question relies on the assumption that your contractor is out to take advantage of you. Do you assume your attorney is going to take advantage of you? How about your accountant? Your realtor? How many accountants, realtors, or wholesalers were killed last year due to work related injuries? 

Contractors run sophisticated, highly regulated businesses. If we make mistakes or take shortcuts our employees can get seriously hurt or killed and we are exposed to criminal and civil penalties. We are also subject to annual audits from a host of institutional players from insurance companies to state and federal agencies. In most cases your GC is the most scrutinized and tightly regulated member of your team. There is also a very good chance that their capitalization is 2-10X yours and that is assuming you're using mom and pop operators like myself. If you go to mid market or regional players then your entire portfolio is likely a rounding error on their balance sheet. 

I bring up capitalization because new investors all too often get carried away with being the boss. We get it, you took a big risk and you don't want to lose your shirt. But treating us like the "help" when we're actually running a multimillion dollar operation is a good way to alienate the best people, leaving you to select among people who will rip you off. 

My advice: rather then spend time generating an incomplete materials list that really good contractors will very probably ignore; find a really good GC that's at the same life and business stage as yourself and has similar business goals. Work with them to develop partnerships and splits that align your interests so successful projects yield above average results for everyone. 

For example. Your contractor does the work at cost in exchange for profit share when the project is complete and sold. Or you offer to work alongside her crew on your project so you get an understanding of how this stuff actually gets built.  

And please please please remember this: Without a GC your flip is just down a run down house. 

Good luck and welcome to the biz. 

As a GC can I ask the question a different way: Why would I want to work with an inexperienced flipper? They are going to want a ton of work at no cost... 

The best advice I can offer is to find GC's that you can get along with and are patient. Then try to figure out a way to align incentives so everyone benefits when work is done well and on time. 

Most importantly, if a deal does not have the money to hire skilled contractors then it's not a good deal. 

This would set up a constitutional fight in the courts. The Roberts Court has signaled repeatedly that it views the current breadth of the interstate commerce clause. For example, Roberts upheld the ACA as a tax rather then a lawful regulation of interstate commerce. 

Also. Anyone who thinks a 7 plus billion industry is going down without a fight is insane. MJ is one of the hottest industries for institutional capital in the country, so Sessions picking a fight with GoldmanSachs is not going to go the way he thinks.

The only thing this might do is force congress to reclassify MJ from a Sched. 1 Substance. 

I went through this same analysis and went the other way. I think building the construction knowledge is way more helpful, harder and more time consuming then learning about the contract and sales side of the business. 

Moreover, Redfin, Trulia, Zillow et.al have rendered the MLS pretty much useless. Pretty much every listing is available online.

I also find that I get a lot of value out of GOOD re agents. These folks are working with buyers (my potential clients) all day everyday and so their design input and predicted final pricing is super helpful in putting together a project pro-forma. 

Ultimately, go with what interests you more. If you have the time and capital, you can usually get around the apprenticeship requirement by taking the NASCLA level 5 building exam. That's the one for the big boys and it's a hard hard test. If you plan on going that route you should budget 3-6 months of study time (if you have experience) and 6-12 months of study time if you don't. BUT... if you pass, you will have learned more about the technical side of construction and specifying then you ever thought possible. And you'll find that your conversations with other building pros are much improved. 

Good luck. 

@Aaron McGinnis and @Manolo D. if I am reading this right, it sounds like you both charge for the design and spec sheet, correct? 

These folks are asking me to do the design, line item breakdown and spec sheet for free. I have already given them that for the demo and the framing. What I am not willing to do is do that for the trades and the finish items. Is that reasonable? 

In my view, demo and simple framing is standardized and prescriptive so it does not take too long to put together a rough outline based on standard assumptions. 

But that is NOT true when it comes to finish materials. Every component has about a trillion options with a trillion different price points. And getting all of the details to come together in a harmonious way is super time consuming. Importantly design and spec is a service that I sell to other customers. So I am reluctant to offer that for free. 

Finally, this is a pretty small job and I have other bigger jobs that are shovel ready and in more prestigious areas. So I don't see a strong business case for making concessions. It would be great to pick up a new client and there is potential for some pretty big follow on work but I am not sure the juice is going to be worth the squeeze. 

Aaron, I am just over in SC so maybe we can get together this year and have a beer and talk shop. 

Go Bulldogs! 

@Aaron McGinnis I do specify my materials and I also tend to use the higher end materials because I work in a higher price point and it's what I am familiar with. Also. I think Advantech is the bees knees. I get specific about approach only when I think it's relevant. 

I do not outline profit and overhead unless it's a commercial job because I agree...people are allergic to me making a profit. 

I find it kind of interesting that so many folks view contractors as blue collar help, when in fact, most of us running fairly large businesses in a tightly regulated industry often with CapEx exceeding a couple million bucks. Hell, the vast majority of Lawyers and a good portion of doctors have no where near the operating costs or capital stack that even a middling contractor has.

Thanks again for your sage advice. 

-Jeffrey