All Forum Posts by: Jeffrey Stasz

Henry Shepard 3 

All. 

State has officially adopted the 2018 Code Book. There are a few big changes but by far the largest and most consequential is the widespread adoption of the guidelines, definitions and regulations outlined in ASCE 24-14. This is a big big deal and is going to restructure much of the liability. If you are acting as your own GC or just starting out please please please get smart on these regulations, a mistep here could expose you to ungodly amounts of risk and liability. 

Reach out with any questions. 

Best 

Jeffrey

I am GC and a developer. Here is why you should be paying for your estimates (this is really for larger/multi-system projects). 

A common assumption among investors is that estimates from a General Contractor should be free. Truth is, many of the better builders charge for bids (pre-construction) or disqualify anyone asking for an estimate from more then one builder. Moreover, the first thing a consultant or coach will tell a builder is to stop providing free estimates. So here, in no particular order, are some reasons you should expect to pay for estimates and actually seek out builders that charge for a bid. 

Contractor Quality: Flippers are notoriously bad clients. Engaging a builder in a pre-construction agreement will help prevent you from being disqualified by the contractor. This will open up an much higher caliber builder and the difference between good builders and bad ones is significant (just search "bad contractor" on the forums if you don't believe me).   

Accuracy: Creating an accurate and detailed bid is a serious time commitment and requires a depth of professional experience to get right. Investing in pre-construction enables a contractor to commit the resources required to get it right. 

Risk Mitigation: Requesting free estimates is usually an indication that the lowest bidder will win the job. So, some contractors will purposely provide the low bid to win the job and then use a process of change order management to increase fees along the way. While an accurate SOW can mitigate these risks the likelihood of an investor beating a contractor at change order management is very very slim. It is almost impossible to write an SOW that captures all of the assumptions, conditions, and necessary activities to achieve a desired outcome and it's pretty unlikely a contractor is going to write that document for you for free. Paying for a bid, gets you an SOW and budget written by a professional that fully understands the nature of the project. It will not be the cheapest option but it will also insulate you from major cost overruns. 

Relationship/Truthiness: We've all met the wholesaler or real estate agent that says a place needs 80 or 100k of work to complete when the real cost is closer to 250k. Sometimes it's due to ignorance or inexperience. But it's also a result of self-interest. Agents and wholesalers are paid to close deals, naturally, their repair estimates are numbers that make the deal work not numbers that get the project done. Paying a builder a consulting fee eliminates that conflict. Yes, the builder wants to secure the construction contract tendered after pre-con, but they also know they will be held to their pre-con number. Finally, paying a pre-con fee allows you to kick more tires without burning out a relationship. It's not reasonable to expect a contractor to come out and bid on 10 jobs that never happen for free. However, engaging that builder as a consultant adds a valuable resource to your team. 

I hope this helps you all be more successful this year. 

It's not even a close call. Knock it down and build new. It will be way way easier. 

@Ashley Zhang it seems like you are learning some lessons the hard way. 

A few things to point out from your other posts. 

It seems like you've consistently pursued the cheapest option- PM instead of a GC. A Cad file instead of a full set of prints. And it seems like you're getting what you paid for. What did you expect? If you wanted a full service experience you should expect to pay for that. 

I agree with @Jay Hinrichs that these are very minor issues and common to new construction projects. 

If you'd like to keep doing this I suggest learning from this experience and go from there. 

@Bruce Gibson i'd recommend finding a contractor that charges for pre-construction and have them take you through the process. 

Estimating is much harder and more time consuming then most folks understand. Some of the best contractors in your area likely charge for estimates and the really good ones that don't only agree to bid on jobs they've pretty much already won. 

Spend some time investing in a contractor and have them teach you how to do a complete estimate. Pre-construction can cost anywhere from 700-7,000 so you will need to call around. But be honest with a contractor, treat her with respect, and pay her for her professionalism and you will end up with an estimating system that is far superior to anything you can find on the internet. 

RS Means is an okay data set. As are the Craftsman Books. But be aware that those data sets are created by folks that know what they are doing so early career folks might see higher initial costs 

@Richie Thomas you get to the meat of the of question at the end of your post. And yes, you are MUCH better off looking for solid deals with enough margin to pay a quality contractor then trying to control for materials risk. I'd be more then happy to talk you through these things in more detail and if you'd like to do that over the phone just shoot me a DM and we can set something up. 

For the benefit of the larger community here are some tips on helping you form a successful partnership. 

First - Find a deal that has more than enough margin to pay a quality contractor and hit your target ROI (We will talk about cost estimation later but this is the single most important principle. Find a deal where everyone can make money and you will be good)

Second - Take some time to understand your state and municipality's laws and regulations around contractors. Each state is unique and knowing what a license means and what they do will help you find the right person. For example: I currently hold an unlimited commercial contractors license. This lets me build any type of structure at any price point. It also means I am terrible guy to call if you need a bathroom tiled. My company is set up to build big houses or office buildings. Can I retile your bathroom? Yes! Will I be more expensive then most other folks? Yes! 

Third - Try to frame the overall size of the renovation/build you want to accomplish and at what price point. If you are just planning on doing a couple bathrooms and some paint that's one thing. If you are planning on doing a more extensive build then look for someone that can handle a larger build. If you have not found a project then make the scope of the build part of your criteria. Doing that will help you look for builders prior to closing on a project. 

Where to find contractors - if you're doing something on the larger side, go to your local building materials supplier (NOT LOWES OR HD) and ask for some names from the sales people. If what you need is more cosmetic I'd recommend starting at your local Sherwin Williams branch and going from there. 

I hope this helps. 

@Richie Thomas it's a fair question and the answer lies in the underlying economics of a build or remodel. Specifically the cost of materials relative to labor. 

Builders (and I am a builder) make money by efficiently executing a plan, not by taking undue margin on materials. Contractors want to buy the materials because we have relationships with quality suppliers. This affords us a discount, a stable price list, and the ability to order excess materials to account for both waste and cull. Materials are delivered and culled stock (eg. boards that are warped or twisted etc) are set aside and picked up by our supplier and refunded to our accounts. 

When clients order the materials they often miss these nuances and don't have the relationships to over order and return materials. Often this leaves deployed crews without the materials they need to complete the work. Downtime is expensive ($2-5/minute) and it's hard for a builder to charge a client for that time even though it is 100% the clients responsibility (client ordered materials > Materials were not sufficient > client pays for downtime). So long as you're happy to sign an agreement where you pay for downtime I'm sure contractors will be happy to have you supply materials. 

Finally, there are just as many shady investors as there are contractors. The difference is, the contractor ultimately holds the liability. So when an investor starts asking to buy all the materials that is usually a red flag: that's a client that wants to do the bare minimum and place all the liability on the builder regardless of the builder's recommendations. 

@Bernard Pearson what is your ballpark renovation budget? I am a builder and might have some subs available.