2014 goes down in the books as an interesting and awesome year for us. We bought and sold several houses last year, and it has been the launching pad for our 2015, during which we already have 6 deals in process. A personal challenge for me — and for many from what I’ve read and heard on BP — is working with your contractors, painters, tile guys, HVAC guys, and carpet installers. Whatever the trade may be, there are a million guys out there, so who the heck do I call? Who do I trust?
Over the course of the year, I’ve met with 6-8 general contractors, 3-4 HVAC guys, countless painters, subs, tile guys, 3 concrete guys. You get the idea. I want to learn who people are, what their work looks like, and what kind of prices I am going to get. And honestly, how easy are they to work with, be in the trenches with, and do I like dealing with them?
I like to think in terms of types of people, types of deals, types of rentals — a hierarchy if you will. It’s the easiest way for me to classify them, organize them, and then easily make decisions on who I should call based on that job.
Here’s what my overall thought process looks like.
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3 Types of General Contractors (& How to Choose One for Your Project)
1. The Corporate General Contractor
This is the guy who shows up, gives me a bid, and has a team in place, usually with a lot of different sub contractors, laborers, etc. This is the person who is NOT swinging a hammer, but has the system in place to handle multiple jobs at a time with other lead guys, project managers, etc.
I’ve met with a couple of these guys; I love their work, but I have not been able to find one yet who would be on budget with my pricing for the renovations on either the rental make readies.
Large GCs often have their pricing at a “retail” price point, versus the guys who are a per hour or per job, or the Mid-Sized GC (below). They are almost always the most expensive bids I get.
I would consider someone like this on a large, upscale project that would be a lengthy job requiring a lot of management skills and that had a budget that would allow for the expense. This guy is usually a great manager (they have to be; that’s what you’re paying for), so they can handle a lot of jobs at a time with a large pool of resources and team to pull from — just be ready to pay for them.
2. The Mid-Sized General Contractor
The mid-level GCs in my area seem to be able to handle 1-2 projects at a time. They have a lead man, the GC, who generally IS the guy and is at least partially swinging the hammer. This is the key I love about this type of contractor: they know, understand, and DO multiple trades — plumbing, electrical, basic HVAC, framing, tiling, sheetrock. They might not be an expert at all of these, but they have working knowledge and are doing at least part of these within the context of the renovation. They have a crew of 4-8 guys and have a laundry list of quality subs for HVAC, flooring, etc. to sub out to.
The GC makes his money working ON the job, as well as managing and handling tasks like bidding jobs, working directly with his guys and his subs, and building some profit into his price as well. The great benefit to this guy is your prices for the basic plumbing, basic electrical, etc. (assuming they are qualified and licensed to do the work) because they can handle them in house, which will definitely be cheaper than calling out just the plumber or just the electrician.
The downside to the Mid-Sized GC is also his strength. He can do (nearly) everything, but he is also still in the trenches. This GC needs to be able to balance work on the job and managing the job/future jobs/other jobs that aren’t yours… AND managing his guys. This type of person has been the sweet spot for me with our renovation projects on flip properties.
3. The One or Two Man Contractor
I love these guys. They are usually very reasonable, they are quick to call back, they usually need the work, and they work reasonably. (Note: If they don’t answer the phone or at least get back to you after the work day, FIND SOMEONE ELSE. That goes with all of these types.) They may also have a general background in basic plumbing and electrical (I have a couple guys in this category, and they both do). I prefer that so I am not calling out someone to do other work, which costs me more money.
This type of person I typically use on my rental properties for make readies and for service calls. I think the quality of work here is solid, but it becomes a question when working on upper scale properties or jobs requiring specific carpenter skills for cabinets or crown molding. I’ve found it’s usually either an extremely high-skilled, slow, methodical, and expensive person — or a reasonably cheap person with decent value-to-work skills and who works well for the rental units. I never use first type; I always use the second in this category.
This contractor is not someone I typically want running a large scale renovation; it just takes too long with the number of guys they have, and they usually are not quite ready (or they don’t have the skill set) to manage a larger project. I am sure there are guys out there who can manage a project just fine, but it just means those are not the guys in my arsenal to call. I appreciate having these contractors for their use in the rentals and for jobs that take usually a week or less.
How Best to Decide
Think about what you need in your business. What kind of work, skill set, price point, and experience do you require? My mid-level GCs make a good living. They are definitely not the cheapest guys out there, but I’ve grown to trust both the work they do and their ability to manage a project.
Make sure you know what you need — someone to manage people and jobs or someone you can be more involved with, running the job site, perhaps hiring subs yourself and being a little more hands on with the operation (working in the job) versus managing/working alongside the guys who are managing managing your jobs.
At the scale we are working with, I don’t have time to be working in every job, but I am there multiple times a week, checking on the guys, solving problems, seeing the progress and making sure the operation is running on schedule.
It’s best for you to made a decision of which kind of person you will be; either is fine. But know your role, so your guys — your GCs and all the sub contractors — understand theirs.
How do you manage your projects, and what kind of contractors have you had the best luck with?
Let’s start a discussion in the comments section below!