Should I Hire a General Contractor or Serve As My Own?

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Rehabbing is one of the major components of the real estate business. A property in need of a rehab is often where the money can be made. But doing a good quality rehab and bringing it to completion is not easy, as there are many potential bumps along the way. You need to know how all of those property pieces fit together, and you will need many different types of contractors to get your job done.

Some contractors are essential due to their knowledge of potentially dangerous systems, such as natural gas or electric. But do you need a general contractor to oversee and coordinate all of this work? Or should you act as your own general contractor? There are pros and cons to each side of this story, and we will go through some of them shortly. First, let’s make sure we all understand what a general contractor is and what they do.

What is a General Contractor?

A general contractor is someone who you hire to manage, coordinate and complete a rehab project. They may or may not be specific tradespeople, but they are often a sort of “jack of all trades” who have detailed knowledge of how to complete the project. They are often responsible for making sure that the project comes in on time and within budget, and they hire and manage sub-contractors, such as electricians or plumbers. Most of the time you will pay and direct the general contractor, who will in turn pay for materials and manage the sub-contractors.

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Acting as the General Contractor

As the property owner, most jurisdictions will allow you to act as your own general contractor (this will, however, vary by jurisdiction and scope of the project, so check your local laws). Therefore, you get to ensure that things are completed on time and within budget, and you would hire and manage all of the other sub-contractors. Why might you want to do this? Here are some thoughts.

First, you can save the money that you would pay a general contractor. General contractors are not going to work for free. They will add an up-charge to all of the services they procure and oversee. This up-charge will directly affect your bottom line.

Related: The Ultimate Guide to Finding an Incredible Contractor

Secondly, being your own general contractor allows you to learn the business. One of the best ways to learn anything is to do it. There is a real advantage in this business to knowing and understanding how a general contractor operates.

Third, being your own general contractor means you will likely get hands on experience with many of the components that go into a rehab job. It is very handy for a real estate investor to have a basic understanding of plumbing, electrical and HVAC systems, as well as all of the other things that make a building function. Knowing and understanding the costs of materials, the time it takes to install them and the prices of labor will be invaluable to your real estate investing career.

Finally, you can watch over things much more closely and perhaps better control the pace of things. If one of your sub-contractors begins to slack off or not do the work to your standards, you can fire that contractor. With a general contractor, you will likely have to go through him or her. It adds another layer.

Why Hire a General Contractor?

Having read this far, you may already have a sense of why you might want to hire a general contractor. A general contractor can be a major asset. Here is why.

First, they know the codes. Hopefully you have hired someone who is recommended and has a good reputation. They will understand what permits need to be pulled and how to get code enforcement to approve the project. If you have never dealt with building codes and inspectors, this can be a major asset.

Second, they know the process to get the job done as efficiently as possible. They should understand which components need to be completed when and know how to schedule their sub-contractors accordingly.

Third, the liability is often transferred to the general contractor if someone gets hurt. Any general contractor worth his salt will have worker’s comp insurance and thus protect you if someone falls off the roof.

Fourth, they likely can get better prices on materials and labor. This is simply the nature of the business. They do more volume and already have good relationships with sub-contractors; thus, they get better prices and may actually save you money in the long run.

Finally, they can warranty their work. If something goes wrong in six months, most folks will come out and try to make it right. After all, they want more business from you, and good ones stand behind their work and reputation.

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Should I Hire a General Contractor?

There are good arguments to be made for each side of this coin. Each side presents a different set of benefits, which can be very attractive to different investors.

Related: 3 Types of General Contractors (& How to Choose One for Your Project)

I think at the beginning of an investor’s career, smaller jobs should be done by the investor. Doing this will help them learn many facets of the business. Note well that I said “smaller jobs.” I am talking paint, carpet, perhaps minor plumbing. An inexperienced investor should not be taking on large rehab jobs.

Bigger and more complicated jobs, like burnouts or additions, may require you to hire a general. These types of jobs can be very complicated, and the money you pay to a general will be well worth it. Still, I suggest you manage the manager and check up on your project frequently.

Finally, using a general will free up your time. After all, you want to be a real estate investor, not a general contractor, right? So do some minor work at first, learn the ropes, then move on and hire a GC and learn how to manage them and free up your time to find more deals and make more money.

[Editor’s Note: We’re republishing this article to help out the investors who have found BiggerPockets more recently. Let us know what you think with a comment!]

What do you think? Should you hire a general contractor or do it yourself?

Please share with your comments.

About Author

Kevin Perk

Kevin Perk is co-founder of Kevron Properties, LLC with his wife Terron and has been involved in real estate investing for 10 years. Kevin invests in and manages rental properties in Memphis, TN and is a past president and vice-president of the local REIA group, the Memphis Investors Group.

26 Comments

  1. Alex Craig

    I certainly think hiring a GC is good to learn the in’s and outs of the order of procedure and how to work within the code inspection requirements. The problem I found when I first started is that the contractors that worked within the margins we needed where the worst. On time and on budget is what we as investors live by, but the contractors in this space more often then not finished way late and over budget. The day I found my first crew was when I started really being profitable. Now I have 3 crews that can do 100% of the non-licensed task. I figure the avg Contractor market up off the bottom line is at least 20% and in their cost is General Liability Insurance, Workers Comps, Contractor licenses, bonds, job supervisor, etc. If you are going to be in this business long term, you have to learn to do this yourself and find your crew.

    • Kevin Perk

      Alex,

      Knowing what you do I can understand your view point (Alex is a turn-key provider and rehabs many a home). I guess I might add a “it depends on what you want to do” to my list. Having and managing your own crew is a big plus with an operation like yours. Perhaps we can get you to share how you found your crews and keep them busy?

      As always, thanks for reading and commenting,

      Kevin

  2. Jacob Vincent

    Thanks for sharing Kevin. This is useful advice for when I eventually will have to hire a GC (whenever that will actually happen).

    I know of someone (with an engineering degree – FWIW) who is choosing to act as GC for a substantial rehab on their primary residence. The learning experience for them should be invaluable.

  3. Larry Russell

    This is a great post! I’m strongly considering getting my GC license to be better equipped for managing my own rehabs. You normally hear investors talk about getting their realtor license but seldom hear about an investor getting their GC license. Why is that? To me it seems more synergistic if you’re rehabbing houses.

    • Kevin Perk

      Larry,

      It could be. I think many newer investors have not realized just how important rehabbing is in this business and think “someone else” will do that. Finding that “someone else” though can be really hard to do.

      Thanks for the comment,

      Kevin

  4. Theodore Renka

    Great article. I was the GC on my last flip and it was a total rehab. Although I benefitted from the savings of doing it myself, I think I will be looking to hire someone on the next one to enjoy my free time more and look for other investments.

  5. micheal reinier

    From my own experience, I have done several rehabs myself in the past without any problems. The last one did not go as well, mortgage company insisted that we provide a detailed scope of work list from a GC and show all permits before moving forward. We purchased a duplex for 60K, put about 60K into it and had it under contract for 200K. The property was appraised, home inspection went very well. Local comps supported the sale. Lenders still wanted us to prove the price increase.

    • Kevin Perk

      Micheal,

      Those who have the gold make the rules. Sometimes you have many hoops to jump through to get the deal done. In the end though, it usually seems to work out. I chalk all of those things you describe up to a learning process. I hope your deal ended up well.

      Thanks for sharing your experience,

      Kevin

  6. Terrence Arth

    Hi Kevin,interesting read. Generally, my experience with subs has been good for smaller projects. While living in North Carolina a number of years back I built a house. Well, I didn’t build it, I hired a GC. I was fairly close to the task and the one thing that struck me was that managing the subs was like herding cats. Subs are by nature independent, so if they get smaller jobs, need to go put a bid or see a job, they are not on yours. It was interesting how many times the subs went to a late lunch and never returned. Or, showed up at 10am. I think for me, a project would have to cost out with all the expenses including the GC or I’d pass. While most of the subs I’ve worked with have been honorable and good business people, I’m not up to chasing subs to meet deadlines, watching for nasty shortcuts, sub par materials etc. That, IMHO is work for a pro.

  7. Said Karimzad

    Very good article, great tips and discussions from experienced investors, I would like to add one more point that might be helpful to the problem that Michael mentioned with the lenders despite of everything he did well. Visual media ( photos, video clips) is a very powerful tool that might be missing, now everybody has an iPhone or ipad that could take some photo or video without hiring a pro, so why not an investor take advantage of this option? to show the condition of a property before and after rehab is done, that might help investors in situation like this.

  8. My grandfather is very independent, and he likes to fix things on his own. His latest project has been to fix the circuit problems the basement has been having. I\’m a little worried for his safety because he is dealing with electricity. Should I try to convince him to hire a general contractor?

  9. For small projects, I like to do the work in my own home myself. However, for remodeling projects bigger than a simple rock wall, I like to hire a contractor. I like knowing that my new roof is covered by my contractors warranty and I\’m not personally liable if it fails. My suggestion is to hire a contractor for jobs that make you feel either nervous or unsafe.

  10. I was actually wondering this same question. I am wanting to do some remodeling in my kitchen, but I wasn’t sure if I should hire someone to help me or not. That being said, I really appreciate you letting me know that it would probably be better to hire someone. And after reading this, I definitely agree with you. It is better to be safe then sorry anyways right?

  11. It is good to know that general contractors work on getting sub-contractors. I was thinking about just being my own general contractor when I build my house, but I was worried about being able to find an electrician. I want to be sure that someone with plenty of experience wires my house so that it all works well. I\’m sure that experienced contractors have a good idea of who is best at the job, so it might be best to trust the work to a general contractor!

  12. My dad is hiring a contractor to build an addition on to his house. I didn’t understand why he couldn’t just do it himself, so I wanted to understand the actual job. Learning all the building codes and figuring out the construction process on your own does sound pretty difficult. I can see how it would be valuable to hire someone who already knows what they are doing.

  13. I really like the idea of buying a tool belt and remodeling my bathroom all by myself. However, you\’ve helped me remember that every construction problems need to follow specifications that keeps the building up to code. Since I\’m a perfectionist, I don\’t think that I could finish my bathroom in a reasonable amount of time. I\’d be so worried about following every building code to the letter! Since you mentioned that general contractors understand building codes and generally guarantee their work, it would make sense to hire someone to do the remodel for me.

  14. Thanks for your article about general contractors, Kevin. Your right about how general contractors can be a significant asset to your build or project. Your spot on about how they know the codes required to pass state, county, or city inspections. This can save you a lot of time and money; because, if your project doesn\’t pass inspection it can mean doing some demolition in order to fix some aspects and then rebuilding. No one wants to do that. Thanks for the post.

  15. I think it is super important to always hire a general contractor. Because when you do this, you know that the job will get done on time and it will be done right. If you serve as you own, and you aren’t sure what you are doing, then the job might not get done correctly.

  16. I\’ve learned the hard way in life that if you don\’t know what your doing, you shouldn\’t try to fix it on your own. So, if you know what you are doing and have a good handle on how a project needs to go down, then by all means do it yourself. If you have no idea what\’s going down though, then it\’s wise to call in a contractor who knows what he\’s doing.

  17. Chris
    I just purchased my second Bank owned property and needed some ideas. On my first property, I hired licensed independent contractors for Electrical, Plumbing, Heating and Building. All required permits were pulled by the Contractors. Most of the Contractors show up late during the day for work and left before the day ended. I checked in with them weekly on the progress of the work they were in charge off. The project took me between 6 – 8 months to complete and a little over budget. What do I need to do differently to keep the work on schedule and within the budget?

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