| Are you looking for contractors? Do you have no idea | | | | 2. Turn-Key (Specialty) Services |
| where to start? The goal of this article to introduce the | | | | If you don't like the idea of paying someone to manage |
| 3 major types of contractors you're likely to come into | | | | your schedules and hire sub-contractors, you can do |
| contact with, and give you some ideas of which is right | | | | this work yourself. But you still need to hire contractors |
| for your projects... | | | | to come in do the actual rehab work. |
| Keep in mind that contractors run the gamut, from | | | | When hiring your own contractors, you have a couple |
| jack-of-all-trade types to high-end specialized artisans | | | | options. The most common -- and most reliable -- is to |
| who focus more on art than on function or practicality | | | | hire specialty contractors who are licensed, insured, |
| and everything in-between. I remember on my first | | | | and can manage themselves and their team. Most |
| house flip, I spent weeks interviewing contractors and | | | | specialty contractors list themselves in the Yellow |
| getting bids. Strangely, I was getting bids ranging from | | | | Pages, and they include those popular businesses such |
| $18K all the way up to $70K for the exact same | | | | as Terminex (pest/termite) and Roto Rooter |
| Scope of Work! I couldn't imagine that there would be | | | | (plumbing); of course, there are likely thousands of |
| a such a large range, and I couldn't figure out what | | | | these kinds of companies in your area that you've |
| caused it. Especially considering the fact that I was | | | | never heard of, but are just as reliable and hold the |
| only getting bids on Labor Costs, not Materials (which I | | | | necessary credentials (license, insurance, Better |
| specified and priced separately). | | | | Business Bureau Rating, etc). |
| This is what I soon realized... | | | | While these guys may not be the cheapest laborers |
| There are different types of contractors and | | | | (they spent a lot of time and effort getting the |
| contracting services, and if I had to categorize them, I | | | | experience necessary to get their licenses and |
| would define three major categories. The differences | | | | credentials, and want to get paid for their efforts), they |
| in these three categories of contractor largely account | | | | will likely get the job done without you having to |
| for the differences in price, and have a very large | | | | "babysit" them or watch their every move. That said, |
| impact on the amount of work the investor will be | | | | you'll still have to call them, get estimates, schedule their |
| required to exert himself. As you might suspect, as | | | | time, and make sure they have access to the |
| you move from the more expensive to the less | | | | property and the information they need -- these are |
| expensive contractor solutions, the amount of effort | | | | the types of things that a General Contractor would |
| that the investor must exert increases quickly. | | | | normally do, and that you would normally be paying to |
| Here are the three buckets of contractors you'll find if | | | | have done for you. |
| you're planning on doing property rehab: | | | | The major downside to working with a bunch of |
| 1. General Contractors | | | | specialty contractors is that you will be responsible for |
| The term "general contractor" is used in two ways, in | | | | managing schedules and ensuring that the rehab |
| my experience. From now on, I am going to | | | | progresses in the most optimal fashion. For example, if |
| differentiate "general contractor" from "General | | | | you hire the painter to come out before the cabinet |
| Contractor" (note the capitalization). A general | | | | installer and the flooring professionals, you'll likely pay |
| contractor is someone who has the ability to tackle a | | | | less for painting, as the painters don't have to spend as |
| lot of different aspects of a rehab project; most | | | | much time protecting the new materials from getting |
| general contractors are good at carpentry, sheet-rock, | | | | paint on them. If you do it the other way around, you'll |
| basic electrical, basic plumbing, basic HVAC, and other | | | | find that the rehab takes longer and is more |
| general areas of home renovation and rehab. This | | | | expensive. While a General Contractor will know these |
| type of general contractor might be referred to as a | | | | sorts of things to keep a rehab moving along quickly, |
| "handyman," though if he is licensed and highly | | | | you might not, and getting that first-hand experience of |
| experienced, he's likely a lot more than just that. | | | | having to re-sheet-rock a wall because you had your |
| When I use the term General Contractor, I am referring | | | | dry-waller work before your plumber, can be both |
| to someone who has all the skills of a general | | | | frustrating and expensive. |
| contractor, but also manages all the aspects of the | | | | Btw, I would consider an experienced handy-man to |
| renovation that he doesn't actually execute himself. A | | | | be part of this Specialty Contractor group, and as I'll |
| General Contractor will often hire sub-contractors | | | | discuss in a future article, a good handy-man may be |
| (contractors with specific skill-sets) to come in to | | | | the most important of all contractors in your arsenal. |
| handle the work that he is either not skilled enough to | | | | 3. Freelance Workers |
| complete or too busy to complete. For example, | | | | The cheapest -- but most time intensive for you -- |
| General Contractors will often hire plumbers, | | | | avenue for getting a rehab done is to hire what I call |
| electricians, roofers, foundation experts, etc, to cover | | | | "freelance workers." These are guys who might have |
| those aspects that require specific expertise. | | | | some experience in some aspects of rehab (they |
| Not only does a General Contractor hire the | | | | might even be general contractors), but don't have |
| necessary sub-contractors, but he will often manage | | | | enough expertise and experience to trust them to |
| the schedule, the project budget, and all the payments | | | | complete even individual parts of a project without |
| as well (if you want him to). For big projects, the | | | | management. Whereas a turn-key dry-waller can be |
| General Contractor might spend all his time managing | | | | trusted to finish up a room while you head to lunch, you |
| schedules, budgets, and sub-contractors, and therefore | | | | probably would want to stick around to manage and |
| might not have time to do any of the work himself. | | | | instruct a freelance worker who was doing the same |
| The General Contractor is also responsible for | | | | thing. |
| ensuring that his subs are properly licensed and insured, | | | | Freelance workers are often called "unskilled laborers," |
| to protect you and your investment (as well as to | | | | because while they work very hard, they don't have |
| protect himself). | | | | the expertise to know how to solve tough problems |
| As you can see, having a General Contractor makes | | | | themselves. They'll look to you to do that, so it's |
| your job as an investor very easy; you hire one | | | | required that you would have the knowledge and |
| person (the General Contractor), you pay only him, and | | | | expertise to solve those problems. For example, a |
| everything just gets done. (At least this is the theory; in | | | | freelance worker might be happy to install carpet or |
| actuality if you don't have a trusted General | | | | lay tile for you, but may not know how; it would be up |
| Contractor, you may need to be very hands-on and | | | | to you to demonstrate proper technique and then |
| manage him to make sure he's doing a good job, | | | | ensure that he is following it and getting the job done |
| which dilutes his value tremendously) | | | | correctly. |
| The downside to working with even the best General | | | | Freelance workers are by-far the cheapest labor |
| Contractor is that he will charge you for all the extra | | | | costs for a rehab, but will require the most time, effort, |
| work he does. If he hires a plumber for $1000, he'll likely | | | | expertise and patience from you. |
| charge you $1100-1200 for that plumber's work, | | | | Many investors will choose a combination of these |
| because he had to find the plumber, hire him, manage | | | | three types of contractor for their project. They may |
| him, and take responsibility for his performance. The | | | | choose to hire a GC for the large projects that they |
| General Contractor is also managing schedule and | | | | couldn't handle themselves, and then use a combination |
| ensuring that the project is on budget, so there will be | | | | of turn-key service contractors and freelance workers |
| extra overhead charges for that. In all, having a | | | | for the smaller projects. It's all a matter of balancing the |
| General Contractor manage your project can cost | | | | cost, time, and effort required to get a job done. |
| you an additional 10-30% on your rehab labor costs. | | | | |