Contractor Perspectives – Part 1: DIY or Outsource a GC?

Who Is a General Contractor?

One of the key players on your fix and flip team is your general contractor (GC).  A general contractor is someone you hire to manage, coordinate, and carry out a rehab project both on time and within budget.  They will be responsible for building, repairing, tearing down, and/or installing the various facets of your real estate investment project.  They will either do the work personally or hire and manage subcontractors such as carpenters, electricians, and plumbers, but they should have detailed knowledge of what it will take to complete a project.

Should I DIY and Act as the General Contractor?

Once you close the deal on your investment property to rehab, you are the legal owner.  Most owners are permitted to act as the general contractor of their own property, but depending on the jurisdiction and project scope, local laws may forbid it without proper licensure, so it’s advisable to seek legal counsel before beginning.

Assuming you can legally act as the general contractor on your property, this gives you more control over your project and allows you to ensure that it is completed on time, under budget, and to a level of quality that meets your expectations.  As a general contractor, you can vet, hire, and manage all other sub-contractors to achieve your goals.

It’s worth asking yourself: “am I qualified for this job?”  If you feel confident in your skills, you could save a lot of money from hiring out a general contractor, which is only going to help your bottom line after resale.  But if acting as a general contractor is not your cup of tea, or you just wish to open up your time for other value added activities, you may be better off focusing on your own strengths and hiring the right man for the job to save yourself the trouble.

Should I Outsource a General Contractor?

If you’re invested in your real estate business, it’s arguably worth cultivating the skills and knowledge to act as a general contractor because it will make you a stronger asset to increase profits on your projects.  Nevertheless, it’s best to start with easy manageable tasks such as painting, tiling, basic plumbing and electric, and work your way up to more complex endeavors.  What are the best reasons to hire out a general contractor early on in your real estate career?

First, assuming you’ve done your research and found an experienced high quality contractor, they know how to get the job done well and how to schedule and manage their subcontractors to do so.

Second, they know the codes and understand which permits are needed to get an inspector’s approval of the project.

Third, since they’re doing volume and already have established relationships with sub-contractors, they can get better prices on labor and construction materials.

Fourth, if someone gets injured, the liability is often in the hands of the general contractor, and if he’s legit, he will have worker’s comp insurance so you will be protected.

Finally, if something goes wrong on the project within 6 months after completion, a good general contractor will warranty their work and try to make it right.  They want repeat business, so this is to their benefit and yours.