How to Hire & Manage a Fix & Flip General Contractor
Why fix & flip when we can just buy and sell, wholesaling real estate for quick profits? The big reason is that there’s a lot more profit when we fix & flip. There’s no reason why a handy person can’t take the do-it-yourself approach, but this probably means you’ll only be able to work on one deal at a time.
Even if you’re hiring out most of the work to sub-contractors, you have to watch the job and supervise their work. Doing all of the material buying and checking the work of the subs takes a lot of time, so you have to put off finding more great deals. The cost of hiring a – general contractor can be made up easily when you can be working on several flips at the same time, or at least looking for the next great deal.
Choosing a general contractor is important, but it’s just as big of a deal to manage how you work with them. Let’s take a look at how to choose one, and some ideas about how to set up paying them and getting them to be as interested in your profits as you are.
Fix & Flip General Contractor Basic Qualifications
You want to be sure that you’re getting a general contractor with the right experience, plus:
- Track Record: You want to see some of the work the contractor has cheap nfl jerseys done, hopefully with before and after photos. If they don’t want you visiting homes they have remodeled, it could be a warning sign.
- Licenses: There will be state licenses, and many times city and county licenses too. It’s OK to ask to see them and make sure they are current. A contractor who forgets to renew their licenses probably has problems on jobs as well.
- Legal: If you’re talking to a general and he tells you he can save you money on jobs by doing things that aren’t legal, run the other way. If they get caught or sued, you can end up on the hook too.
- Insurance: This includes bonding. Many states require bonding for a contractor to get their license, but Lender if they don’t, you still want to use a bonded contractor. You also want them to keep the right kinds of insurance, including liability, workers compensation and good vehicle coverage.
- References: Get references from other fix & flip investors they’ve worked with. If they haven’t yet, then talk to their remodel customers. You want to know that they perform on time and meet or beat the budget.
Sure, a lot of insurance coverage and licenses raise the cost of the job, but taking short cuts can end up costing you more in ways you STRONG can’t budget for.
Give Your Contractor the Big Picture for all Jobs & Make it Clear
Sure, you need good communication with your general contractor, but there’s more to it than that. You can work on the fly if you work alone, but when you hire someone and give them a big job to do, shouldn’t you be very clear about what the job is exactly?
- Have a general off-the-shelf set of instructions and specs that apply to every job and make sure they read and understand them.
- Let them know that you’ll be checking on jobs and how often.
- Clue them in on your business plan so the good contractors can become your partners for profit.
This is the kind of stuff you get to early, before you get to details of any specific jobs. In fact, you want to get to cover these while you’re checking references and scoping out their work.
Fix & Flip Contract and Scheduling
We’ll talk about money later. Right now let’s look at how we want to set up our deal and project with the general contractor to be sure that we’re both on the same page.
A Written General Contract
You may be able to do this in two steps. You set up a general contract that covers how you’ll work together, what you expect, and what the contractor should expect.
- All of the stuff about jobs should be kept on schedule, work days and off days.
- Spells out the requirements for insurance, bonding and legal work practices.
- Sets out who is responsible for choosing subcontractors, or if it’s the general, do you have final approval/disapproval rights? A general may plan on hiring a sub that you know from another job and you didn’t like their work.
- Clearly sets out penalties for work that isn’t up to standards and for falling behind on the schedule (more on this in the money stuff later).
- You may be able to find an off-the-shelf general contract that works, but you want to run it by your lawyer and change or add legal clauses they recommend. This is important, as even the most carefully chosen contractors may not live up to your needs and you will have to use this contract to end your deal at the lowest cost to you and the least damage to your deal.
A Written Project Contract
Then do a separate contract that is specific to each project, and:
- Has all of the required legal stuff about the property, so it is clear where the work is being done. This can become important if you later think some of your job materials are going somewhere else.
- This is where you clearly and in detail explain the job, including:
- How the 发现大量的TIME_WAIT解决办法 contractor will be paid and how much (more on money to come).
- A hard schedule for completion, as you will probably have a contract in place to sell to your buyer by a certain date. One of the jobs of a general contractor is to supervise every phase of the job and keep the subs out of each other’s way, so you may not have a schedule for phase completions.You will want some type of understanding in writing as to when certain major things should be complete. An example would be doing a new roof first to protect the work you’ll be doing inside. If this important item is late, it throws the entire job off track and you risk losing your buyer or some of your profits.
- You will be funding the job, so the contract must be really clear as to when you’ll make payments and what can be a problem and cause you to hold back money the contractor asks for. A quality problem or botched job by a subcontractor is an example.This is important because the general contractor will be paying the subcontractors (unless you do that), and a job can get into trouble in a hurry if the guys doing the work don’t get paid when they think they should and they have done a good job.
- You want lien releases for all work done each time you make a payment. You want them from every sub and the general contractor for all work you pay for. You need this spelled out in the contract and the lien releases handed over in exchange for checks.
- The contract will include a detailed set of specifications for the work to be done and the materials to be used. Do this after a walk-through with the general contractor. You’ll get good ideas and can take photos to add to the contract to a make it even more clear what is expected.
Those are the high points, but you’ll want to take a look at some good contracts other experienced fix & flip investors use.
The Money – How Much and When for a Fix & Flip Deal
The Straight Bid
First let’s talk about how you set up your deal with your general contractor. You know what you can sell the home for, how much you paid, and you have a project budget. The most common way to pay your contractor is to have them give you a hard bid and then you pay them as job phases are completed, holding back a small percentage (called retention) for a set time at completion to be sure all liens are cleared and certificates of occupancy are delivered.
We already talked wholesale nba jerseys about making sure that the contract discusses when payments will the happen, and it should also spell out what can cause money to be held wholesale jerseys back and how much. Penalties need to be understood and agreed to, and you need to enforce them. In a straight bid job they could call for some kind of daily damages to be paid if the job isn’t finished on time.
You can pay the contractor based on invoices they submit plus a percentage as their profit. You can also build in a bonus for coming in under budget to give the contractor a reason to try and save you money. Another way to do this is for you to pay for materials as they’re bought and you shop for what you want to save money. You pay the contractor their cost for labor plus a percentage.
Make Them Your Partner
We’re not talking about an actual partnership in most cases. It’s a partnership in the profit goal. You set a minimum amount of profit you want from the job based on your estimates, and you bonus the contractor with a nice percentage of extra profit. It can even be as much as a 50/50 deal. The contractor doesn’t even have to bid the job in this case, but they’ll need to be sure they can perform inside the budget, and you do too. You can set an upside cap on what they will be paid.
Funding It All
Too many new fix & flip investors worry about this part the most, but they shouldn’t. Private/hard money lending is the answer, and you can quickly qualify and learn all about it at Cornerstone Company’s website. the Go there now to get this out of the way so you can concentrate on what you’ve learned here.
Fix & Flip investing is the most profitable strategy if you do it right. Follow these instructions in choosing and working with general contractors and you’ll be able to concentrate on more than one deal at a time. The more in play, the greater your profits.