Being your own General Contractor

[California]

A couple of points I haven't seen mentioned:

It is well worth the cost to work with an architect. You can cheapskate this and take him completed plans for review, if you can't afford more. But you need his sense of aesthetics and experience to avoid design errors like that 40k kitchen Eddie described.

Don't expect him to catch all the design errors. His specialty is beauty, light, livability, not engineering. And it's worth it to have this specialist in livability extend your thinking beyond what you came up with yourself.

The second point is that an architect can introduce you to builders and subs. This is important - you would never find them all on your own. If they are referred by a local architect this provides a little more incentive for the sub to preserve his reputation and do good work.

There are just as many bad architects out there as bad contractors. Ask around and find someone whose previous customers still like him.

 

[gemini5362]

Eddie thank you for your reply. It is good that you pass on your discount to your customers. A lot of people in the building trade do not do that. I lived in Saudi Arabia for several years working on US military weapons systems. When I moved back to Arkansas I had bought an old farm and was remodeling the farmhouse and adding on 3 bedrooms which basically was 1500 more square feet. I hired someone that I had gone to high school with and new very well. We settled on a fair labor price. I had other people give me bids a lot lower but the quality of his work is very good. When the lumber yard delivered material I wrote a check for it right then. If I went to the lumber yard to pick up anything for him he told me to make sure to tell them it was for him and for my house. It was not until years later that I found out he got a 10 per cent discount on all those materials and that discount was paid back to him later. Effectively he made thousands of dollars extra off of the job without having to put his credit at risk or do any extra work for it. I always paid for items as I bought them and he would send me to the lumber yard for whatever he needed. I was not real happy when I found out about that.

It amazes me that people will spend a lot of money on a house or garage or etc and not think nothing about that but will not spend a 1000.00 or less on having an attorney look at the contract for the building. On one of the posts in another thread someone spent a couple of million or more on having some new buildings built and didnt have an attorney aprove of all his contracts now he is looking at oweing one of his sub contractors several times what it would have cost to have an attorney to check out the contracts with all the subcontractors.

 

[riptides]

We are just completing up a major remodelling effort documented on these boards. We went with a general contractor we could WORK with. And I mean c l o s e l y. The gentleman was great in gather our input and worked the entire process from architecting to swinging a hammer. Was it worth our money. Absolutely. He pointed us in the right direction for selection of plans, materials, and other choices. The onus of getting subs was on his back. And let me tell you, sometimes they worked, and sometimes they didn't. But the GC made sure things got done, and done RIGHT. If we were to have done that, no way. The minute one thing slips it is a snowball effect downhill.

I think if you can find the right person to work with, the label of GC is well earned. I cannot put enough wording into "the right person". Do your research well, see projects and jobs, ask around, ask for references, visit them on their turf, etc. etc. You want someone that cares about the job, their rep and business.

Good luck.
-Mike Z.

 

[MarkV]

I hope you don't think I was implying that all subs have problems.

Hi Eddie,

I knew you were making a point about the type of people you can run across in this business rather than saying everyone in the business is that way. We could pick almost any profession and do the same thing. I just wanted to make a point about the other type of sub’s and contractors out there so things were not taken out of context.

MarkV

 

[Paddy]

Geminixxxx,

Payment. We all have to make money and only a well paid worker do you a good job. He gets discounts because he is a volume buyer. You are not. Sure I don't like the idea of this hidden source of income but, the final price and quality of work is what should be the focus. Next time you go out to dinner, notice how they make their money. Drinks and you pay the wait staff! Talk about mark up, a $5.00 bottle of wine for $20.00! What system where not only be we pay their waitstaff, but have to do math after a few rounds of drinks!!

GC points;
GCs can earn their money. All you have to do is goof up on a few things and all your DIY savings went out the door. from what I've seen over the years, home owners ruin a lot of good material. I've nice marble poorly set, oak trim cut short, drywall muded like a 5 year old did it, flashing leaks and on and on.

Bids vs Time and material.

There are 3 ways to look at bids 1) over priced, 2) correct price and 3) under priced. You the home owner lose on 1 and 3. Many builders will cut every corner if they see them selves loosing $$. Or better yet, walk off the job to cut their losses. I prefer Time and Material with weekly bills. If you trust your builder in the first place, it's the way to go. If things run a muck, your comiment ends on Friday! Sure we can all say it like a blank check, but when I used to help with writing bids we included a huge fudge factor. Also, with time and material, the owner can choose to do a portion here or there depending on time avalibility.

Just thoughts

 

[dmccarty]

Here is how my builder did things. I doubt others will do this but you can try.

It was a fixed price contract. But he had allowances for items such as trim, flooring, lighting, kitchen, baths,etc. His allowances would be low for what WE wanted. We knew that there was no way that his allowances would pay for what we wanted. This might sound bad and it could be if you did not figure out that the allowance would not get what YOU wanted. And of course it meant that the price on the contract was not going to be the final price.

That is the badness. Here is the goodness. Say you had an allowance of $10,000 on the windows but you spent $20,000. He only charged his %15 on the $10,000. The other 10K he did not earn a dime on. So you could overspend but he did not take a cut.

My one big issue with building a home is the GC/contractor charging a percentage on the materials. This is BS. There is no price difference to put in a window that cost $200 vs one that cost $400. Why does the GC/contractor make more money for the same work for putting in an item.

Our builder tried to get close on allowances but his idea of what was acceptable and our view was different. This truely was a difference in personalities. His home is very functional and plain. He does not have anything costly in his house. He was raised on a poor farm in a poor county and you did waste money on a fancy fixture when a cheap one let the water out just as well. We don't have high end stuff but we sure did not want a $20 fixture. BTDT aint worth it.

We set up a budget on the allowances starting with his numbers and then adding what we thought the final price would be. This was all wrapped into a final price to the bank for the loan.

Later,
Dan

 

[Tom_H]

We built our log home here in the Central Valley back in '93. I knew a contractor up in the Sierra foothills who had already built a dozen log homes with the log home manufacturer I wanted to go with. I had visited several houses he had done and from time to time followed the progress of them. I also had talked to the homeowners for whom he had built and had received positive feedback about him from all of them. So I knew I wanted him to build the house.

We had spent a full five years planning the house. We visited over 80 different log homes throughout the state and I drew several sets of plans before settling on one. The manufacturer took my plans and fed them straight into the CAD/CAM, making only one minor change (I specked a log header above the garage doors that they changed to glu-lam). This saved architectual fees.

I knew that my contractor would have to commute about 75 min. each way and wasn't familiar with the suppliers and subs in my area. This meant I would have to do a lot of legwork for him, so we also spent much of that five years pricing supplies of every last item and getting numerous bids from subs. I think I actually got estimates from 22 different drywall subs. This was before home centers put every one else out of business, so we had to go to a LOT of suppliers.

When I applied for the constrution loan, it turned out that my contractor had declared personal bankruptcy a few months earlier. It was the recession of the early 90's. The bank had a cardiac. He had not, however, filed business bankruptcy. Prior to this, I had already had to write three petitions to the bank for special exceptions, such as accepting alternative construction with no comps for resale and letting us commit 40% of our income to the mortgage. I had already turned over tons of financial documents and records to the bank to prove that I had never bounced a check or had a late payment in my life, that I had a history of frugal spending and scrupulous savings, never carried credit card balances, etc., so the bank already knew I was a low financial risk. The bank gave me 48 hours to prove how they could take acceptable risk on this contractor. I called several or his previous clients (one was a regional mgr. of a credit union) who agreed to be interviewed by the bank, put together a list of his civic achievements, stated truthfully that I had carefully read 8 books on being one's own G.C. I proposed that he be the contractor of legal record, that I would use my $40,000 life's savings as the start-up capital, that I would select the subs-but he would supervise them, also that the bank would release the draws to me and I would pay subs and suppliers from a checking account at their bank, while constantly sending balance statement copies to their bank. He would work as the construction foreman and also do the concrete, plumbing, electrical, rough and finish carpentry, and get paid only for his labor time. I'd do the roof and a little carpentry, and the wife and I would do all staining, painting, and cleanup. I had the entire proposal written in great detail and to the bank on time. This was my 4th do or die task of this kind for the bank. I guess writing over 90 formal papers during several years of grad school was helpful. They accepted it; I got a beautiful house and saved a lot of money; he had steady work for nine months and got back on his feet financially. It all worked out better than I'd hoped, but it was the result of a lot of preplanning, hard work, and good luck that turned situations that had the potential for calamity into success.

 

[gemini5362]

Geminixxxx,

Payment. We all have to make money and only a well paid worker do you a good job. He gets discounts because he is a volume buyer. You are not. Sure I don't like the idea of this hidden source of income but, the final price and quality of work is what should be the focus. Next time you go out to dinner, notice how they make their money. Drinks and you pay the wait staff! Talk about mark up, a $5.00 bottle of wine for $20.00! What system where not only be we pay their waitstaff, but have to do math after a few rounds of drinks!!

Paddy I understand what you are saying and we dont have the issue with markup on wine because I live in a dry county . The problem I have with the hidden profit is just that it is hidden. I expect a volume buyer to get a discount. What I have a problem is the lack of liability that they have for that discount. If I make an agreement for someone to do work on my home we negotiate price. I do my homework and try to get a fair price for both of us. If all the materials are delivered to my home and I write a check for them right then. If I am told to go to a certain store and buy the material and I pay for it right then there is no risk for the GC he has not had to pay for the materials up front. He has no investment in the cost. I dont expect him to get a hidden profit with no investment. There are other industries that do the same thing. We just bought a new car. On some of the models they had something called a value added column it was put on by the dealer for extra profit. I walked off the lot and did not look at anything on their lot. Every time i see something like that I dont do buisness with them. I am the same way about GC. They deserve a fair profit but do not deserve to make a profit off of materials that I completely pay for at the time they are purchased. If I am the one purchasing and paying for them then I deserve any discount that is given.

 

[capt jack]

Eddies advise on: NEVER GIVE PEOPLE MONEY UP FRONT!!! is the golden rule.
You hear this all the time but people never learn. credit is way to easy these days, if they don't have any there is a reason. Not ALL subs are addicts. Some are off duty firefighters trying to build a better life for our family.
But you get what you pay for. Looking for the cheapest bid will get you a whole new class of friends. Next best advise: check the last several jobs they did, not just the referals they told you about, but where the supply house says they were working last week, the week before that etc..
Don't know about Kansas, But in Texas banks can't loan money to someone to a homeowner to be his own GC if it will be his primary (homested) residence.

 

[mjarrels]

Best talk to your lender... many will not let you be your own GC unless you put down a large down payment... many folks have been burned. I thought about it will I built 8 years ago but was talked out of being my own GC. Best money I ever spent was hiring a GC to do the work. (I paid 50% cash for building cost)

mark