If you are a builder or Fix and Flipper, you have undoubtedly thought about whether or not to outsource the General Contractor role on your projects. The obvious benefit to not hiring a General Contractor is the money you will save, but what is the cost to save that money?
A General Contractor is someone that will oversee your project. They will manage all the subcontractors and help get you to the finish line. They are generally not as skilled at specific tasks, like plumbing or electrical, but might be more organized and should understand the basics of the entire project.
BENEFITS OF ACTING AS YOUR OWN GENERAL CONTRACTOR
In most cities you will be allowed to act as your own as long as it is a smaller job or you hire and manage licensed subcontractors. General contractors will want to be paid for the value they bring to your project so if you choose not to hire one, that savings will go directly to the bottom line. Paying less for the rehab could mean more profit for you.
Another benefit of acting as your own is the experience you will gain. As a real estate investor, it is a good idea to have a basic understanding of what it takes to rehab a house. This will help you with future projects or come in handy if you ever hire a bad contractor.
Finally, if you don’t have one in the way, you will be in much more control. Not saying it would happen, but I could see when there might be a time when you end up with a bad one. Getting a General Contractor off the job is not easy. They could have their crews working and they might owe their subs money. Dealing directly with the subs actually doing the work is often times much easier.
BENEFITS OF HIRING A GENERAL CONTRACTOR
Although I am acting as a co-General Contractor for a house I am building for my girls and I, I am a big believer in using one on your projects. This becomes especially true as you grow as a real estate investor. It is extremely hard to scale your investing business if you are working in it, so anything you can shift to someone else while still making a profit will help you grow. Aside from shifting the workload, here are some other reasons why you might consider paying for a General Contractor:
They understand building code and can ensure work is done according to that code.
If you have a good one, you will save money on your holding costs because they know how to complete a job in an efficient manner.
It is a great way to shift liability. If something is not done correctly, you can shift that responsibility to the General Contractor or their insurance. They should also manage any warranty issues.
They could actually save you money, because often times they have good relationships with subcontractors and get preferred pricing. This could be true with material suppliers as well.
Although I think it is best for most investors to hire one, there are good arguments either way. It is not a terrible idea to go through some deals without help so you can learn the process. That is exactly why I decided to take on that role with my new home. It also might come down to how much time you have and your ability to do the job. Most investors can handle smaller jobs without the help of oner. Experienced investors can likely handle even large jobs without any help. If you have the time and want to maximize profits, I can see you taking on the role, but if you are limited on time or are more interested in growing, you probably want help.
I am a big believer that in order for you to maximize income, you need to focus on two things. What you are good at and what makes the most money. In my opinion, finding and negotiating deals is a much higher paying activity than managing subcontractors. That, and I am learning that not everyone is good at running a project.