Question for Rehabbers - Posted by IB (NJ)

Posted by IB (NJ) on November 16, 2000 at 11:47:18:

Hi Mike:

Are you saying that I can’t legally hire roofers or plumbers (or accept their estimates) for my rehabs unless I’m licensed? I’m assuming ‘GC’ has something to do with a obtaining license.

When you negotiate with YOUR contractors, does the estimate given reflect the price for the materials or just the labor? If so, do you pay for the labor on a scheduled basis and pay for the materials separately?

I’m working out of Newark and its surrounding cities. How about yourself?

Thanks for the info.

Question for Rehabbers - Posted by IB (NJ)

Posted by IB (NJ) on November 14, 2000 at 17:49:54:

I’m a little confused in working with contractors. Just finished my first rehab deal where my contractor was a complete jerk. He went about 8 weeks over schedule and caused us a lot of time and headache (never let your contractor know you’re a newbie). Anyway, we hired him as our general contractor who then subcontracted out about half the work. We totally lost control of this project and gave it all to this jerk. No deadline stipulation in the contract. Mistakenly left out (of the contract) alot of stuff that we wanted done. Despite all of that, we should be closing with a buyer next week and walk away with about $30k profit.

My question is this. We’re now sarting on our second rehab and would like more control on this one. I’m confused about the purchase of materials. We plan on hiring another contracting crew but will be taking the necessary steps to ensure that these guys know who’s in charge. The contract will be tight. Payments will be scheduled after weekly inspections. Deadlines will be stipulated and changes will be agreed to in writing. Penalties will be applied for work going over agreed schedule (with a little leeway ofcourse). But what is the best way to go about getting the materials? Should I let the contractors get the stuff or should I get a list of what’s needed and get it myself? What’s the best way to do this to stay in control of the project? How do I stop the contractors from buying me cheap crap? I may hire a separate electrician and plumber depending on whether or not these guys have any licensed/insured people on staff. Any other tips for working with contractor’s? Including the stuff the books don’t tell you.

As always, thanks.

Working with contractors - Posted by Ron (MD)

Posted by Ron (MD) on November 14, 2000 at 22:04:50:

Your main question related to materials. I rehab about one house per month, sometimes two. I want no part of the purchase of materials. I have had a few unusual situations where a less-than-solvent contractor was doing a small job for me on a trial basis. He had no money and, since he was new for me, I didn’t trust him with too much money up front. I was paying for materials directly. I very quickly learned to hate Home Depot. At first, I would meet him there about an hour after he was supposed to get there to collect his materials. Well, contractors never get anywhere on time and I found myself hanging around Home Depot waiting for him to finish, then waiting in line to pay. A colossal waste of time.

With the next guy, the deal was he had to pick out all the materials and take them in a cart to the service desk. The service desk then rang them up and called me for my credit card number. An improvement over the first situation, but still a pain.

I currently use three different contractors (none of them works exclusively for me). Here’s how I handle materials. My scopes of work are very detailed. They typically run five pages, single spaced. My instructions are very specific. As for materials, I include with each scope of work my “standard list of materials”. It is one page, single spaced. It isn’t a shopping list for a particular job, it’s a list of the materials I want used for specific applications. For example, it gives the Home Depot SKU and price for each door I want used (i.e., front, rear, basement, and interior), each light fixture (i.e., kitchen, dining room, bedroom, exterior front, etc.), the floor tiles (bathroom and kitchen), the bathroom fixtures (toilet, vanity, medicine cabinet, tub surround, etc.). You get the idea.

This material list (and the detailed scope of work) serves two important functions. It is very helpful for the contractor to price one of my jobs – he doesn’t have to guess how much, for example, my dining room chandelier will cost. Secondly, it provides clear, specific guidance for them during the course of the job.

My contractors are responsible for every aspect of the rehab (including materials) except for carpet, HVAC, electric service panel, and roof. The scope of work specifically states that I expect them to hold to the agreed contract price unless there is a major surprise. I make clear (in writing) that minor problems along the way will simply be handled, with no additional nickel & dime charges along the way. I’d say that 80% of my jobs come in on budget. The other 20% may be over budget by 5-10% when a significant problem rears its ugly head.

I do not want to be in the position of scrutinizing their receipts from Home Depot before I reimburse them. I don’t want to be wondering if I’m paying for 5 buckets of paint but they’re only using 4 on my job. With my three regular contractors, I will typically advance them about $2k on a $12k job, so they are not out of pocket for material. I then give them $2-$3k per week draws as long as the job is moving along. I don’t have a written draw schedule. They have to make a payroll each Friday and I’m not smart enough to design a draw schedule that breaks a job down into four neat one-week segments.

Once you find a contractor (or two or three) that works well for you, this is all much easier. Getting to that point can be a real challenge.

Ron Guy

Re: Question for Rehabbers - Posted by PBoone

Posted by PBoone on November 14, 2000 at 18:32:51:

One thing we do is to never allow the contractor to supply materials. Go around town and open accounts with building supply companies or get a home depot/base credit account and supply the material yourself this will save you about 25%
Another is to be the general contractor yourself. Hire out the work but pay noone to lead the job unless they are on your payroll.
Pat

Re: Question for Rehabbers - Posted by IB (NJ)

Posted by IB (NJ) on November 14, 2000 at 21:21:23:

Thanks Pat. A few more questions. Who actually goes and picks up the supplies when I open the Home Depot account? Does the contractor do this on my account so that I can keep track of the cost of materials? Also, if this is done, does that mean I only negotiate a price for the labor with the contractor. How do I factor in the cost of the supplies if I don’t know much about carpentry? Thanks.

Re: Question for Rehabbers - Posted by Mike O

Posted by Mike O on November 15, 2000 at 23:04:49:

IB,
I would suggest you GC your rehabs, I think a license is about $250.00 in New Jersey. Then you can get estimates from subcontractors, and pick your own subs.About the home depot supplies, I am a regular at the depot, I know the cashiers, assistants, hilo drivers, manager, truck drivers. Well, anyway I was told that you can fax your order to the store, they will pick the order, and have it ready for you to be picked up. Have the subs fill out a work order, and fax it to the depot. They can then pick it up.
PS: Where in NJ are you working?
MIke O