If you are a GC, how would you charge an “investor” that wants to buy bare lots and build spec houses, and have you “help” him?
He’s footing all the bills, and making most decisions about which suppliers and subs to use. No exposure whatsoever on your part.
You are bringing your skills as a builder, your tools and equipment, plus your crew of carpenters, capable of framing and finishing.
You won’t see any invoices, as they will all be going to the big guy, the investor.
The big guy’s got a buddy that owns a string of lumberyards, and the buddy at the yards will have his backoffice guys do all the takeoff work. You will have very little if anything at all to do with getting the right stuff to the site when it’s needed.
Basically, you’re doing the framing, the exterior and interior carpentry, plus providing a sort of lead carpenter function.
So, what will you charge?
Replies
I always cringe when someone says they have a "buddy" who is going to "hook them up"
Most of the time I hear that from a homeowner and then go talk to the "buddy" and they say something either like, "I didn't know he was building again." OR "If that s.o.b. thinks I'm giving him another kitchen at cost he's got another thing coming."
One of our current project homeowners thinks he has more buddies than he does. He sure doesn't mind shopping his buddies prices around though!
Sorry to vent. The buddy system never works out for me. And I hate being told which suppliers and subs I can use.
What the heII are you brewing up now gene??? lol!
Sounds like he could just hire any old GC to get it done.
What's his advantage to having you do it??
Info's too vague...........pay you, offer you a few points of the profit?? But why??
Why shouldn't he just shop a GC to get it done?
I Love A Hand That Meets My Own,
With A Hold That Causes Some Sensation.
[email protected]
Second thought..........
and making most decisions about which suppliers and subs to use
To me that is a big red flag. He is expecting you to gc the job, but he is gonna take care of hiring the subs. So they visit the site and you are not to offer input?? Who's gonna run these guys at the site?? YOU ARE!!!
Who's hiring the site work, foundation, and supervising it???
and the buddy at the yards will have his backoffice guys do all the takeoff work. You will have very little if anything at all to do with getting the right stuff to the site when it's needed.
Oh, I love that one!!! Gene, Gene, Gene, (I sound like Mike Smith now!) why on earth would you opt out of specing the lumber. Not much worse to me than having a pile of lumber dumped on the job, then trying to figure out what to use where? I know some of it will be obvious, but we all have our different need and ways of ordering the loads.
Some of the threads here (on BT) are very cryptic in a sense. It's like I want to ask the poster, just EXACTLY what is it you want to know???
Eric
I Love A Hand That Meets My Own,
With A Hold That Causes Some Sensation.
[email protected]
To quote the words from CCR's old hit from the hippie days, "It ain't me, babe."
It is happening right in the 'hood, though.
Not my cup of tea, for sure.
Schelly answered the question, sort of, except he's not working on specs like this guy is.
No fee at all, just labor, plus OH&P on the labor. I sure would want to make sure that my overhead computation included enough for everything. Bringin' ten grand in scaffolding, jacks, tools, and equipment to a job ought to be worth something.
We have been working for the past eight months on one of our jobs as a carpentry sub under a project manager for the HO. The set up is pretty much as you describe without the various buddies. We are charging the same hourly rate that we would charge on any T&M job. This rate includes our overhead and profit in it. We may make slightly less because there is no markup for materials or subs but we are not standing behind any of that as we would on a regular job.
Like any job, the problems usually arise from the personalities involved. I wouldn't do this deal with anybody and we will break it off quickly if it does not continue to work. There are grumbles from the HO about the overall cost of the project but we haven't heard anything directly but positive comments. The grumbles are mostly directed at the architect so far. It's been pretty good for eight months which isn't a bad run.
In Florida that would be considered selling your license. So I would have to have enough to cover all my legal bills and enough to take care of my wife and kids until I got out. The I'd need a bit more to cover re-training since the state would have taken my GC license when I went up the river.
Strange you should say this about Florida.
Mr Big's had some projects done there, just recently. Can't be sure of the terms, though.
What if a Florida residential contractor "borrows" cash at a very "favorable rate" from a lot owner, to finance the construction of a big new home on the owner's lot, and uses the cash to pay suppliers and subs, then doesn't charge a markup on those costs?
Does the FL GC get to keep his license?
No problem there at all. The state doesn't care if you make a profit. They just want to know that since they licensed you, you're the one actually doing the contracting. I get a newsletter about once a quarter from the state with a 6 or 8 page list of contractors who screwed up and their punishment.
He's footing all the bills, and making most decisions about which suppliers and subs to use. No exposure whatsoever on your part.
Gene, beware, the only way to tottaly insulate yourself from exposure is with competent legal advice, the skillfull application of entity selection and absolutly doing nothing!
If you want to re-phrase your statement, to say that your exposure is limited, then I'll accept that, as long as you are entering into a limited partnership, corp or llc.
Gene, you are basically describing a general partnership. If the partnership involves the building of only one house, it would be considered a joint venture but to be technically considered a joint venture, I think that there would have to be explicit language explaining the exit strategy. In the absence of the explicitly detailed exit strategy, this arrangement has all the trappings of a general partnership.
There are severe liability issues with general partnerships and they should be thoroughly discussed with legal counsel before entering into them.
The allocation of duties seems to eliminate the possibility of this being considered a limited partnership.
A lot of the independent old cusses in here will tell you to run from these types of arrangements, but not I. I see the distinct seperation of duties as a Godsend and I think it's easy to simply attach a number for the varying services rendered. Those numbers are negotiable, and I can tell you what we have been offered and what we accepted.
We were offered to partner in a venture to build spec houses. The "investor/builder" will supply all the capital or credit, GC the job including handling everything except the rough frame. We will rough frame it. When it sells, we will split the net revenues 50/50. We are talking about speccing 250k -350 k homes. Our "capital investment" will be the cost of the rough carpentry......anwhere from 15k on the small job to 20k or so on the larger job. The partner will essentially be "skimming" a build fee equal to our carpentry fee.
Do we like the offer? Yes. Would we trade and do it the other way? Yes.
When you analyze offers, it's up to you to decide whats best for you. It might not work for others, but it might be perfect for you. Some will think I'm crazy, but I like the idea of a competent, ethical partner taking care of a major portion of a complex business. Sure, I could take it all on myself, but I've learned that 1/2 of something is often better than 100% of nothing. If we could structure every rough frame that we do with this business arangement, I'd be tickled pink and adding carpenters to the payroll as fast as I could find competent ones. Why? Because if the typical 20% minimum return is earned, our 15k rough frame (on the 250k house) would eventually be booked as 25K....a 66% increase for doing nothing more than carrying the cost of framing contract as a receivable for a few months and accepting some additional risk, most of which is covered by builder's insurance. Of course we would carry the ethical liability of accepting the debt load if we can't sell, but that risk is minimized by working with someone that has lived and prospered off spec building for 25 years.
If we manage to sell for a somewhat higher return, the numbers can only get rosier.
The one thing I don't understand is why you wouldn't be able to access the invoices. That would send up a red flag and it indicates a less than honest relationship. I fully understand the "big guy" wanting to maintain control of the purse strings because he's the guy financing the deal, but I don't know why he'd want to hide the paper trail....
blue
Just because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
Either consult
or sub contract the framing and trim
you can't do both evenhandedly
Welcome to the
Taunton University of Knowledge FHB Campus at Breaktime.
where ...
Excellence is its own reward!
hes taken his time gettin to his point me thinks.
http://forums.taunton.com/tp-breaktime/messages/?msg=53774.1
Gene has always held his cards close to his vest. No problem with that. He is try ing to play the hand he holds.I'd fold
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
It's real easy to fall in to the belief that you can find the answer to any question by posting it here.
That's a compliment to everyone here.
EricI Love A Hand That Meets My Own,
With A Hold That Causes Some Sensation.
[email protected]
I often refer to this place as a Mastermind ( principle from Napolean Hill - Think and Grow Rich) I do think you can find almost any answer here, if you phrase it correctly, keep a discussion alive ( living, not just bumped up and up) and if you are ready to hear what is said..
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
I often refer to this place as a Mastermind ( principle from Napolean Hill - Think and Grow Rich)
I do think you can find almost any answer here, if you phrase it correctly, keep a discussion alive ( living, not just bumped up and up) and if you are ready to hear what is said
When the student is ready.....the teacher will appear.
I loved Think and Grow Rich.
I rememer working on a roof with that CD blaring up over the eaves. My son and I would listen, then look at each other a knowing look in our eyes. Then, we followed it up with a CD that explained how to get out there and make offers on real estate deals using nothing more than our thoughts, ideas and effort. I remember my son excitedly telling me....."I'm going to make a ton of offers tonight on the way home!" He was so pumped up finally knowing that he held the power to achieve anything that he wanted...
He hasn't followed through on the effort...and we all know that everyone has their own dream...he just doesn't know what his is yet.....it's coming though.
I highly recommend Think and Grow Rich to everyone. I believe it should be mandatory reading in every high school.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!
I am psychologically mal-adjusted to be able to use on eof his principles - Never do your self what you can hire others to do for you.I just like to do things
Welcome to the Taunton University of Knowledge FHB Campus at Breaktime. where ... Excellence is its own reward!
Whatever you need to make a day plus 20%.
Who Dares Wins.
First, to answer your question, I'd charge hourly at a pretty good rate for your time, and standard rates for the crews.
Second, I'd be very careful about who is the legal GC, and who's on the hook if there is a problem down the road. In short who's insuracne will be used if there is a defect.
I found that out that helping an good business contact, a very busy Realtor, build their own house, turned into a nightmare when there was a problem 3 years later involving a subs work he hired, managed and paid, and my insurance fixed the defective workmanship! It really wasn't worth the $7,000 I made helping him build a $600,000 home he sold for $1M two years later, and then moved out-of-state!! Tom
I can understand your situation if you live in a state where licensing is required, maybe.
Florida is an example. Any owner can self-GC his own house, provided that he employ licensed subs.
But if you were in a locale where even that wouldn't work, and the owner you spoke of used you as a "paper GC," you got screwed.
There is no licensing required where I am, and I am pretty sure this guy that is working carpentry for the investor throwing up specs, is simply charging as you are suggesting.
Gene, here in Michigan we are allowed to use someone else's license.
Since everyone has a builder's license, I dropped mine. I know I could hire anyone's license for$50 if I ever needed to pull a permit.
blueJust because you can, doesn't mean you should!
Warning! Be cautious when taking any framing advice from me. There are some in here who think I'm a hackmeister...they might be right! Of course, they might be wrong too!