What Does a General Contractor Do in Real Estate Flipping?

In the world of real estate flipping, finding the right individuals to handle various aspects of the project can be overwhelming. Many wonder if hiring a general contractor is a necessity or if they can save money by hiring multiple specialists instead. This article explores the role of a general contractor, the benefits and potential drawbacks, and why having a comprehensive team can be valuable for successful real estate flipping.

The Role of a General Contractor

A general contractor acts as the middle man, managing a team of specialized contractors to execute the renovation or flipping project. Unlike other contractors who focus on specific tasks (like painting or plumbing), a general contractor has established relationships with reliable experts and ensures all work is done on schedule and to a high standard. This intermediary role is crucial, especially for those new to the market or unfamiliar with local contractors.

The Value Proposition of a General Contractor

Finding and managing multiple contractors can be fraught with challenges. A general contractor takes the burden of coordinating tradespeople off your shoulders, ensuring that all aspects of the project are completed correctly. They also negotiate deals with contractors, providing you with better rates and terms based on their established relationships. This service is particularly valuable because it ensures quality work and saves you time and effort.

However, hiring a general contractor comes with a cost. A comprehensive study by the National Association of the Remodeling Industry (NARI) found that while general contractors add an extra layer of complexity and expense, they ultimately provide significant value to their clients. The cost of the service is justified by the peace of mind and the assurance of a well-executed project.

Important Considerations When Working with Contractors

Regardless of whether you choose to hire a general contractor or individual specialists, there are several important considerations to keep in mind:

Pay only after the job is done: Delays in payment can lead to contractors withholding their work or disappearing. Ensure that the job is completed before making any payments. Be wary of contractors buying materials: Contractors who remove materials or fail to deliver them can be considered thieves. Keep materials on-site or have them delivered directly to prevent this. Check references: Research all contractors thoroughly. Verify their business information and seek references from previous clients to gauge their reliability and professionalism. Get everything in writing: Have a detailed contract outlining the scope of work, costs, and timelines before commencing the project. Establish a safety net: Experienced contractors often have strong networks to address unexpected issues quickly, ensuring the project remains on track.

Time and Cost Considerations

While hiring a general contractor is recommended for those new to real estate flipping, seasoned professionals might consider tackling the project themselves. The time and effort required to manage multiple contractors and their tasks can be significant. Moreover, hiring a general contractor means you'll be tasked with negotiating deals and keeping track of various aspects of the project. This can be especially challenging if you have a full-time job or other commitments.

On the other hand, doing the work yourself can be more cost-effective in the short term. However, if you have the time and skills, you may want to explore the option of hiring subcontractors to handle specific tasks. This hybrid approach can offer the best of both worlds, allowing you to control the project while leveraging the expertise of professionals for particular tasks.

Leveraging a General Contractor for Future Projects

For future projects, consider hiring a general contractor to gain insights into the process. They can provide valuable lessons and reveal best practices specific to your local area. Each city or town may have unique permitting requirements, local customs, and regulatory compliance that can influence the success of a renovation or flip.

For instance, a general contractor might advise that in your particular city, it's essential to obtain a building permit for structural work, which can save you money in the long run. Alternatively, they might suggest that local plumbers are particularly skilled in installing certain types of fixtures, which could be more cost-effective than commissioning a different specialist. These insights can help you make informed decisions and offer a more budget-friendly approach to future projects.

Conclusion

The decision to hire a general contractor for a real estate flipping project ultimately depends on your time, skills, and financial considerations. While it can be a significant investment, it offers peace of mind and ensures a well-executed project. By understanding the role of a general contractor and the considerations involved, you can make an informed decision that benefits both your current and future projects.