Own GC on the first spec, or hire one and watch how they do it

Question

I've swung hammers for eleven years and I've run other people's jobsites, so the framing and the sequencing don't scare me. What I've never done is carry the money side of a house I own. I've got a lot under contract and I keep going back and forth on whether I pull the builder license and GC it myself or pay someone 9 or 10 percent of hard cost to do it while I learn the parts I'm weak at.

The case for doing it myself is obvious. On a 380k hard cost that fee is somewhere around 35k, which is a real slice of a first project's margin, and I already know most of the subs by name.

The case for hiring is less obvious to me but people keep making it. A GC with a book of subs gets called back faster than I will, and in a market where nobody can fill crews, being the guy whose framer shows up in week two instead of week seven might be worth more than the fee. There's also the license question, which differs by state, so I need to actually confirm what my state requires before I assume I can pull permits in my own name.

Which way would you go on a first one?

aliyah_b · Answer

The fee isn't the number I'd be looking at. I'd be looking at carry. If a hired GC finishes 90 days sooner because his subs answer the phone, and your loan is running interest on 380k plus the lot, that 90 days is real money against the 35k you saved. Do the math both ways with the same interest rate and see what the gap actually is before you decide the fee is expensive.

luis_carrera · Answer

I've been circling this exact question for four months without a lot under contract, so take that for what it's worth. What changed my thinking was realizing the two options aren't symmetric in what they cost when they go wrong. If you GC it and misjudge sequencing, you eat the delay and you also eat the learning. If you hire and he misjudges it, you still eat the delay, but you have someone to argue with about it and a contract that might say something about who pays. Girder, you know construction, so your risk isn't the build. It's the first time a lender draw inspection lands a week late and you've got a sub waiting to get paid.

megan_doyle15 · Answer

The sub-answering-the-phone point seems bigger than the percentage, even though all of this is new to me.

Own GC on the first spec, or hire one and watch how they do it

3 replies