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How Do General Contractors Charge?

 
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Old 01-09-2012, 07:18 PM   #1
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How Do General Contractors Charge?


Hello Fellas,
I just moved to Texas from Kansas and found your forum. I have been framing houses for some time now, but I am thinking about starting my own deal here in Texas. I have a few questions if y'all don't mind me asking:

1) How do general contractors charge their clients, on say a home build or remodel?

2) If they take a percentage of the total build costs, which is how I think they do it in Kansas, then do they pay for all of the subs out of their own pocket? Or is it paid at the end of the build and the home owner pays all the subs?

Any information you can give me would really help. Thanks guys.
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Old 01-09-2012, 07:57 PM   #2
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Re: How Do General Contractors Charge?


I try to get 1000% mark up.

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Old 01-09-2012, 07:58 PM   #3
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Re: How Do General Contractors Charge?


or a million, which ever is the lesser amount.
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Old 01-09-2012, 08:04 PM   #4
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Re: How Do General Contractors Charge?


Quote:
Originally Posted by BigJake View Post

2) If they take a percentage of the total build costs, which is how I think they do it in Kansas, then do they pay for all of the subs out of their own pocket? Or is it paid at the end of the build and the home owner pays all the subs?

.
Lot's of variables here, it's not a simple answer.

Google Fixed Contract and then Cost Plus Contracts. They are two different animals.

You've got a LOT of learning to do, and in NO CASE do subs wait until the homeowner pays at the END to pay them. Or you will lose that sub.
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Old 01-09-2012, 08:11 PM   #5
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Re: How Do General Contractors Charge?


I don't think I was clear enough. Let me try again.

Usually its done 2 ways correct? The first is cost plus deal where the GC charges an over all % of the total cost of the project. Is that right?

The other is a flat fee that gets negotiated before the build begins. If the costs go over, the GC's fee doesn't change.

Now, my true question is this: How do GC's get paid? Do they run all the costs through their business, then pay out the subs as they complete their task and keep whats left?

Or, does the home owner pay the subs out of their construction loan as the subs complete the work and then they pay the GC at the completion of the build?

I'm building to a greater overall question here, I just wanted to know the answer to this one first.

Again, thank you.
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Old 01-09-2012, 08:13 PM   #6
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Re: How Do General Contractors Charge?


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Originally Posted by BrandConst View Post
or a million, which ever is the lesser amount.
Do you have any useful information?
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Old 01-09-2012, 08:17 PM   #7
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Re: How Do General Contractors Charge?


Quote:
Originally Posted by BigJake View Post
I don't think I was clear enough. Let me try again.

Usually its done 2 ways correct? The first is cost plus deal where the GC charges an over all % of the total cost of the project. Is that right?

The other is a flat fee that gets negotiated before the build begins. If the costs go over, the GC's fee doesn't change.

Now, my true question is this: How do GC's get paid? Do they run all the costs through their business, then pay out the subs as they complete their task and keep whats left?

Or, does the home owner pay the subs out of their construction loan as the subs complete the work and then they pay the GC at the completion of the build?

I'm building to a greater overall question here, I just wanted to know the answer to this one first.

Again, thank you.
Yes, no, sometimes, maybe.
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Old 01-09-2012, 08:20 PM   #8
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Re: How Do General Contractors Charge?


Quote:
Originally Posted by BigJake

Do you have any useful information?
Sure, tree fiddy + cost (current temperature(current price of gold+cost of subs))=how gcs charge.
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Old 01-09-2012, 08:21 PM   #9
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Re: How Do General Contractors Charge?


Why do you believe you're ready to be a contractor if you don't even know how to charge for being one?? Work for someone a year or two and get close to the manager.
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Old 01-09-2012, 08:25 PM   #10
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Re: How Do General Contractors Charge?


I.m sorry you're getting a bunch of smart-a$$ answers here, but the problem is that your question is too broad and complex for a simple answer. And questions like these gives us the impression that you are in way over your head.


To the other posters: You guys are doing what angus just asked us not to do.
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Old 01-09-2012, 08:27 PM   #11
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Re: How Do General Contractors Charge?


Quote:
Originally Posted by A.T.C.
I.m sorry you're getting a bunch of smart-a$$ answers here, but the problem is that your question is too broad and complex for a simple answer. And questions like these gives us the impression that you are in way over your head.

To the other posters: You guys are doing what angus just asked us not to do.
In fairness I did report myself...
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Old 01-09-2012, 08:28 PM   #12
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Re: How Do General Contractors Charge?


Enough already with the stupid answers.
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Old 01-09-2012, 08:29 PM   #13
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Re: How Do General Contractors Charge?


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Originally Posted by ohiohomedoctor View Post
In fairness I did report myself...
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Old 01-09-2012, 08:30 PM   #14
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Re: How Do General Contractors Charge?


Quote:
Originally Posted by BigJake View Post
I don't think I was clear enough. Let me try again.

Usually its done 2 ways correct? The first is cost plus deal where the GC charges an over all % of the total cost of the project. Is that right?

Well ya sorta...If you are referring to Time & Material. You set up the day of reckoning (weekly, bi-weekly or monthly) tally up the receipts (which the owner sees) + subs + labor + P&O. Even though you may have a T&M contract a sub can/may & will give you a hard fixed cost.

The other is a flat fee that gets negotiated before the build begins. If the costs go over, the GC's fee doesn't change.

Negative. If cost go over it is because of a change order your P&O percentage gets added. You get them approved prior to work. You can also have a not to exceed clause. Also in T&M.

Now, my true question is this: How do GC's get paid? Do they run all the costs through their business, then pay out the subs as they complete their task and keep whats left?

Depends on the job. A large job or one with several phases you set up on a draw system. All costs go through business. YOU ALWAYS PAY SUBS WHEN THEY FINISH.

Or, does the home owner pay the subs out of their construction loan as the subs complete the work and then they pay the GC at the completion of the build?

At times the HO will pays subs on a T&M job. On a draw HO pays GC only. Refer to draw system above.

I'm building to a greater overall question here, I just wanted to know the answer to this one first.

Again, thank you.
You sound more like a HO asking how a job works....
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Old 01-09-2012, 08:30 PM   #15
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Re: How Do General Contractors Charge?


Quote:
Originally Posted by A.T.C. View Post
I.m sorry you're getting a bunch of smart-a$$ answers here, but the problem is that your question is too broad and complex for a simple answer. And questions like these gives us the impression that you are in way over your head.


To the other posters: You guys are doing what angus just asked us not to do.
I'm a moderator on a few sports message boards. I can see how this type of question would bring out the very best in people.

Anyway, I have framed houses and done many other things for years. I understand the construction process very well. It put me through college.

However, I have never been a GC on a new home build. I could walk up and build it, but I am not sure of the financial aspects. There are a lot of "builders" out there who do it all. There are also a lot of GC's out there who don't pick up a tool. I want to know how it works.
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Old 01-09-2012, 08:35 PM   #16
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Re: How Do General Contractors Charge?


It depends on your market, and your product, your sales budget and system and your customer. For the most part small projects like a kitchen remodel, bath remodel, or a small house 300k or so. The GCs round here just submit a fixed cost bid. On the big stuff it seems like they take a management fee and the rest goes to bid. It really depends on what you are offering. Some of the GC gets as little as 2%-3% some are getting 150%.

For me it depends on what we are doing, and who the sub is. My electrician is fantastic. He has always been 100% accurate, very efficient, and customers love him. I will mark him up just a little, my granite guy is the opposite, his work is fantastic, but he is a mess, he is always underestimating the cost of materials, truck breaks down, tools break whatever. I mark him up 200%. And for the record I gladly pay my electrician $75 an hour the granite guy is lucky to get $20
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Old 01-09-2012, 08:37 PM   #17
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Re: How Do General Contractors Charge?


hope that helps
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Old 01-09-2012, 08:40 PM   #18
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Re: How Do General Contractors Charge?


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You sound more like a HO asking how a job works....
Thank you. A draw system. I wondered how all these contractors could afford to pay these subs out of their own pocket. They set up the draw system and have it pay out accordingly. There might be a few days overlap I assume, but in general you aren't out a ton of money for months on end.

I guess, in the end, the HO has no idea how much the GC is getting paid unless they have had multiple bids from many other builders/GC's.
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Old 01-09-2012, 08:41 PM   #19
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hope that helps
It does help. Thanks.
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Old 01-09-2012, 08:44 PM   #20
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Re: How Do General Contractors Charge?


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Originally Posted by BigJake View Post
Thank you. A draw system. I wondered how all these contractors could afford to pay these subs out of their own pocket. They set up the draw system and have it pay out accordingly. There might be a few days overlap I assume, but in general you aren't out a ton of money for months on end.

I guess, in the end, the HO has no idea how much the GC is getting paid unless they have had multiple bids from many other builders/GC's.
Why does it matter what the GC is getting paid to the homeowner?
Do you compare new cars by the salary of the ceo or the cars value?

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