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How do General Contractors charge?

44K views 117 replies 27 participants last post by  rselectric1 
#1 ·
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.
 
#4 ·
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.
 
#5 ·
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.
 
#10 ·
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.
 
#15 ·
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.
 
#11 ·
A.T.C. said:
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...
 
#16 ·
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 GC’s 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
 
#21 ·
Scribbles said:
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 GC’s 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
You need a new granite guy. Subtract a few starters and slab from his overhead and you could afford a good one.
 
#31 ·
What Mr. Phillips describes here is the very first class in any MBA program in this country. It was in mine. I appreciate the link and I appreciate his post. However, I was more concerned with the process of it all. Certainly I googled it and read all there was about it.

The process was a little bit fuzzy to me. So, worded very poorly, I asked you guys a questions. I thank you to the people that answered it legitimately.

As I said, I had framed houses for many years, but I never paid much attention to the process of it all. That was my fault. I haven't framed a home in 8 years. All of this is a little bit fuzzy to me honestly.

I am not hanging out my shingle tomorrow and going to start contracting. I am going to go home and hang out with some builder buddies of mine first.

This all might be a pipe dream honestly. I own 2 businesses right now and at least one would have to go first.
 
#34 ·
Customers want to enjoy the process.

Think of it like this, you want to go to Harvard. Everyone get perfect grades. That is par for the course; everyone gets a perfect sat, again just par. So you study hard and do everything you need to get a 4.0 and get an 1600 on your sat. But guess what the other 20k applicants are the same. What make the difference? Extras.

Your quality as a contractor must be perfect. That just par for the course. So you are as good as a thousand other contractors in your area. Why are you better, why should you be worth something extra, what do you offering that the other guy doesn’t, focus and build your business on this.

80% of businesses fail. That is par for the course, do you want to be par?
 
#86 ·
I know this should be obvious, but to me, that is framable. Well said, and I thank you for writing it. I just may print that sucker out and staple it to the doors of my trailer as a reason to work that extra hour to make sure it's right, buy a new board if I cut one wrong, etc., etc., etc. That is why...
 
#36 ·
Big Jake, welcome to our community. I'm sorry you got beat up here, but we get questions from DIYers and hacks on here pretty regular, and not to be an ass, your questions lean in the DIY and HO direction. I've been known to be a jerk myself... I'm going to take you at your word your a carpenter who wants to be a builder, I've been there.

There are many ways to charge as a GC. Time and Materials, Cost Plus a percentage, Cost Plus a percentage with a cap, Cost Plus a fixed rate, Fixed Cost Bid. There are many ways. The main thing to know when contracting is Labor +Materials+ Overhead+Profit equals your price. This is very basic, but I'm not going into graphic detail on the web. If you want more information, PM me.

BTW, welcome to Central Texas. If you like BBQ, Mexican food, cold beer, hunting and fishing and beautiful women, you will love it.
 
#59 ·
I love all those things, so I will fit in well. But the BBQ in KC will not be beat in Texas, I promise you. I can assure you that I am not a home owner looking for answers. I would google what I needed if I were. I asked you guys because you are pro's. Or supposed to be pro's. I plan on being here for a long time.

Truthfully, I am not sure how much the GC portion of my company will occupy. It is something that I want to offer, but it won't be my only service.
 
#37 ·
jawtrs said:
Big Jake, welcome to our community. I'm sorry you got beat up here, but we get questions from DIYers and hacks on here pretty regular, and not to be an ass, your questions lean in the DIY and HO direction. I've been known to be a jerk myself... I'm going to take you at your word your a carpenter who wants to be a builder, I've been there.

There are many ways to charge as a GC. Time and Materials, Cost Plus a percentage, Cost Plus a percentage with a cap, Cost Plus a fixed rate, Fixed Cost Bid. There are many ways. The main thing to know when contracting is Labor +Materials+ Overhead+Profit equals your price. This is very basic, but I'm not going into graphic detail on the web. If you want more information, PM me.

BTW, welcome to Central Texas. If you like BBQ, Mexican food, cold beer, hunting and fishing and beautiful women, you will love it.
Hunting?

In utah We have dogs bigger than the deer in Texas.
 
#38 · (Edited)
They aren't huge but big racks, and the neighboring county is the deer capitol of the world. If it wasn't great, why do people fly from other states and pay 10,000$ for a lease? Lol

Also dove and pigs my friend. I killed over 250 DOVE this year.

250 DOVE. Lol. Only 3 deer.

Actually most leases around here are 1500 to 3500. Its hard to find a poor boy lease anymore.

I do know a few high fence places that charge 3000 for management deer and up to 20000 for a trophy. Ridiculous what lawyers will pay...

Can't argue deer here are like overgrown rabbits. South Texas has some big deer.
 
#46 ·
jawtrs said:
:laughing::laughing::clap: Hope the game warden doesn't see this. Lol. 250 DOVE. DOVE. LOL

3 deer, no bucks other than a 12" spike. Culled two does. ****ty season.

They are big rabbits around here really. Biggest buck I ever shot was a 21" spread 10 pointer, he weighed 108 lbs BEFORE I cleaned him. Lol
108! We're you riding him when you weighed in?
 
#47 ·
No 108 is pretty big here though. I here these ignorant bastards say they kill 135 lbs all the time, never happen in CENTEX unless your giving it steroids. Only weighed that one because the scale was available. I figured 125. Not to good at guaging weight. My buddy killed a 150 lbs 8 point in Kansas this year. HUGE neck. Crazy.

Think we hijacked a thread?:laughing:
 
#50 ·
Have a Yankee friend who says the same thing. Used to be if you could hang a ring on it, it counted. Officially it changed to an inch. :laughing: That is for real, too. My buddy is from Illinois and he calls 10 points 5x5. Only he usually doesn't think its a 10...:whistling
 
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