E03: Choosing a General Contractor: Tips from Experienced Investors
Manage episode 381639821 series 3519087
Today’s episode is all about construction execution. Peter, Ron, and Wade dive into important topics like vetting general contractors, managing construction projects, and tips for choosing the right GC. They discuss starting small with value-add projects vs new construction, how to find reliable subcontractors, and setting the right payment schedule in contracts. Learn from their experiences working with GCs over the years. Whether you're just getting into real estate investing or looking to refine your strategy, this episode is full of practical advice straight from investors who have done hundreds of deals!
Here are some power takeaways from today’s conversation:
- Interest rates and its impact on real estate investing
- Navigating the construction process as a beginner
- The functions of a general contractor (vs. a construction manager)
- The “walk before you run” strategy
- What is an asset management process
- How to navigate conversations with general contractors
- Tips for finding a solid real estate agent
Episode Highlights:
[02:43] Interest Rates and Their Impact on Real Estate Investing
- Real estate interest rates are influenced by factors like tenure, liquidity in secondary markets, and the mortgage-backed security market. Recent data shows the tenure reaching a multi-year high of around 4.8%. It will be interesting to see how this affects mortgage interest rates and if the market reacts similarly to the past six months. Currently, interest rates have stabilized after a rapid increase earlier this year. In the present market scenario, with low supply and higher interest rates, rental prices may align with the interest rates if demand remains strong.
- [09:50] Navigating the Construction Process: Advice for Beginners
- Entering the world of construction without prior experience can be risky. It is crucial to conduct thorough research and gain a solid understanding of the construction process. Starting with simpler new construction projects might be easier for beginners compared to tackling complex value-add properties requiring extensive renovations. New construction projects come with their own set of complexities such as approval processes, permitting, and zoning regulations. It is important to take it slow and gradually ease into construction unless you have a trusted general contractor who can handle the project. Mistakes are common, especially if you lack understanding of the construction process or entrust it to unreliable contractors.
- [21:58] Employing “Walk Before You Run” Strategy
- The "walk before you run" strategy is a wise approach for real estate investors new to construction projects or new markets. It essentially means starting small and gradually taking on more as your skills and experience grow. In new markets where you don't have established relationships, only do simple value-add projects at first like cosmetic upgrades rather than major renovations. Only take on larger, more involved construction once you've built up competency in that area through smaller jobs.
- [34:55] Tips for Finding a Solid Real Estate Agent
- When searching for a real estate agent, reach out to your network of investors, lenders, property managers, and attorneys for personal referrals. Additionally, review recent sales in your desired neighborhoods and examine well-presented listings as a sign of a proactive agent. Prioritize specialists in the type of property you're interested in and interview them about their experience, marketing strategies, and track record. Read online reviews from past clients to gauge their communication style and work ethic. Ensure the agent is readily available during negotiations and consider an agent who also offers property management services for long-term investments. Ultimately, trust your instincts and continue searching until you find the right fit.
Resources Mentioned:
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