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Archive for Construction Management

What’s the best way to pay laborers?

Trade contractors generally pay laborers by the hour, or by the piece installed on a weekly or biweekly basis. Let’s look at the pro’s and con’s of each.

By the Hour:
Pro(s) – Laborers are paid a rate per hour for the time they work, capping their cost and making it easier to control the amount of hours employees work. Some workers will want to work as many hours as possible.
Con(s) – Laborers are generally paid an additional 1/2 time the rate for overtime. The employer needs to monitor the performance of the worker and watch the hours to make sure that the laborers work consistently and continuously.

By the Piece:
Pro(s): You only pay them for the units installed, regardless of how long it takes someone to complete a unit.
Con(s): When paid by piece, employers needs to watch to make sure the guys don’t blow through the material and claim they used more than expected. When workers are paid per piece, they are not necessarily the most careful or do the best job, and they are often nowhere to be found for the little corrections that are a common part of what we call the punch list.

Generally, laborers like to be paid on a weekly basis. When they know they are getting a steady paycheck every week they are more likely to continue showing up. Laborers have been known to go from one employer to another for the same pay, just because the new one pays more often. While it’s easy to feel like laborers don’t care about anything except getting paid, as much as possible – it’s important to remember that many really do care about doing a good job. You just have to take the time to make sure they understand the expectations.

When do you make money on the property flip?

Often, investors tell you that, “In real estate investing you make all your money by buying right!”

The truth is, “Buying Right” is only part of the ‘flipper equation’.

Most property flips need repairs and upgrades as part of working the flip. Even when holding property, eventually repair and maintenance is needed. This makes property flips, a three-step process: Buy, Renovate, and Sell.

If you buy wrong it’s hard – some say impossible – to turn the situation around. There is no question; flipping property starts with the buy. People have a great degree of control over the buy if they are objective and willing to walk away from the deal. The “trick” is to have solid information that makes you confident you are buying right.

The same information helps your reasonably predict, but cannot control, the sell. Selling is always subject to market changes.

You can buy right only to see the profit slip away when the renovation goes over budget, takes too long, or both. It’s easy to understand why going over budget can reduce profit, but a project is on budget, but takes too long and the market changes – taking a dive mid project. That’s what happened to thousands of flippers when the housing bubble burst in 2008.

Each of those conditions are enough to lose some or all of your profit. Both together, will have you deciding between holding and renting in hopes of the market eventually turning around, selling at a loss, or foreclosure.

That’s why controlling the renovation, is the best way to maximize profit. With the right construction management system and tools in place, you can keep competition fair and reasonable, clearly outline expectations, hold people accountable, control costs, maintain a healthy power structure, and provide checks and balances.

And with unbiased and objective support in place, you can easily sort out confusing and / or conflicting information.

With these two things, you can keep your residential and light commercial project on track, profitable and headache free.

How much time will it take to manage your own Construction Project?

Some owners think a professional construction manager is not needed. They are sure that in just a few short hours per week they can keep in contact with all their subcontractors, make material choices, manage the project’s finances and even deal with the building inspectors. “It shouldn’t be all that hard,” they say to themselves, “why pay for services I don’t need?”

Okay, that’s one way of looking at it. But, before making that decision, it might be a good idea to think about it a bit more; especially to gain an understanding of everything involved in managing a construction project. There’s actually quite a bit of work that needs to be done, even before the project begins. Not only does the project need to be put out to bid, but the schedule needs to be written, the scope of each contract needs to be developed and the plans need to be drawn.

There are some things which need to be done, no matter how big or small the project. Pulling construction permits and dealing with inspectors doesn’t change with size; nor does the selection of carpet and paint colors. No matter how big the project is, these things have to be done.

On the other hand, there are items which are highly dependent upon the project’s size. Developing a schedule, project specifications, plans and blueprints are all items that are affected by the size of the project. Even though there might be an architect generally taking care of the plans and specifications, they do so with the input of the owner. The bigger the project, the more questions they’re going to have and the more time the owner is going to have to spend discussing options, making decisions and checking the plans and specifications.

Then there’s the actual management of the construction work. Communication is key to a successful construction project, not only verbal communication but written and visual communication as well. When ample time isn’t given to properly document decisions that are made and instruction that is given, there is more opportunity for misunderstandings, errors, and even law suits.

Then there’s the need for regular inspections and reports of the project’s progress. Why are regular inspections and progress reports needed? Because without regular inspections, there is no way of knowing whether the contractor is doing the work according to what is expected. How can you know if the change to a position of a wall is actually done, if you don’t check it? How can you know if the right size plumbing pipe is used without measuring it yourself? You can’t count on the contractors doing what you say, without checking their work.

There’s a great management saying, which applies very much to construction, “People do what you inspect, not what you expect.” Never assume your contractors are doing what you expect, unless you take the time to inspect their work. This would be even truer in cases where what you expect isn’t the norm. If you had the architect specify 4” drain pipes for your toilets, and the plumbing contractor is used to using 3” drain pipes, he might very well put in 3”, even though you are expecting 4”. Unless you inspect his work, you’ll never know.

The reality is that daily communication and regular inspections are an absolute necessity for any construction project. All of this needs to be thoroughly documented, to protect you as the owner. If you don’t do so, you are asking for trouble.

The real question isn’t whether or not you can manage your own construction project; it’s whether or not you have a system that helps you organize the time to do so. If you can’t dedicate a couple of hours per day to managing the project, you don’t have enough time. You won’t end up happy with the results, because your contractors will misunderstand you at every turn. Your project won’t be successful, but rather, be a series of ongoing problems for you.

That’s where Construction Conductor and Construction Coaching come in. With Construction Conductor you get a complete understanding of all the terms we talked about above. You get the secrets to using project management best practices and get the tools necessary to ensure every project is a success. You’re taught everything you need to know about practical day-to-day construction management. A dedicated Construction Coach who knows everything that needs to be done and how to do it is has the time and knowledge necessary to ensure that everything on your project is completed and inspected properly. That ultimately saves you time, money, grief and gives you a better finished project.

Can You Afford a Project Manager?

Many homeowners look at the idea of hiring a Project Manager as an extra, unnecessary expense in their home building project. “After all,” they think to themselves, “I’m already paying an Architect and a General Contractor. Both of them are supposed to be managing my project, why should I hire another manager?”

That’s actually a very good question, one that I hope you’ll let me answer for you. First of all, these three people, the Architect, the Contractor and the Project Manager all have different functions, even though they look like they are all doing some of the same things. We need to understand what the difference between their different functions and different outlook is.

The Architect is concerned about the design of your home. He wants to build you something that is going to make him look good, while providing you with a home that will keep your family safe and comfortable. Although most Architects also claim to manage the construction project, what they’re really doing is making sure that your home is built according to their design and specifications; not trying to save you, the owner, money.

The General Contractor is concerned about how your home is built. More specifically, he’s concerned about how much it costs to get built. You have a contract with him, which limits the amount of money which you’ll pay for his services. So, he wants to make sure that the project costs less than that, ensuring his profit. He’ll do the best possible job, within those parameters. But, when push comes to shove, he’ll sacrifice quality to keep his profit.

The Project Manager doesn’t have to worry about the design or the profits. If you hire a Project Manager, he doesn’t need to worry about his profits, because you’re already paying him to do the job. His concern is that the whole project is completed in the best possible way, in order to make you, the customer, happy.

You see, the Project Manager is the only one of those three who is your advocate as an owner. He’s the only one whose best interests are to look out for your best interests. That makes his focus much different than the other two professionals whom you are working with.

The important thing in getting the maximum benefit from the services of a Project Manager is when in the overall project timeline the owner hires him. The greatest savings for the owner comes from hiring the Project Manager first, even before hiring the Architect. In this way, he can be proactive for the owner from the very beginning, before any other professionals are hired.

If the Project Manager is hired first, he can do the most good. As the owner’s representative, he can locate, interview and negotiate the best possible contract for the Architectural work. As part of this negotiation, the Project Manager can negotiate with the Architect to remove the extra costs associated with contract administration, communication and schedule management out of the Architect’s contract. Since the Project Manager would be handling these functions, there is no reason to pay the Architect for them as well.

By doing things this way, there is no additional cost to the owner for having a Project Manager on their home building project. In fact, since Project Managers typically charge lower rates than Architects, there would probably be an overall savings. However if the Project Manager is hired after the architect, then they are unable to negotiate the administrative savings, so the additional cost would be the cost of the Project Manager, less any savings that they can provide throughout the project. Finally, if the Project Manager is hired after the General Contractor, he is only able to provide damage control. His payment would be over and above whatever other contract costs.

If you feel that you need an advocate, someone who is looking out for your best interests in your home building project, then you need an independent Project Manager. Your Architect and Contractor may be friendly, qualified professionals; but they aren’t your best advocate, the Project Manager is.