Juan Catano works in industrial construction and is currently remodeling his home. He and his wife are changing their duplex into a triplex and recently, they’ve taken on the role of general contractor. This week, you’ll hear the first part of a 2 part interview that we did. He’ll tells us about their experience so far and about some of their challenges. He also shares how he’s finding and managing his subcontractors. Let's get right to the interview.
Michelle: Give us a brief description of your project. Tell us when you started and where you are at this point.
Juan: My wife and I own a duplex in Oakland, CA. We live in one of the units and we rent the other one. We are making the duplex into a triplex by converting our basement into a 2 bedroom rental unit with an storage area for us and a shared laundry for both tenants.
The project required the entire foundation to be replaced. A new foundation and retaining wall will be added to the back portion of the house as it sits on a sloped lot.
We hired the first Design-Build firm September of 2015 and we have hired and fired 3 GCs since. We are currently working with a couple of subs.
Michelle: Tell us why you decided to become the general contractor.
Juan: The GCs we hired had many issues in terms of construction schedule management, slow payment of their subs (which made the subs stop showing up several times), high markups (sometimes 50 or 100%), poor estimates of the project, and illegitimate change orders. Most of the invoices we received were asking for payment of activities that were not completed. The general contractors delayed the project by not having the materials onsite that the subs needed to perform their work. So we felt that having a GC as a “middleman” was detrimental instead of beneficial to the project and it was money that we could be saving as well.
Michelle: How are you finding/getting the names of your subcontractors?
Juan: We have been mainly looking on Yelp and Angie's List, and reaching out to our friends. My wife has a large social media network where she writes posts asking for referrals, and we also ask the subs if they have any referrals.
Michelle: Are you getting bids or just hiring subs without a bid process? If you are getting bids, could you describe the bid process to us? How long does it typically take to get bids back?
Juan: We have been asking every sub for bids. We've been trying to get at least 3 bids to have a good base of comparison. Usually the process starts with a phone call where we explain what we are looking for and most subs ask for a digital copy of the plans prior to setting up a jobsite visit. During the jobsite visit the sub asks questions about the scope and they identify what they intend to quote on. Depending on the complexity of the scope of work quotes have been taking from 2 days to 3 weeks.
Michelle: How often are you at the job site?
Juan: We live on above the jobsite.
Michelle: Are you doing any of the labor yourself?
Juan: Not really, we are doing the hiring of subs, procuring some of the materials, and tracking the costs and schedule. My wife did some of the backyard landscaping design.
Michelle: Have you had any inspections yet? If so, how did the inspections go? Do you think the inspectors were harder on you because you are an owner builder?
Juan: The inspections that we have had so far were for the foundation and slab. They were done prior to us becoming the GC, so the GC we hired handled them. My wife has been in contact with the city and the utilities inspectors to make sure we are meeting all the requirements. We should be having our framing and MEP (mechanical, electrical and plumbing) inspection in a week or two. We are hoping it will go smoothly.
Michelle: Have you had much trouble with subcontractors not showing up as scheduled or not completing their work? If so, how did you handle those problems?
Juan: Since we became the GC the subs have been showing up. The schedule has slipped but we see them working hard so we are cutting them some slack. One of the subs has not completed part of his work. With this sub we are withholding payment until the work gets completed. They seem to be willing to finish it but we have yet to schedule the completion.
Michelle: How often do you plan to pay subs? Let’s talk about the penalty clause for subs not finishing their work on time.
Juan: We are letting the subs request the payments themselves instead of us creating a payment schedule. We base the payments on the level of completion of the work. Up to this point the payment requests have been on a weekly or biweekly basis. We understand that cashflow is important for the subs so we want to help that as much as possible.
Some subs have their own contract so we have used theirs on occasion. Our standard contract has a penalty clause for project delays. Some subs requested to have this clause removed. We are finding that this clause better serves on a GC contract as they are responsible for the overall construction schedule. For individual subs, it seems to be better to just have an honest conversation upfront about your expectations for their performance. I think the risk of having delays penalties is having the contractors or subs start cutting corners and performing poor quality work to save time and avoid the penalties.
Michelle: Did you get most of your materials locally or online, and are the suppliers giving you a builder’s discount?
Juan: It has been a mixed of big box stores, local specialty stores and online. We have purchased little materials ourselves, we’ve been having the subs pickup the materials themselves at the local big box and specialty stores and we get the call from the store to process the payment and the subs bring us the receipts that we then can verify when the material gets delivered to the jobsite. By doing this the subs are buying at contractor discounted rate.
We were offering the subs 15% markup on the purchases to cover their time to select and pickup the materials but in some cases this markup was too little or too much as it is based on the amount of the purchase. We are now finding out that sometimes it is cheaper to have the subs include materials as part of their quote. This was the case with a concrete sub who had leftover wood forms from another project that they could reuse on our project instead of having to purchase new wood forms.
That's it for the first part of the interview. Thank you, Juan, for talking with us.
And thank you, BYHYU, for joining me this week. Come on back next week for part 2 of the interview where Juan will tell us what he wishes he had known before he started his project, what surprise costs he ran into and what mistakes he would warn other owner builders about.
If you are an owner builder who would like to be interviewed or know of an owner builder who would like to share their experience on this podcast, email me at info@BYHYU.com.
Please remember that the purpose of this podcast is simply to educate and inform. It is not a substitute for professional advice. The information that you hear is based the only on the opinions, research and experiences of my guests and myself. That information might be incomplete, it’s subject to change and it may not apply to your project. In addition, Building codes and requirements vary from region to region, so always consult a professional about specific recommendations for your home.