First, you could hire subcontractors. If you are acting as your own general contractor, you can typically save approximately 10 percent of the total cost of the project, as long as you know how to manage people and the timing of each trade. For example, if you double-schedule subcontractors who cannot work together without tripping over each other, you can cause delays, and rescheduling may cost you more than hiring a general contractor. Therefore, you need to know your limitations and understand the timing of each subcontractor’s work. If you forget to inform and remind subcontractors of when you will need them, they may be tied up on other projects and your job may be delayed, causing you to pay interest on a house that is just sitting.

When working with subcontractors, it is also important to get three to four quotes on the work before hiring someone. Make sure that everyone you consider is bidding on the exact same scope of work and materials, and check their references carefully. You need to make sure that they not only do quality work, but that they do it in a professional and timely manner. I have turned down many low bids because I learned that the subcontractor had a reputation of being slow to respond or late to a job. This delay can cost a lot of money, and has to be considered when determining whether a quote you have received is truly a good deal. Once you find a subcontractor from whom you consistently get good prices and quality, timely work, I do not believe that you need to continue to get three to four bids on projects that fall within the same category as the other jobs he has done for you. I prefer to be loyal to the subcontractors that have treated me well, although I do check their prices occasionally.

The third and least expensive method of rehabbing a property is actually hiring the laborers you need in order to get the job done. Doing this requires skill in the management of people, and you must find and hire the right people. Remember that when you hire the laborers yourself, you are ultimately responsible for the quality and timing of everything; therefore, you need to know exactly what needs to be done and by when. All of your terms and agreements absolutely must be put in writing. If the terms are not in writing, a dispute often will arise, even among family and friends.

When determining how you will pay your workers, it would be wise for you to consult your accountant, who can either refer you to a payroll service or tell you the maximum dollar amount that you are allowed to pay laborers in cash. You can also try working with a temp agency that specializes in the construction industry; they will handle the payroll for each person you hire. These services do not provide cheap labor, but if you are well-organized, have materials on-site, and need people for a few or several days, this is a great option and can save you the costs of hiring a contractor and the hassle of trying to finding more work for the workers once the task is done.

One last thing I would like to mention in relation to the hiring of laborers is insurance. Make sure your payroll service is paying into whatever your state mandates for workmen’s compensation, and check with your homeowners’ insurance agent to see if you need an additional rider on your policy when you are acting as your own general contractor. If you do this frequently, your agent may set you up with a general liability policy in your corporation’s name.

Now that we have discussed saving costs on labor, let’s take a quick look at the materials side of cost cutting. If you are hiring laborers, subcontractors, or even general contractors, you can save big money by buying your own materials. Remember that you must buy the quality of materials that your neighborhood dictates and follow the specifications of the installer. There are some cheap products out there that actually cost you a lot more in the long run than they save you in the short term. For example, there are storm doors available that cost $150 and take 30 minutes to install. Similar doors can be bought for $105, but take three hours to install. If you are paying an installer $25 per hour, you will actually save money and end up with a nicer door by buying the more expensive one. Ask your installer or supplier what brands are the quickest to install and still have the quality that you need. When buying materials, it is usually better to buy 10 percent extra to make up for potential waste and the possibility of damaged goods. I have learned that it is cheaper to return extra materials than to delay the job by running short and having to send someone to buy more at an inconvenient time.

Another way to save on materials is to buy from discount suppliers. Many large cities now have a Habitat for Humanity ReStore. You can often find great buys on even new materials that have been donated as overstock or scratch-n-dent. Be cautious not to buy a color or style that you or your buyer will not be happy with. There are many days that I am unable to find a single product that is suitable for my project, but there are other days when you can save hundreds or even thousands of dollars on something that is a perfect match for you.

You should also check Home Depot and Lowe’s for their scratch-n-dent appliances, cabinetry, and bath fixtures. If the scratch is repairable or in a location that is covered by another cabinet anyway, you can save a bundle here as well. Check around your area for major suppliers’ warehouses or factories. In my area, for example, is the KraftMaid factory. Their warehouse features an enormous selection of cabinetry at huge savings. I do not find a match every time, but most of the time, I do and it is worth the effort. Appliance and window stores also have overstocked, mistakenly ordered, and scratch-n-dent items as well.

Another idea for saving on materials is to volunteer at your local kitchen and bath showroom to take down their kitchen and bathroom displays when they are changing out for the new line. I have been able to get entire kitchen displays for free by volunteering for half of a day! The last place to check, if you have storage room, is building material auctions in your area. If you can sit on the expense of buying the materials and have room to store them without having to pay for a storage unit, you can find huge savings here. Remember that in this business, every dollar saved is another dollar in your pocket when you sell!

Mark Gilliland
USA RE Mentor