Identifying Your Team
In This Chapter
- Protecting yourself from shady contractors by understanding the process
- Knowing how to pick the right bid
- Understanding what it means to be the general contractor (GC)
Building a tiny house can be a fun and exciting project, but it’s not for everyone. Perhaps you want to hire a builder to do the whole thing for you, or you want to do some aspects of it while leaving others to subcontractors? If you want to hire someone for any part of your build, you’ll need to know how to assemble the best team possible.
In this chapter, we cover the various aspects of working with builders and subcontractors from the hiring process and understanding quality contracts, all the way to scheduling and managing your subcontractors. We also cover strategies for staying sane, happy, and productive on your jobsite, no matter how busy your life may feel during your build.
Your builder will be in charge of the day-to-day construction and management of your tiny house, but you’ll still play an important role in the dream home’s creation. Be sure to choose a builder who appreciates the significance of what this tiny house means to you and who’s enthusiastic about your project.
We know of a few cases where tiny house clients were left with unfinished homes, an absent builder, and a lawsuit to deal with. In order to minimize risk, it’s important to have an overall understanding of the big picture so that you can ensure tasks are completed in a timely, legitimate, and cost-effective manner. Let’s go over ways for you to get the best builder at a fair cost.
Ask for Referrals
Referrals are your best resource when it comes to finding the right builder for your tiny house project. Ask for a list of clients for whom they have completed projects and call each of them. Keep in mind that the builder specifically wants you to talk with the people they’ve had positive experiences with, so don’t be shy to ask them for a couple other names that weren’t on the original list. Call those clients as well and ask for an assessment.
To be fair, bad clients are as frequent, if not more so, than bad builders, so take any referral with a grain of salt. Rather, look at the overall trends in the feedback. If three out of four clients have positive reviews, you’re probably looking at a good builder. If it’s a 50-50 split though, you might want to either find out more about the builder or move on to another contractor.
TINY WARNING
You can learn a lot about a potential builder by visiting one of their current jobsites. If it’s chaotic and disorganized, there’s a good chance that the builder doesn’t pay a lot of attention to details and/or organization.
Ideally, the builder will have a current job you can swing by to check on the quality of work being done. Look for site cleanliness and organization. Believe it or not, this says a lot about a builder and how focused they are on details. See if you can speak with the current client and ask how things are going. If the builder has a crew, ask to meet them as well.
If possible, considering that there aren’t nearly as many tiny house-specific builders out there as conventional ones, obtain at least three bids on your project. This will give you a sense of what you can expect to pay for your tiny house and also give you the opportunity to weed out over- and underpriced bids.
Typically, you want to choose bids that fall in the middle of the two extremes. Bids that seem too good to be true usually are. In those cases, you often risk ending up in one of two scenarios:
- The builder uses the low bid as a tactic to secure the job. Once it gets started, he or she hits you with change order after change order, adding cost to the original bid.
- The builder is sub-par and doesn’t understand the full scope of the project. In the end, they can’t complete the build on budget, on time, or to the quality you were expecting.
In either case, you’ll find yourself in a tight spot because you’ll have signed a contract that obligates you to meet the specifications of the agreement. If the builder doesn’t blatantly break their end of the deal, you may find yourself trapped in an unpleasant situation.
DEFINITION
A change order is an amendment to a contract to add/remove/change the scope of work.
Solid Contracts Are a Must
A quality contract is vital to the success of any business partnership. The more detailed and clearly it’s written, the better things will turn out for all involved. A contract is most successful when it protects everyone, not just one side of the equation. Nobody wants to feel like they’re at risk.
There are several different contracts commonly used in the construction industry. Builders typically create them, so you may not be afforded a lot of input on the details. Regardless, it’s vital you not only understand what you’re signing, but that you’re comfortable with all of the details. Construction contracts are upheld in a court of law so take this part of your research seriously.
There are five common types of contracts that a contractor may present: a Lump Sum Contract, a Time and Materials Contract, an Incentive Contract, a Cost Plus Contract, and a Guaranteed Maximum Price Contract.
In a Lump Sum Contract, also known as a Fixed Price Contract, the client and builder agree to a fixed price for the work to be completed. An accurate set of construction plans is required for these contracts. Without them, a builder can’t accurately estimate the job.
In a Time and Materials (T&M) Contract, the contract enables the builder to charge an hourly rate for their labor plus the cost of materials. Any subcontractor charges billed through the general contractor are forwarded on to you as well. Builders typically increase material and subcontractor costs by 15 percent in order to cover their own overhead and profit margins. T&M contracts are typically used when the job’s scope isn’t clear enough for an accurate lump sum estimate. Such contracts can be risky for clients because they’re open-ended and because the builder doesn’t have an incentive to work quickly.
In an Incentive Contract, built-in provisions in the contract reward the builder with bonuses when they hit certain targets (quality, deadlines, and the like). This contract is a great option on builds with tight deadlines or other specific needs.
In a Cost Plus Contract, the client pays the builder for all construction costs plus an additional fee to cover the builder’s profit and overhead. If costs get out of control, there’s no cap to push up against, making it a high-risk contract for clients, especially if all the details aren’t clear from the onset.
In a Guaranteed Maximum Price (GMP) Contract, contract caps are set in place to protects clients. It’s a good contract for builders as well if they add enough cost to protect themselves from overruns. GMP contracts can be used as stand-alone contracts describing the scope of the work as well as a not-to-be-exceeded price. They can also be an added feature to other contracts. For example, a T&M contract can have a GMP clause added to protect the client.
The following eight required elements of a quality construction contract are essential to the success of your project. It doesn’t matter which contract your builder ends up using. Without any one of these elements, your contract will have gaps that leave one party unprotected. Other elements may be added to the contract as long as they don’t detract from the power of the eight listed.
1. Full name, address, and contact information of both parties to the contract plus their respective signatures
2. Financial terms, including cost and payment schedule
3. Detailed scope of work to be performed
4. Schedule of the work and the project’s completion date
5. Builder’s license, insurance, warranty, and bond information
6. A clear description of the change order process
7. The tradesmen’s right to lien details
8. Details about the subcontractor payments and responsibilities
Beyond just the builder’s basic contact information, you’ll want to add multiple phone numbers, email addresses, website contacts, social media pages, and more. This information not only helps in overall communication but also provides potential safeguards should the builder disappear mid-job.
The contract’s financial terms are crucial and must be clearly laid out. You’ll want to specify the type of contract used, the overall contract cost, and the payment schedule. It’s vital to know when payments are due. For example, if these terms aren’t in writing and your builder requests a 50 percent down payment before getting started, you’ll have to come up with the funds even if you haven’t made accommodations to access that much money so far in advance. A moderate down payment of 10-20 percent is customary, but most payments are actually paid as distributions once the work is completed, not as large lump sums ahead of time.
Listing out what are called line item costs is a great way to define a payment schedule. In this scenario, when the builder completes a task such as framing, rough plumbing, and so on, they get paid the amount specified on that line of the contract. If your builder doesn’t offer this approach initially, encourage him or her to do so.
Be sure to include a provision to hold back 10 percent of the contract price until the final walkthrough and delivery. This protects you from the builder walking away from your house when it’s nearly done. Once the walk through is concluded and any punch-list items have been completed, you can release the final 10 percent payment to the builder.
DEFINITION
A punch-list is a checklist of items to be finalized before the contract is considered complete.
We’ve already mentioned the importance of detailed construction drawings. A detailed description of the specific scope of the work is equally important in a contract. By clearly defining all tasks to be completed, there can be no grey area and thus a lot less potential for unexpected change orders from the builder.
To be clear, there are almost always details that will be missed in contracts, so all you can do is your best to anticipate what may come up. Having the vast majority of the details covered in your contract will make any moments of potential negotiation less painful.
Be sure to include a schedule of work and a completion date in your contract. Some clients choose to include incentives, such as bonuses for projects completed ahead of schedule. In other cases, the incentive is actually more of a punishment in disguise; the most common being a cost-per-day fee charged to the builder for each day they are late in completion and delivery of your home. This penalty helps to offset any unexpected costs for you associated with the incomplete project such as hotels and food expenses. For the builder, the incentive is avoiding these costs entirely.
Make sure your builder is licensed, bonded, and insured. Without those safeguards, you could be left out in the cold if something goes wrong. Check the builder’s license and standing with the state board of contractors before you sign any agreement. Include the contractor’s license number in the contract to show you’ve done your due diligence.
Change happens. Even the most well planned construction project can see unexpected events. Sometimes the client creates the alterations, other times the builder does, and sometimes it’s external forces such as weather. As such, it’s important to understand what will happen when changes occur.
Change orders are the industry standard for tracking alterations in a construction project. They typically include a new scope of work description, the cost for said work, and the impact on the schedule. Both parties are required to sign any change orders before work can resume.
If you’ve prepared your build plan well and have a quality builder, you won’t need too many change orders. That said, if you continually suggest alterations during construction, change orders are going to come at a fast and furious pace. Stay the course with your plan the best you can to maintain your budget and timeline.
The last two elements are somewhat intertwined. It’s vital you understand the role of subcontractors on your tiny house build. Because the general contractor/builder hires the subcontractors for the job, he or she is responsible for paying them. The subcontractors have an option that protects them from not being paid, which is the right to place a lien against your property. It may seem unfair that a subcontractor can encumber your house and land if the builder doesn’t pay them, but that’s how things work. You can see the importance of ensuring that the builder does indeed pay all of his or her subs.
DEFINITION
A lien is the right to keep possession of a property owned by another until any debt owed by that person is paid off.
The Importance of Communication
No matter the size of your house, there’s a lot on the line during the construction process. The success of your build is dictated in large part by how well you and your builder communicate through any changes and unexpected events. Small things can blow out of proportion in short order if your communication isn’t good. Before you sign any contracts with your builder, check in with your intuition. If you have a hunch that you shouldn’t trust them, or that you won’t be able to let them know when something needs to be dealt with, listen to that inner voice and don’t sign any documents to work with them.
If you want to be present on the job site daily, schedule your visits for the end of each day while the builder is gathering up their tools. It gives you a chance to review the day’s work and have a conversation with the builder while not interrupting them. You want them focused on your house, not on answering your questions throughout the day.
Mind If I Help?
If you want to work alongside the builder on the construction of your tiny house, you’ll need to establish a clear outline of what that looks like in advance. Believe it or not, you might end up raising the cost of the build if you don’t have a lot of experience. If you’re a skilled builder and want to help out though, you may be able to save some money on the contract if your builder is willing to work alongside you.
TINY WARNING
Despite your best intentions, if you don’t have a lot of construction experience, haven’t made previous arrangements with your contractor, and suddenly show up on your tiny house jobsite with hammer in hand, you might actually significantly slow down the progress of your build and end up having to pay more.
Working with Subcontractors
If you plan on being the general contractor (GC) on your build and only intend on hiring subcontractors for specific tasks, you’ll need to understand the role of a GC. General contractors are in charge of scheduling, payments, management, and much more. In short, they’re responsible for the success (or failure) of a build.
General Contractors vs. Subcontractors
A major difference distinguishes general contractors from subcontractors: responsibility. GCs are in charge of all aspects of a build from start to finish. If something goes wrong, the buck stops with them. Subs, on the other hand, specialize in one job aspect and are only responsible for their portion of the work. For example, a plumber is not responsible for the electrical work completed by an electrician. A GC, on the other hand, is responsible for not only their own work, but also that of the electrician and plumber and all other subcontractors used on the job.
It’s important to recognize that as the GC, you’re the responsible party. You may save financially by doing it yourself, but if you don’t run a tight ship, you may end up actually losing money. Being a GC works well only when the future homeowner is organized, pays attention to detail, and is able to schedule and manage others.
Knowing Which Subcontractors to Hire and When
The first challenge in hiring a subcontractor is knowing when to bring her onto the jobsite. Making sure you have the right amount of overlap from one subcontractor to the next is important to the overall job flow. Let’s consider who you might want to hire and how scheduling that subcontractor should play out.
Many tiny house DIY builders hire out the plumbing, HVAC, and electrical, so we’ll assume you’ll do the same. Who should you schedule first? The answer is typically the HVAC company. As a rule of thumb, the trades installing the largest and hardest-to-adjust components get first crack at a house. Generally, the plumber is brought in next, followed by the electrician.
This can all change completely though if, for example, the HVAC team wants power wired to the house before they get there to ensure their installations are working properly. In that case, you’ll need to adjust the order of operations. You must be clear on your subcontractors’ needs and expectations well before you have them come onsite.
TINY TIP
We suggest a half-day overlap between subcontractors if possible so that they can communicate any pertinent details from one tradesman to the next.
Managing Your Subcontractors
Your biggest job as a GC pertaining to your subcontractors is ensuring they’re on task, on time, and on budget. You’ll also have other jobs on your project, but this must be your main focus.
Be sure to have a solid contract with each of your subcontractors, just as you would if you hired a GC. You need to confirm that they’re licensed, insured, bonded, and carry workers’ compensation insurance for any employees. You don’t want to be left responsible should something go wrong. Remember that as the GC, ultimate responsibility falls back on you. If you have builders’ insurance, your insurance carrier may require your subcontractors to list you as an additional insured person on their policy.
DEFINITION
Additional insured is a person (you) that benefits from being insured under an insurance policy underwritten for someone else (the subcontractor). An additional insured policy typically applies to liability coverage and is often applied by means of an endorsement added to an original policy. When you are an additional insured, you’ll either be identified in the policy by your name or by a general description under a blanket additional insured endorsement.
The best way to keep your subcontractors happy is by paying them on time. As soon as you receive a bill for work completed send their payment. That is assuming, of course, that you’ve reviewed the work and accept it as complete.
Scheduling and Managing a Build’s Timeline
With signed contracts in place, you can start scheduling your jobs. In order to limit the risk of missed appointments with subcontractors, stay in close contact with them. Put in a reminder call at the beginning of the week and follow up with a reminder the day before they’re scheduled to show up.
It’s not uncommon for subcontractors to miss a scheduled appointment. After all, they juggle lots of jobs and if a problem shows up on another project, it may impact their ability to make it to yours on time. A subcontractor missing a scheduled day of work on your project can throw off your entire critical path. They’ll be more likely to make it up to you as soon as they can if they are reminded that you’re on a timeline. Placing those phone calls is one way you can communicate the importance of timelines to your build.
Time Management
As a general contractor, you’re responsible for all aspects of the job including subcontractors, suppliers, and insurance. This responsibility includes creating and maintaining the schedule, too. All this while still maintaining healthy relationships with your family and friends. This might be new for you, so know that things might be hectic for a while until you get used to your new role.
You might sometimes feel like you’re herding cats as you try to keep everything flowing smoothly. The good news is that there are some useful strategies that can help you stay sane.
SMART Goals
There are regular goals and then there are SMART goals. Regular goals are frequently unrealistic and/or unbounded. As such, it can be very hard to achieve them. A SMART goal is totally different and is designed to set you up for success.
DEFINITION
A SMART goal is a clear and measurable goal that has the best chance of leading you to success. It is described as follows:
- S: Simple and Specific
- M: Measurable
- A: Attainable
- R: Relevant
- T: Time-Bound
Set your goals smartly by clearly and specifically stating your goal, what your end result should be, how you can attain it, and the time in which you want to achieve it.
Don’t Multitask
For years, we’ve been told that multitasking is the best way to get a lot done. However, research repeatedly shows that multitasking only leads to stress and sub-par results. We encourage you to focus on one task at a time, especially once you’ve started building your house.
As a general contractor, you’ll wear many hats. You’ll be the builder, the site foreman, the superintendent, the bookkeeper, the office manager, the office assistant, the supply manager, and so on. If you try juggling all of those roles at once, you’re certain to drop something. If you focus on each task individually, your chances for success increase exponentially.
It’s all about managing your time effectively. If you know you have to do several different things, you need to break up your day into bite-size chunks. Create a schedule to bring order to a chaotic day. Focus on one job at a time while being methodical and deliberate with each task and you’ll minimize financial and time-consuming mistakes and have time along the way for fun and a little relaxation.
- Working with a contractor can either be a pleasant or terrible experience, so it’s important to know how to find the right one for you and your project.
- You can feel secure that you’re paying the right price for your contractor when you gather up multiple bids and contact their previous clients for recommendations.
- Contracts don’t have to be scary when you know what to look for.
- Being a general contractor can be a great experience when you know how to perform the job well and in a timely manner.