Any contractors, or wives of, out there?

[Scarlett]

I have some questions....

[Miss Sherry]

My dh is a general contractor.
I really think to find out more about it they just need to talk to the people he would be working with and check around with others in the area. There is ALWAYS risk involved and only they can decide if they want to take a risk.
No doubt he already knows this, but even if it is family he will be working with, any agreement between himself and them need to be put on a contract in writing and signed.

The housing industry varies around the country so someone trying to answer your questions that is not familiar with the market where this project will be built really won't be able to help much.

I think maybe your friend just needs a listening ear more than actual business advice.

[Miss Sherry]

I just wanted to throw in a thought for your friends.
If he decides to take on this job and be tied up with it for a year and a half or more something to consider is that he will lose momentum with his own business because he will not be getting in touch with his own clients. It could be very much like starting over when this project is done,

Ideally, he needs to have made enough from this project to hold him over and keep paying the bills while he get's his own business going again. That is very important.

[Sunny]

My dh is a paint contractor, so not exactly the same, but similar.

It sounds as if this contractor should act as a general and have other contractors working for him so that he has some time to continue to support any other business that may come along. (as opposed to doing most of the work himself).
A contract even among family is necessary.
Pay for a general is usually a percentage of the bids from all the other sub contractors, or a total of the cost of the house. I think our General Contractor averages about 15% when we built. It really depends on location, job, and what that contractor is doing.

I can't imagine that there would be terrible risk. Sounds like the wealthy family could get the construction loan themselves and that way there isn't any great financial risk to the contractor as far as being stuck with an expensive house (or two). he just needs to arrange a payment schedule, which would probably be based upon when trades are finished. ie.. framing gets paid, contractor gets paid. roof done and paid, contractor paid. etc..

[Miss Sherry]

Sunny said
"I can't imagine that there would be terrible risk. Sounds like the wealthy family could get the construction loan themselves and that way there isn't any great financial risk to the contractor as far as being stuck with an expensive house (or two). he just needs to arrange a payment schedule, which would probably be based upon when trades are finished. ie.. framing gets paid, contractor gets paid. roof done and paid, contractor paid. etc.."
That sounds reasonable. I missed the detail that the houses being built do not need to be sold.
There is the risk, however, that if he works full time on this project for a year and a half or more that his own business will dwindle and it will be like starting from scratch when this project is over.

[Amy in NY]

I just wanted to throw in a thought for your friends.
If he decides to take on this job and be tied up with it for a year and a half or more something to consider is that he will lose momentum with his own business because he will not be getting in touch with his own clients. It could be very much like starting over when this project is done,

Ideally, he needs to have made enough from this project to hold him over and keep paying the bills while he get's his own business going again. That is very important.

My dh is a self-employed sales engineer. He took 6 months off last summer to open a bike shop which did not work out (no financial loss for us.) One year later, we are just starting to get on our feet again. It has taken that long to bring his first business back up to speed and receive income again.

Your friend's dh should definitely look at how this will impact his business and make sure that his monetary compensation will cover the loss of clientele and marketing that will ensue while (if) he builds these 2 homes.

[Scarlett]

Thanks everyone.