A BUILDER SIDE: for a change! part 1.

[Sailesh Channan]

We injected $250k to get our construction venture going. Client payments have been good.

All our clients to date have been investors and we all have a vested interest in getting the work started and finished as quickly as possible. We have a commitment to produce the highest quality of work possible for the materials we use. This means no complaints from clients on workmanship and payments are made on time.

We pay our subbies on a seven day account which is unusual in this industry.

We got into construction with a goal to grow the business significantly over the next five years. I am sure our initial investment will be repaid several times over in that time.

 

[craigb]

Mmmm cash flow is a bit tight for this , as i just spent the last two years building my ppor,
So no income to show , and a rather large mortgage,
projects are coming and it will be very cash flow poitive soon , but they dont just call you and say ok can you start tommorrow, as you know there's a few weeks /months to a contract and deposit.

 

[Piston Broke]

omg...it's a tough gig m8.
I admire your "get the job done attitude"

 

[stumunro]

craig, nothing personal, but in my other life managing a plumbing business we never worked for builders either...

why? 8 out of 10 times you wouldn't get paid.



on a side note, sorry to hear of your endeavours, sounds like a painful customer, is there any room to improve your processes?

good luck

 

[TimD]

Craig, thanks for sharing your story. It is a learning experince for some of us to hear how it is on the other side of the fence.

Please keep us updated on how the job progresses.

Tim

 

[craigb]

JUST AN UPDATE!
The funds crashed into the account at 12.30 am this morning and i sat and tally through the accounts, cheques were written, and the bricklayer got his phone call, i drove from one end of town to the other, paying all that were waiting, coffee , chats and generally net working the system, they are all now happy, I discovered that every account that i paid , I was the only one doing so! bigger badder companys were also way behind, all liasions ended up in a laugh! as we all hoped for better times, so it was not just me, and we live to fight another day, i expect the same sort of thing to happen through the next stages , but that will be called part 2
thanks for listening.

 

[Perp]

Some lenders are really atrocious at handling progress payments; I've experienced it myself. My lender:

1) Withheld a $50K progress payment to my builder because approx 0.3m2 of tiles hadn't been grouted. As always happened, the sequence had been juggled and the builder had not only completed everything else for the $50K milestone, but also most of the works for the subsequent $40K milestone, too. The lender wouldn't even pay $49K (withholding an ample $1K for the incomplete grouting); they withheld the entire $50K for the couple of weeks it took to get the tiler to come back and grout this small section (which was re-work, hence why it had taken so much longer than the other works specified for the milestone).

2) Postponed another progress payment because even though the specified construction had been complete, the clean-up "hadn't been completed to the lender's satisfaction", because the skip hadn't been removed. The lender argued that removing the leftover timber for works for that milestone, was part of what that milestone payment was for, and thus not all works for that milestone were complete until the skip was removed. The timber remnants were in the skip, but the skip was still on site because it was still being filled up, as work was ongoing... My builder even provided a receipt proving that he'd already paid for the skip to be removed, but that wasn't adequate.

Truly, in future, I'd think very hard before ever taking out another construction loan. If I can possibly avoid it, I'll instead draw down equity from elsewhere and use that cash to pay for construction, then refinance when finished. Much less hassle than involving the lender in progress payments.

 

[craigb]

craig, nothing personal, but in my other life managing a plumbing business we never worked for builders either...

why? 8 out of 10 times you wouldn't get paid.



on a side note, sorry to hear of your endeavours, sounds like a painful customer, is there any room to improve your processes?

good luck

Sorry to here that about you not getting paid, i pay 2 out of every 10 plumbers, {just jokes}.
In canberra the word spreads so quick if you don't get paid it short lists the choices of tradies.

OZPERP; thanks now finally somone truly understands the fight, and managing , money, or time can repair those damages,

 

[Minx]

Craig I really felt for you.

Our golden rule though is to never build for customers.

My partner has some brillaint mentors and builder friends who have in the past and it has ruined them.

We also on the chippy side of things don't do work for owner builders either, not worth the headaches.

The reality is that not doing work for customers (meaning we do our own jobs/developments) means that we are in total control.

It also means that we won't get stitched like others have had.

Reality is that I have the knowledge where I know that if I were to have a builder build my house I'm confident that I can legally get out of paying around 50k based on that knowledge. This sort of stuff I would never repeat to anyone building including those who may be building with a project builder. My knowledge could mean that the builder makes zero profit and pretty much worked for nothing. This is why we would never work for customers. Investors ok in the sense of joint venture with them being silent partners in the mix.

As a chippy my partner is paid on time all the time, he has a handfull of builders/developers that he does work for that operate on the same principle as we have adapted above. Besides these guys make in excess of 500k in profit a year, their practice is obviously working well.

Best of luck with the rest of the build.

 

[Perp]

Our golden rule though is to never build for customers.

Minx, it's a real shame that the industry has evolved in this manner. No wonder it's hard for people to get builders!

What has been the particular issue with owner builders? Budgetary, or difficult to deal with, or incompetent, or ... ? (Some of all three? LOL) Constant changes that they don't want to pay for?

Do you have any tips as to what, as a customer, one could do to substantially increase the attractiveness of their job for the builder? Obviously, I'm guessing, the first thing for the builder is to find out whether they're dealing with somebody reasonable; somebody who expects to pay a decent price for services rendered, and understands that unforeseen problems beyond the builder's control will arise.

But what other elements would be red flags? The financial capacity of the customer?

 

[Minx]

Minx, it's a real shame that the industry has evolved in this manner. No wonder it's hard for people to get builders!

What has been the particular issue with owner builders? Budgetary, or difficult to deal with, or incompetent, or ... ? (Some of all three? LOL) Constant changes that they don't want to pay for?

Do you have any tips as to what, as a customer, one could do to substantially increase the attractiveness of their job for the builder? Obviously, I'm guessing, the first thing for the builder is to find out whether they're dealing with somebody reasonable; somebody who expects to pay a decent price for services rendered, and understands that unforeseen problems beyond the builder's control will arise.

But what other elements would be red flags? The financial capacity of the customer?

It's all 3 to be honest but mainly for OB's it's incompetence. As an OB you take on the "builder role" and many OB's don't. That means that my partner is doing work which is above an beyond his role as a chippy. Unfort for him he has had to put on the builders hat in many instances in order for him to complete his job. It's not fair as he isn't getting paid for it and there are other issues.
Another is the complaint at how it's expensive etc do it for me cheaper. An OB won't provide ongoing work so there is no rationale there to look after them.

About 2 years ago my partner did a quote for a builders mate who was OBing. The guy said no way your quote is too high. That's fine he didn't care. Three months later when the framing was complete he gets a call begging him to come out. Curiosity got the better to him. And the build was on the way home. The frame was very bad, so bad that it did not get passed at inspction. The steel was installed poorly also. Cheapo brothers had stuffed it up. My partner was begged to fix it but stayed well away from that one.
My partner has also experienced poor work from OB's who thought they would save some $$ by doing the set out or the bricky has stiffed up the brick work and the house is 20 mill out of square.
I could go on all day....

Sorry to say but the best builders I know are those that do their own projects.

 

[Gee Cee]

Ozperp I have similar views to you regarding construction and progress payments.
For smaller projects I just prefer to use pre arranged Lines Of Credit.
Then If i am going to hold I re-finance at completion. For the best deal I can do.

This saves constant problems with banks and added inspection/ valuation fees etc.

And if it is only a quick build and sell I save stamp duty on loan/ mortgage finance as well as set up costs and pay out costs etc