Definition
A general contractor (GC) is the party responsible for delivering a construction or renovation project. The GC plans and supervises the work, coordinates subcontractors and materials, manages the schedule, enforces jobsite safety, and helps ensure the work meets quality standards and permit/code requirements.
What a GC Typically Does
- Project planning: sequencing, staffing, and a realistic timeline.
- Trade coordination: schedules subs (plumbing, electrical, flooring, paint, etc.).
- Procurement: orders and delivers materials; manages long-lead items.
- Site supervision: daily oversight, quality control, punch list close-out.
- Permits & inspections: pulls permits (if contracted), schedules inspections, handles corrections.
- Safety & compliance: jobsite safety practices and required documentation.
- Cost control: tracks budget, approves invoices, documents change orders.
Common GC Contract Types
- Lump Sum (Fixed Price): one price for a defined scope. Best when the scope is clear and drawings/specs are complete.
- Cost Plus: owner pays actual costs + a fee (percentage or fixed). Best for uncertain conditions, but requires strong controls.
- Time & Materials (T&M): labor hours + materials at cost, often used for small or urgent work; can be risky without caps and documentation.
- Guaranteed Maximum Price (GMP): cost-plus with a cap; requires defined scope and clear allowance rules.
How GCs Make Money
GC pricing typically includes direct job costs (labor/materials), plus overhead and profit. In addition, the GC may apply a markup to subcontractor work and may include allowances for uncertain line items. Understanding where markups live helps investors compare bids fairly.
Why It Matters to Investors
Your GC is a major determinant of CapEx accuracy, timeline reliability, and ultimately the speed at which you can stabilize NOI. A good GC protects the plan: clear scope, clean documentation, predictable sequencing, and minimal rework.
Investor Controls & Best Practices
- Write a tight Scope of Work (SOW): define finishes, “ready-to-lease†standard, and what “complete†means.
- Bid leveling: normalize bids to apples-to-apples (same line items, same assumptions).
- Change order discipline: no work proceeds without written approval (except true emergencies).
- Payment controls: progress payments tied to milestones; hold retainage until punch list completion.
- Job walks: weekly site walks with photos, a 2-week lookahead schedule, and blockers list.
- Documentation: lien releases, insurance certificates, permits, inspection sign-offs.
Example
An investor plans a 40-unit interior upgrade program. The GC coordinates unit turns (demo → rough trades → drywall → paint → flooring → trim → appliances → punch) and manages trade sequencing to minimize downtime. With clean scheduling and consistent quality control, the property can maintain occupancy while executing renovations efficiently.
Red Flags
- Vague bid: missing line items, unclear allowances, or “as needed†language everywhere.
- Weak change-order process: verbal approvals, late submissions, or no backup documentation.
- Schedule hand-waving: no workplan, no lookahead schedule, no critical path awareness.
- Insurance/licensing gaps: can expose ownership to major liability.
- Too cheap to be real: often turns into change orders or quality failures later.