General Contractor

Definition of "General contractor"

Written by

Ulrick Germain

Charles Rutenberg Realty

Typically, a general contractor or GC in the real estate industry defines a person who signs a contract with a property owner or developer. Thus, they assume full responsibility for bringing a construction project to fruition. For this purpose, a general contractor hires and pays subcontractors to finish particular phases of a new construction project. Additionally, they supervise all project details and aspects. 

What does a real estate general contractor do?

A GC submits quotes at tenders and procures construction projects. They hire other subcontractors to carry out various construction aspects. Then, a real estate general contractor controls business functions regarding accounting and work schedules. More explicitly, a contractor decides and manages their services’ location, timeframe, and modus operandi.  

What does an independent contractor imply?

An independent or freelance contractor is a self-employed individual or company hired as a nonemployee to conduct work for or offer services to another company. Consequently, independent contractors must pay their own Social Security and Medicare taxes.

Furthermore, a company that hires an independent contractor is not bound to offer them employment benefits, such as health insurance and employer-sponsored retirement funds (for instance, 401k Plan). Each payee must be accurately classified as an independent contractor or employee by the payer.

Real estate independent contractor agreement

A real estate sovereign contractor agreement is a legally binding contract between a real estate firm, a buyer or seller, generally referred to as a principal, and an independent contractor. The latter will operate as the principal's agent to execute duties and responsibilities for selling or purchasing real estate for the given principal's benefit.

What’s the difference between a general contractor and an independent contractor?

We’ve established that the GC is the project manager overseeing the construction project in its entirety. In addition, a GC has a building team performing physical labor, typically under the Construction Superintendent’s supervision. Then, general contractors get in touch with other contractors or subcontractors (persons or firms) who will execute particular tasks, such as electrical installations or plumbing. You can call this outsourcing.

GCs get hold of construction projects by providing a good quote at bidding events against other builders. GCs must study project drawings, plans, requirements, and additional subcontractors’ fees to submit a quote. Thus, a GC will work for the owner while a contractor for the GC.

When real estate investors become general contractors

Even successful investors can become general contractors. Why should you consider getting a GC license? First of all, you can gain more control over your real estate rehabilitation project, such as rehabbing a flip house. Otherwise, you won’t have that free hand when you work with a third party. An outsider GC might be involved in multiple projects at the same time. Secondly, cutting out the middle man is always a good idea.  

The following scenario applies when hard money loans fund the rehab project. Running your GC project and paying your subcontractors will reduce your construction expenses. Or, you can put your general constructor company in as a line item (a separate item in your bookkeeping ledger or financial budget.) As a result, you can reimburse yourself when you take your draws! Note that your GC company differs from the company with which you’re actually doing the rehabilitation. Therefore, you can get paid, or you can save. This method is beneficial when dealing with hard money loans granted for a specific construction project.

Becoming a general contractor involves a lot of risks. A contractor must assume significant responsibilities regarding safety issues and financial risks. To get the general contractor license, you’ll have to attend the OSHA 30 safety training program focusing on safety issues on construction sites.