GC Partnership Advice Needed


I am looking to partner with a General Contractor on a project. The conversation has been based on the exchange of “Sweat Equity” for Partnership Equity. I am looking for advice on how to make the Contractor a fair offer. Outside of GC services, he does not intent to put cash in the project. The GC believes his costs will average around 30-33% of market value as his reasoning for pricing is 33% Material, 33% Labor, 33% Taxes.

What is a reasonable % of equity you would offer a GC? Also, I would want to make it incentive based including hitting Timeline, Budget, Other? Do you agree?

I look forward to your general feedback and recommendations.

Can you fully trust this contractor can deliver? Have you thought about what happens if you end up falling out? I think getting an estimate with 2-3 other contractors will give you an idea if you should go in the direction of sweat equity. Sorry I could not give you a direct number.

I think involving GC as partner can bring more harm than good
Its a thin line… on one end he’s willing to put in sweat equity if you don’t have at least 5 past projects or customers that he’s worked with that can give you feedback on his work I would question it.

Second is he has no skin in the game which is key to holding him accountable .
Hes not willing to put in Capital up front can be a problem down the stretch with unforeseen events

Hope this helps


     I am an engineering, commercial and building general contractor in multiple states, real estate developer and commercial and residential investor.

Since you have not stated what kind of project or size of potential contract let’s start with the basics!

Evidently you have the land or a contract on the land and hopefully a plat plan, have located and verified all site utilities and have verified survey pins? If no sewer connection is available you have hopefully had a perk test done to determine whether you can use standard septic or will need the more expensive alternative septic? Have you had a soils test done? Does your architect or civil engineer have knowledge of the area and have confidence in the soils composition and compaction? Are they using common standards?

Who submitted for the permits and have you verified tap fees and utility connection costs? Who is paying for permit fees, tap fees, assessment fees, etc? Have you selected a surveyor who will give you blue line certifications and install batter boards? Do you have soils conditions requiring a stabilizer during over excavation and compaction? Is a basement involved? Will you install a sump and sump pump?

Are you using geothermal HVAC as a system? Vertical or horizontal loop? Do you know your setback, offsets and rear clearance requirements to lot line? Do you have an utility easement in front?

Having a general contractor partner with you still requires a contract, scope of work, critical path schedule and performance penalties for going beyond your negotiated time line! Who determines change orders and who pays for them if required? If there are blue print errors who corrects them, who determines the “As Built” and who determines cost? I recommend using RS Means construction cost data as the standard between the two of you so your GC partner can’t say it takes 4 hours and $300 in materials when RS Means says 1.5 hours and $75 in materials? Make RS Means your deciding cost and time guideline!!!

If your GC has other work your scope has to outline his performance related to your expectations? Will you hold retainage on your sub contractors? Is the project paying and ordering materials directly to save costs? How do you handle inspections and inspection failures? Are you getting material, labor and subcontractor lien releases?

Have you worked out upgrades in advance? If the change order is at your request what is charged to the job? What is your GC’s labor rate for each trade with burden? Are there special inspections involved?

If this is residential how are you handling warranty cost’s and will you put away a reserve in case there is builder defect litigation filed against your project during the next 10 years?

Everything has to be in writing!