How do you find a trusted builder? Bob Andersen shares his expertise when it comes to the process of tendering for a builder.

Hi, Bob Andersen back again.

In our last video, we talked about getting the building approvals, the construction certificate, and the possibility then of tendering the construction. In other words, finding a builder—that’s what we’ve got to do. There’s a couple of ways of tendering.

TYPES OF TENDERS

You can do what you call an open tender, where you just go to the market, look for any builder, look who’s interested in quoting on this job—that’s an open tender (I tend not to do those). A select tender—that’s when you choose a couple of builders. You might choose 2, 3, or 4 builders— and each one of the builders will quote on the job. That’s called a select tender.

THE CASE STUDY

In this particular case study that we’re looking at—the 4-townhouse project I’ve talked about—I just chose 2 builders. One of them was a builder who’ve done quite a few projects with me, probably built about 5 townhouse projects in the previous 3 or 4 years—I went to him. Also, I went to another builder that I haven’t long met, it’s actually a student. Somebody did my property development course who was a builder, I was pretty interested when I found out he was a builder, had a little talk with him. I said, “Look could you be interested in this particular townhouse project?” So I went to 2 builders at tendering.

THE PROJECT

The first builder, the guy who has done 5 projects was coming a little bit high, and that can be the case. What I find with builders is, just because a builder is the cheapest in one particular project doesn’t mean he’s going to be the best for the next one. Not that price is everything. Quality of work, finish, and how long it’s going to take the builder—that all comes into it. But in this particular process, I ended up going with the student builder. Well recommended… just because he’s a student I didn’t get him the job, I had to do my own due diligence. I’ll show you how to do due diligence on builders in a moment.

Everything came out fine, the price was right—it’s beautiful—and the job’s gone brilliantly. How do you find builders? There are all sorts of ways. You can’t beat referral. I reckon, the best way to meet a consultant, architect, town planner, or a builder is to be referred by somebody else that you trust. In other words, if you know somebody—another developer or somebody else, perhaps an architect or another consultant—who’ve used a particular builder on few different occasions… that’s a good referral, and often it happens that way. You may not be aware, but there’s such a thing as a building broker.

BUILDING FINANCE BROKERS

You’ve heard about finance brokers who’ll find you the right finance package, there’s actually building brokers—who work with a range of builders—who will help you find the right builder. They’ll know all sorts of builders in different places. Certain builders, for instance, might only build 15 townhouses or bigger. Other builders might build up to a maximum of 6. Some builders only build certain areas. Some builders might build townhouses but might not build apartments—there are all types of builders.

A good building broker will know a range your builders: Builders that he’s worked with, builders that are trustworthy, builders that he knows he can refer to with confidence. There’s a fee to pay, it’s about 2% of the contract price, but that actually goes on to the building contract so you don’t directly pay that 2% to the building broker. It comes out during the stage payments to the builder, but it is in there. So as a result, the builder and I will come up with a pretty tight price knowing that that’s in there as well.

BACKGROUND CHECKS

A number of my students have used building brokers, I’ve used them on the odd occasion myself, with great success. When you’ve got a builder, is it the right builder? Well, I hope so. So what can you do as a bit of a check? Well, we do a bit of due diligence on a builder, particularly on a new one. We can do a credit check, there’s various platforms where you can go—it costs about $60 from memory—where you can check the credit rating of a builder. You can see if there’s any bad debts out there, or if there are any unpaid bills (people who have got notices on them!)—you can do that.

You need to check the builder’s license for the right sort of building, and pretty much in every state, there is a particular semi-government department that administers buildings and building licenses and that sort of thing. In most cases, you can go to their website and see if the builder is licensed for that particular type of work.

GETTING REFERENCES

References are good, ask the builder for some current and recent references. I’d like 3 or 4. I’d like 1 or 2 references from people he’s building for right now, and maybe, a couple of references from people where he’s finished the job in the last 12-18 months… written references. Also some of these are subcontractors, give me three subcontractors: electrician, plumber, plasterer, painter, brick layer, concreter—I don’t care – Give me three of those, and I’ll have a talk to those guys.

QUESTIONS TO ASK

I’ll start to ask how long have you been with the builder? How much work do you do with the builder? Does the builder pay on time? Has he ever been late? —those sort of things. Also, supplies, I want to know who your suppliers are. Who’s your timber, concrete, and materials supplier? Who are they? I want to talk to them, they get phonecalls like this all the time. I want to know what sort of accounts he’s got… How large his trade account is. If he’s ever gone over… Has he ever been late to pay.

BUILDER INVOLVEMENT

Now, there’s only so much that you can do checking out a builder but it’s important to do at least those basic checks that I’ve given you. But of course, if it’s a good reference from somebody you trust, then things should come up trumps anyway, but you should still do them.

Now in terms of builders, I’ve said sometimes you might get a builder involved in the building approval, construction certificate stage as well. Sometimes I might even get the builder and say “Look, you can get involved now, you’ve got first right of refusal at the end when we go to tender.” I might still say to the builder “Look, I’m going to get three prices, but because you worked with me on the way through, I’ll give you first right of refusal on the best price, whatever it happens to be. But no absolute guarantee that you’ll get the job at the end.”

FINAL THOUGHTS

So what you need to know? Of course I said, you need to know the market so that you’re getting the right sort of design, the right sort of finish approved for your tender. So what you’ll need for your tender? You’ll need a copy of your development approval, because there’ll be certain conditions in there that the builder needs to know about. You need a copy of all the plans, the plans that the certifier pulls together at the end: architect’s plans, the different engineers’ plans, all those plans. You need a full set of those for the builder, to price. And you need your specifications, your standards of finish. The builder needs all those things to give you a price, what we call a lump sum price in order to do it.

So that’s how builder’s work. That’s how you find good builders. That’s how you can check out good builders. It’s a pretty important thing to have. I hope you’re enjoying this, I look forward to catching up with you again shortly, and we’ll move forward in this particular project. Looking forward to it, bye now.

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