What Is Subcontractor?
A subcontractor—or "sub"—handles a specific trade: plumbing, electrical, HVAC, roofing, drywall, flooring, or finish work. The general contractor typically hires subs and marks up their labor 15–25%. Investors can hire subs directly to save the markup but must coordinate scheduling, building-codes compliance, and lien risk themselves. Vetting subs requires checking license, insurance, and references. On a typical rehab, you might work with 4–8 subs across trades—coordination and quality control are as important as price.
A subcontractor is a specialized trade worker—plumber, electrician, HVAC tech, roofer, etc.—hired by the general contractor or directly by the investor to perform specific scope on a rehab-costs or construction project.
At a Glance
- What it is: A specialist (plumber, electrician, HVAC, roofer, etc.) hired to perform a specific trade on a construction or rehab-costs project
- Why it matters: Subs do the actual work; their quality, timing, and pricing directly affect project success
- GC markup: General contractors typically add 15–25% to sub labor when they hire and manage them
- Direct hire: Investors can hire subs directly to save markup but must coordinate scheduling and assume more risk
- Vetting: License, insurance, and references are non-negotiable before hiring any sub
How It Works
GC vs. direct-hire subs. When you hire a general contractor, they bring their own subs. The GC coordinates scheduling, handles building-codes inspections, and assumes liability. You pay the GC; the GC pays the subs. The GC's fee includes a markup on sub labor—typically 15–25%. When you hire subs directly, you save that markup but you become the coordinator: you schedule trades in sequence, pull permits if required, and manage quality. Direct hire works for experienced investors who understand trade sequencing and have time to project-manage.
Licensing and insurance. Subs in licensed trades (electrical, plumbing, HVAC, roofing in most states) must hold current licenses. Verify license status with the state board. Require general liability and workers' comp insurance—if a sub gets hurt on your property and isn't insured, you can be liable. Get certificates of insurance (COIs) before work starts and ensure you're named as additional insured where appropriate.
Lien rights. Subs and suppliers can file mechanic's liens if they don't get paid. If your contractor hires the sub but doesn't pay them, the sub can lien your property—you may have to pay twice. Require lien waivers at each payment: the sub signs that they've been paid for work through date X and waive lien rights for that work. On direct-hire jobs, pay subs promptly and get waivers before releasing the next draw.
Typical trades and sequencing. A full rehab-costs might involve: demo, rough plumbing, rough electrical, HVAC, framing/drywall, roofing, insulation, finish plumbing, finish electrical, flooring, paint, trim, and punch-list items. Order matters—you can't drywall before rough-in is done. A good GC sequences this automatically; if you're self-managing, you need to understand the critical path.
Real-World Example
Investor Rachel: Self-managed rehab in Kansas City, Missouri.
Rachel buys a 1,400 sqft single-family for $95,000 and plans a $28,000 rehab. She's done three rehabs with a GC and decides to self-manage this one to save the 20% markup. She hires four subs directly: a plumber ($4,200), an electrician ($3,800), an HVAC tech ($2,900), and a flooring installer ($5,400). She does demo, drywall, and paint herself with a handyman ($2,100). She coordinates a roofer ($4,200) and a general handyman for trim and punch-list ($2,400).
She vets each sub: checks Missouri license databases, requests COIs, and calls two references per sub. She creates a simple schedule—demo first, then rough plumbing and electrical in parallel, then HVAC, then drywall, then finish trades. The plumber runs late; she shifts the electrician up and avoids a 3-day delay. Total sub cost: $24,900. A GC would have charged roughly $30,000 for the same scope (20% markup). She saves $5,100 but spends 40 hours over 9 weeks coordinating. For her, the trade-off works.
Pros & Cons
- Subs bring specialized skills—you can't do licensed electrical or plumbing work yourself in most jurisdictions
- Direct-hire subs save the GC markup (15–25%)—meaningful on a $30K+ rehab-costs budget
- A good GC manages subs so you don't have to—scheduling, building-codes, and quality fall on them
- Vetted subs with strong references reduce the risk of rework and scope-creep
- Building a sub network gives you flexibility for future projects—you're not locked to one GC
- Coordinating multiple subs requires project management skill—wrong sequencing causes delays and rework
- Unlicensed or uninsured subs create liability; a lien from an unpaid sub can cloud your title
- Subs can disappear mid-job, deliver poor quality, or pad change orders—vetting reduces but doesn't eliminate risk
- GC markup buys you a single point of contact; with direct hire, you're the one solving disputes and scheduling conflicts
- In tight labor markets, quality subs are booked weeks or months out—plan ahead or pay premium rates for rush work
Watch Out
- License verification: Never hire a sub in a licensed trade without verifying their license with the state. Unlicensed work can fail building-codes inspection and create liability.
- Insurance gaps: Require COIs before work starts. If a sub's worker gets hurt and they lack workers' comp, you can be held liable. Verify coverage limits meet your risk tolerance.
- Lien waivers: Get lien waivers at each payment. Without them, an unpaid sub can lien your property even if you paid the GC—you may have to pay twice to clear the lien.
- Scheduling risk: Subs often overcommit. Build buffer into your timeline. If the electrician is 2 weeks late, the whole sequence slips. Have backup subs or flexible milestones.
Ask an Investor
The Takeaway
Subcontractors are the specialists who do the actual work on your rehab-costs or construction project. A general contractor hires and manages them for a 15–25% markup; you can hire them directly to save that fee but you take on coordination and risk. Either way, vet every sub: license, insurance, and references. Get lien waivers at each payment. Quality subs are worth the premium—rework from bad subs costs more than paying good ones upfront.