General Contractors refusing to quote without them buying materials
Rental Property Investor · Member since 2023 · 5 posts · 16 votes
Hi all! We have a really hard time finding a general contractor for our repair project in a buy & hold SFH in Kansas City, MO. We hired a property manager after purchasing the house and both contractors they sent in are "skeptical about providing a quote if they cannot use their own materials". In their experience "it has lead to a lot of headaches and delays with the project". We are out of state investors and were going to stick to David Green's advise of getting quotes without the materials for fair comparison + being able to select the material we want, put it on our credit cards. Do you think it's reasonable for contractors to refuse a quote without materials? Should we keep looking?
As a long-time Contractor I would never bid on a job where the customer wanted to provide materials themselves. Nothing but headaches....and it's just plain rude. You want to buy the products, but I bet you won't be there to meet the trucks, inspect the materials, unload them or see to their security until they are installed. Right?
You expect the GC to do all that for you for free correct? And then when there is a mistake in the order (because the customer never knows what the H they're doing) then it's a big delay which gets blamed on guess who? Yep, the GC....
@Svetlana Kazantseva if you want to save money (or use your CCs), then it's only fair to pay the GC the money it is costing them to do this your way....I would offer them 20% to start and see what they say. But you will lose any good GCs and end up with the new, inexperienced, unlicensed guys...it just ain't worth it....
@Kyle Sosnowski - I usually have the contractors place the order for materials and then call the supplier or retailer to pay over the phone. Or when they go to pickup the contractor will call me and then hand the phone to the company to complete payment. Been doing it like this for a while and it's worked well.
@Bruce Woodruff - Tell me more about your point of view? Wouldn't this help the contractor since they don't have to front the money?
It's no help to any decent contractor, they should have zero problem fronting any amount of money. (As long as the customer does not get too far ahead of the payment schedule.) And the GC should insist on doing so, since it keeps the project 100% under their control..... exactly what gets ordered, who orders it, when does it arrive, who unloads it, where does it go, who is responsible if it gets damaged or stolen, when does it get installed, who cleans up?
I hope that makes sense?
Here is where people get confused ...........The " Contractor " or " GC " is the person dressed nice with a clip board who sizes up the job , prices it , meets with the owner , provides a contract with all the details , they run the business .
The people doing the work are called " employees " or " carpenters " or " plumbers " also called " Laborers " etc .
Rarely will the " Contractor " strap on a tool belt , even though he can .
Its kinda like a football team , The contractor ( coach ) calls the plays , and the players execute the plays .
Yeah I think this thread has been hamstrung by the fact that some posters have been talking about handy-people and general laborers/ carpenters as if they are GC's, or using "contractor" interchangeably as a catch-all for anyone doing work on a property.
The original question specifically asked about GENERAL CONTRACTORS (GC's). A GC has a General Contractor's license from the jurisdiction that they work in. They pull permits, are bonded and have insurance. They work directly with architects and engineers (or are designers themselves if it's a design-build project). They typically don't work directly on the job themselves but instead oversee and manage entire projects while their subs (sub-contractors) do the work. Very few if any GC's are going to let a client order materials or even quote a job without materials, or start a job without getting a down payment/ setting up a payment schedule (not to get too far off topic). It just doesn't happen normally because it's literally their job to oversee the project entirely including supplying materials (usually for less than the client can get materials for themselves anyway, even after being marked up, but I digress again).
For smaller jobs like handyman-type stuff, repairs, even a unit turnover... sure in those situations it might be possible to deviate from the normal GC process, because you're usually not actually working with a GC in those cases. Home owner's can even pull their own permit and do the work themselves or hire some helpers if they want to. However in doing so they take on more responsibility and liability. They've got to manage the project along with any tradespeople involved and basically do the job that a GC does (and often end up with less-professional results). But when working with a legit, actual GC, if they're smart and experienced they're just not going to let the client be part of the project any more than necessary, as a rule, other than choosing what they want to have done and writing checks (not any GC's that I know anyway). We used to say half-jokingly (but not really joking), "It'll be (X amount), or double that if you watch, or triple that if you help". The client should not be involved, it just slows things down and messes up the process and anyone with experience knows this to be true. Like Matthew keeps saying, when you hire a GC you're paying for a finished product, not just hiring a laborer.
Maybe the confusion is in part because the OP may not actually need a GC for their project, as they said it was a repair. Maybe they just need a carpenter or a handyman for their specific scope of work, and if that's the case then they can manage the process and even order and buy materials if they want to. However if it's a bigger project like a full remodel, addition, new construction, etc. basically anything requiring a permit, then it's usually a smoother process to just hire a GC and let them do what they do rather than insert yourself into the project as the owner and try to do a GC's job.
Then we've got people further confusing everybody by bringing commercial construction practices into it for some reason, which is another horse of a different color and not really germane to the original conversation at all... but still interesting and hopefully we all learned something nonetheless.
@Steve K. really good points.
Although the OP may have had a smaller job in mind, most states prohibit a simple Handyman from taking on any project more than $500 anyway, so the customer is stuck with a GC or doing it as Owner)Builder, which makes them assume all liability and responsibility.
This has been a good thread and hopefully has provided valuable info to investors and homeowners. It is surprising how many have no clue as to how the GC relationship works.
@Bruce Woodruff - Good points, makes sense. I see how this could be frustrating for quality GCs, contractors, or working on extremely large projects.
@Bruce Woodruff - Good points, makes sense. I see how this could be frustrating for quality GCs, contractors, or working on extremely large projects.
There has been a reoccurring theme that's tap-dancing around the actual point of things. Each iteration I read about not having a GC supply or pay for materials, actually has nothing about a desire to control the materials management leg of things, it's from a perception/assumption that it will save-$, effect a reduced cost of materials.
So I wonder, why is everyone speaking to this, going about striving for a discount via passive-aggressive measures?
Why not simply ask "How can I get this job done at a discount?"?
At my shop's lobby we had a big sign over the receptionist desk all but impossible to miss when a client came in, it read "We do 3 kinds of job's here; Good, Fast, and Cheap. You can pick any 2". Many got a good chuckel but it was serious. If it's Good and Fast, it won't be cheap. If it's Fast and Cheap, it won't be good, etc. etc.. If someone asked for how they can get additional discount, we'd happily shown the way how, sacrifice good or fast, or both, it's just that simple.
But seriously, why the tap-dance around the truth, your hunting for a discount. Why not just be honest and ask how.
The issue I see with all of the comments on this thread is a clear lack of perspective. Contractors aren’t willing to understand the Investors side, Investors are willing to understand the Contractors side. If everyone would zoom out and really try to gain perspective of the other side it would help clear up so many issues.
Contractors,
You need to understand why the Investors are asking for bids without materials. It’s because they have been burned in the past by paying a contractor for materials up front who walks with their money and doesn’t do any work, or contractors trying to overcharge. Why they are looking for the best deal. It’s because they are looking to maximize their investment. Why they are choosing the contractors they do. They don’t need someone who isn’t accountable and will want to charge insanely high prices. Once you begin to understand what they are after you can help provide a service to them that will benefit all parties.
If you as the contractor are always on the defense and pushing back to potential clients needs with a “my way or the highway” attitude it’s not going to solve anything. It also doesn’t help when you say you’ll charge 2-3x what the going rates are either if they don't bend to your will. Would you want to work with anyone that has that attitude? What if you went to a nice steak house and requested your meal prepared a certain way. In return the staff was rude and said that you’ll get what you are served and if you don’t like it, you can leave or we’ll just charge you double! That’s not the greatest business model.
Trust me, I understand the difficulties of the construction industry. It’s not for the weak! It’s incredibly easy to get jaded over all of the crap that happens in our industry such as clients who don’t pay, labor shortages, supply chain issues, tight schedules, incompetent inspectors, terrible drawings, weather, safety, etc. If handling that is too much go do something else because it’s not going away!
Investors, homeowners, business owners, etc. need our expertise. As contractors we need to be great communicators and keep the client’s interest in mind at all times. Contractors need to be clear on the expectations the owner should have on their work and what’s in their bid. Unmet expectations lead to frustration, so make the expectations crystal clear! Take accountability for everything and do what you say you’re going to do, period!
Investors,
You need to understand that without contractors, your dream of financial independence doesn’t happen. Acting like you are some high and mighty investor that deserves to have contractor bow to your every demand is a load of crap. It’s amazing how many times I’ve heard “If you give me a good deal on this job, I will have future work” or “I don’t want to spend much on this project, it needs to be cheap” or “can you do it cheaper”. Newsflash, contractors don’t want to hear this at all.
Advice – don’t ever say the word “cheap” to a contractor. There isn’t a quality contractor that wants to do “cheap” work. Instead, you should ask for value, or ways the contractor can meet your expectations for the project for maximum return on investment. If you are open about the goals of your project, they will be able to help you reach your goals with their expertise. If they can’t do that, they aren’t a good contractor or you have unreal expectations.
It is your responsibility to be a good client to your contractors. Their jobs are far from easy and it’s only worse when you have unreasonable expectations and treat them poorly.
Let’s use the steak house example again. If you are provided with great service and a great meal but only make your servers/cooks job harder by being ridiculously nitpicky, rude, and never showing gratitude no one is going to want to serve you. You may get by for a short while but eventually they are going to find a way to keep you away. In the contractor world, word gets out quick (at least in my area) about bad clients so it’s best you don’t get a reputation you don’t want.
Pay your contractors timely, understand sometimes schedules and budgets aren’t met, things can and will go wrong. It’s not always your contractor’s fault and you need to understand this concept.
To sum this all up, I used to be a bitter contractor that always cussed working with clients, Architects, Engineers, GC’s, etc. Then I became an investor who needed different contractors to help me scale my business and I realized what the client goes through. There are some BAD contractors out there, I mean awful. It really opened my eyes to what they have to go through and why they request the things the do. Now I have a better understanding of both sides and it’s helped me provide a better service to my clients as a contractor.
Grow your perspective and it will change so much. Be good to people because you may not understand their perspective.
The issue I see with all of the comments on this thread is a clear lack of perspective. Contractors aren’t willing to understand the Investors side, Investors are willing to understand the Contractors side. If everyone would zoom out and really try to gain perspective of the other side it would help clear up so many issues.
Contractors,
You need to understand why the Investors are asking for bids without materials. It’s because they have been burned in the past by paying a contractor for materials up front who walks with their money and doesn’t do any work, or contractors trying to overcharge. Why they are looking for the best deal. It’s because they are looking to maximize their investment. Why they are choosing the contractors they do. They don’t need someone who isn’t accountable and will want to charge insanely high prices. Once you begin to understand what they are after you can help provide a service to them that will benefit all parties.
If you as the contractor are always on the defense and pushing back to potential clients needs with a “my way or the highway” attitude it’s not going to solve anything. It also doesn’t help when you say you’ll charge 2-3x what the going rates are either if they don't bend to your will. Would you want to work with anyone that has that attitude? What if you went to a nice steak house and requested your meal prepared a certain way. In return the staff was rude and said that you’ll get what you are served and if you don’t like it, you can leave or we’ll just charge you double! That’s not the greatest business model.
Trust me, I understand the difficulties of the construction industry. It’s not for the weak! It’s incredibly easy to get jaded over all of the crap that happens in our industry such as clients who don’t pay, labor shortages, supply chain issues, tight schedules, incompetent inspectors, terrible drawings, weather, safety, etc. If handling that is too much go do something else because it’s not going away!
Investors, homeowners, business owners, etc. need our expertise. As contractors we need to be great communicators and keep the client’s interest in mind at all times. Contractors need to be clear on the expectations the owner should have on their work and what’s in their bid. Unmet expectations lead to frustration, so make the expectations crystal clear! Take accountability for everything and do what you say you’re going to do, period!
Investors,
You need to understand that without contractors, your dream of financial independence doesn’t happen. Acting like you are some high and mighty investor that deserves to have contractor bow to your every demand is a load of crap. It’s amazing how many times I’ve heard “If you give me a good deal on this job, I will have future work” or “I don’t want to spend much on this project, it needs to be cheap” or “can you do it cheaper”. Newsflash, contractors don’t want to hear this at all.
Advice – don’t ever say the word “cheap” to a contractor. There isn’t a quality contractor that wants to do “cheap” work. Instead, you should ask for value, or ways the contractor can meet your expectations for the project for maximum return on investment. If you are open about the goals of your project, they will be able to help you reach your goals with their expertise. If they can’t do that, they aren’t a good contractor or you have unreal expectations.
It is your responsibility to be a good client to your contractors. Their jobs are far from easy and it’s only worse when you have unreasonable expectations and treat them poorly.
Let’s use the steak house example again. If you are provided with great service and a great meal but only make your servers/cooks job harder by being ridiculously nitpicky, rude, and never showing gratitude no one is going to want to serve you. You may get by for a short while but eventually they are going to find a way to keep you away. In the contractor world, word gets out quick (at least in my area) about bad clients so it’s best you don’t get a reputation you don’t want.
Pay your contractors timely, understand sometimes schedules and budgets aren’t met, things can and will go wrong. It’s not always your contractor’s fault and you need to understand this concept.
To sum this all up, I used to be a bitter contractor that always cussed working with clients, Architects, Engineers, GC’s, etc. Then I became an investor who needed different contractors to help me scale my business and I realized what the client goes through. There are some BAD contractors out there, I mean awful. It really opened my eyes to what they have to go through and why they request the things the do. Now I have a better understanding of both sides and it’s helped me provide a better service to my clients as a contractor.
Grow your perspective and it will change so much. Be good to people because you may not understand their perspective.
Sir, I think you have said it best. It is the lack of perspective and seeing the situation from the other side. I would say that is the #1 thing an investor is worried about, "who is least likely to rip me off and run off with my money." #2 How can I maximize the allocated funds. For GC's, customers looking to be too involved and being asked to discount their work. And treat each other with courtesy and respect
@James Hamling @Bruce Woodruff https://www.biggerpockets.com/users/brucew127 the little @ sign isn't working today.
Mom's having a heart valve fixed. I ordered it from the pig farm direct to save .0001 cents. It'll work right??
Stop listening to a guru who sells you that you know more than the doctor.
The issue I see with all of the comments on this thread is a clear lack of perspective. Contractors aren’t willing to understand the Investors side, Investors are willing to understand the Contractors side. If everyone would zoom out and really try to gain perspective of the other side it would help clear up so many issues.
Contractors,
You need to understand why the Investors are asking for bids without materials. It’s because they have been burned in the past by paying a contractor for materials up front who walks with their money and doesn’t do any work, or contractors trying to overcharge. Why they are looking for the best deal. It’s because they are looking to maximize their investment. Why they are choosing the contractors they do. They don’t need someone who isn’t accountable and will want to charge insanely high prices. Once you begin to understand what they are after you can help provide a service to them that will benefit all parties.
If you as the contractor are always on the defense and pushing back to potential clients needs with a “my way or the highway” attitude it’s not going to solve anything. It also doesn’t help when you say you’ll charge 2-3x what the going rates are either if they don't bend to your will. Would you want to work with anyone that has that attitude? What if you went to a nice steak house and requested your meal prepared a certain way. In return the staff was rude and said that you’ll get what you are served and if you don’t like it, you can leave or we’ll just charge you double! That’s not the greatest business model.
Trust me, I understand the difficulties of the construction industry. It’s not for the weak! It’s incredibly easy to get jaded over all of the crap that happens in our industry such as clients who don’t pay, labor shortages, supply chain issues, tight schedules, incompetent inspectors, terrible drawings, weather, safety, etc. If handling that is too much go do something else because it’s not going away!
Investors, homeowners, business owners, etc. need our expertise. As contractors we need to be great communicators and keep the client’s interest in mind at all times. Contractors need to be clear on the expectations the owner should have on their work and what’s in their bid. Unmet expectations lead to frustration, so make the expectations crystal clear! Take accountability for everything and do what you say you’re going to do, period!
Investors,
You need to understand that without contractors, your dream of financial independence doesn’t happen. Acting like you are some high and mighty investor that deserves to have contractor bow to your every demand is a load of crap. It’s amazing how many times I’ve heard “If you give me a good deal on this job, I will have future work” or “I don’t want to spend much on this project, it needs to be cheap” or “can you do it cheaper”. Newsflash, contractors don’t want to hear this at all.
Advice – don’t ever say the word “cheap” to a contractor. There isn’t a quality contractor that wants to do “cheap” work. Instead, you should ask for value, or ways the contractor can meet your expectations for the project for maximum return on investment. If you are open about the goals of your project, they will be able to help you reach your goals with their expertise. If they can’t do that, they aren’t a good contractor or you have unreal expectations.
It is your responsibility to be a good client to your contractors. Their jobs are far from easy and it’s only worse when you have unreasonable expectations and treat them poorly.
Let’s use the steak house example again. If you are provided with great service and a great meal but only make your servers/cooks job harder by being ridiculously nitpicky, rude, and never showing gratitude no one is going to want to serve you. You may get by for a short while but eventually they are going to find a way to keep you away. In the contractor world, word gets out quick (at least in my area) about bad clients so it’s best you don’t get a reputation you don’t want.
Pay your contractors timely, understand sometimes schedules and budgets aren’t met, things can and will go wrong. It’s not always your contractor’s fault and you need to understand this concept.
To sum this all up, I used to be a bitter contractor that always cussed working with clients, Architects, Engineers, GC’s, etc. Then I became an investor who needed different contractors to help me scale my business and I realized what the client goes through. There are some BAD contractors out there, I mean awful. It really opened my eyes to what they have to go through and why they request the things the do. Now I have a better understanding of both sides and it’s helped me provide a better service to my clients as a contractor.
Grow your perspective and it will change so much. Be good to people because you may not understand their perspective.
This is really, really, REALLY good.
Frustrating in a way, I had a knee-jerk itch of a reaction to argue it, but your right, your right.
As a GC, or I should say when I was a FT GC, it get's tough. One get's "grissly". Your dealing with various government entities attacking you what seems almost weekly. It it isn't on taxes it's insurance, if not insurance it's work comp, if not work comp it's inspectors, if not inspectors it's new IRC, or new hazmat whatever, or or or. And same time, as you getting bleed left right and center, than installers pressing they "need" 65, 85, 105 per hour and you remind you had to train them how to correctly cut a 45 cope just last week.
And than you run a sales appointment and the home owners are going on and on with an architectural digest out how they want this elaborate $220k kitchen reno and than say there budget is $35k, can you make it happen, you NEED to make it happen, because they can't settle for anything less than Brazillian Walnut cabinets and Italian Marble c-tops.... And than onto the next, and the next, and the next. Than the sales call with an investor, who never said he was an investor just a home owner wanting to do a project, and he says how he's willing to "help you out" and if you do labor only, at $25per hr, he will give you more work. Mind you this is his 2nd project EVER.
It jades you. It does.
And yes, 1,000%, NEVER pitch me on "cheap". That pisses us off! We build things, we are very much artist. Our work matters, a lot. It's a piece of us. Every job done is a part of us, it's our gallery, what we are giving unto the world. It's more than just a job or project to us. And if it isn't to a GC, there a hack and run-away.
Cost controls, ok, got that, happy to help. Figuring how we get 7gal of sh#t in a 5gal bucket, ok, let's figure this out how we can make it happen. But to ask me to be CHEAP, is calling me cheap, calling my work cheap, calling my years upon years of blood sweat and tears to gain the skills to do what I do UNVALUED, wasted.
But yeah.... As a whole, yeah, I think we probably do need some collective tradesman therapy sessions to maybe vent a bit and not take it out on the next client.
Keep in mind all you investors, in a world where we are operating on a 20% gross profit margin, that means for every MILLION dollars in work we complete, which if average project is $35k that just over 28 project's done, we have $200k sitting there, that Uncle Sam than rob's us of his cut, so maybe we have $150k. $150k to pay ourselves something to live off of, for new equipment, to grow the shop if we can, it's not just all pocket $. That $150k very rapidly get's widdled down to more like $50k, or even less. So a million bucks is not a million bucks, it's actually very little.
When you bid a job labor and materials , the customer thinks that the labor part is what the contractor makes .
Like a $50k job with $12K in materials , Hey he is ripping us off he is making $38K for 3 weeks of work , I dont make that , he is ripping us off .
I wish it was that good
After every other business bill , and taxes etc are paid , The business may see $5000 in the bank if everything geas right . ( which happens now and then )
You need to understand why the Investors are asking for bids without materials. It’s because they have been burned in the past by paying a contractor for materials up front who walks with their money and doesn’t do any work, or contractors trying to overcharge. Why they are looking for the best deal. It’s because they are looking to maximize their investment. Why they are choosing the contractors they do. They don’t need someone who isn’t accountable and will want to charge insanely high prices.
While I agree generally with your post, I think the above selection has some assumptions that are overlooked.
A customer/investor cannot be so stupid as to a) neglect to check a potential Contractor's credentials, b) pay a large sum of money to a crooked Contr, c) not insist that the Contr use proper Contracts, COs, Etc.
This happens continually on the Forum and it gives the Good Contactor community a bad name. Investors are business people and have zero excuse to give a Contr 50% up front. Then blame all Contractors for their own stupidity...?
Rant Off.
@Kyle Sosnowski - I usually have the contractors place the order for materials and then call the supplier or retailer to pay over the phone. Or when they go to pickup the contractor will call me and then hand the phone to the company to complete payment. Been doing it like this for a while and it's worked well.
@Bruce Woodruff - Tell me more about your point of view? Wouldn't this help the contractor since they don't have to front the money?
It's no help to any decent contractor, they should have zero problem fronting any amount of money. (As long as the customer does not get too far ahead of the payment schedule.) And the GC should insist on doing so, since it keeps the project 100% under their control..... exactly what gets ordered, who orders it, when does it arrive, who unloads it, where does it go, who is responsible if it gets damaged or stolen, when does it get installed, who cleans up?
I hope that makes sense?
Hi Bruce,
You seem very experienced in your field, I would like to ask you a question.
How does it play out when, hypothetically you have a job about to start and you get damaged materials (in this case, all of them are unusable)
As the owner, how would we go about dealing with this with the contractor in the best manner/what has worked in your business.
I appreciate the wisdom in advance.
You seem very experienced in your field, I would like to ask you a question.
How does it play out when, hypothetically you have a job about to start and you get damaged materials (in this case, all of them are unusable)
As the owner, how would we go about dealing with this with the contractor in the best manner/what has worked in your business.
I appreciate the wisdom in advance.
Red flag. They are up charging on the material.
Of course contractors mark up materials ... When you rehab a house and sell it dont you mark it up as much as you can ? When you rent a house dont you make a profit ?
No different than being a contractor .
Profit is not a dirty word
There is no issue with up charging if you disclose it.
Sounds like they want to hide their markup on the materials!
Quote from @Eliott Elias
Red Flag. They are up charging on the material.
Really guys? Seriously? OMG, a business is adding a markup to their product? Stop the presses because that's never happened before, right...? 🤣
Lol, after many years in business a good GC will build up so many valuable relationships with Vendors, Supply Houses and Subs that they can't even be counted. I ordered so much lumber (For framing) from one local lumber house that not only did I get large discounts but I got free pencils (OMG) and free tickets to local NFL/MLB games, which I rarely used, I would pass these on to my Subs to further cement our relationships. This is how the Construction business works, people....!
What shocks me the most is how Realtors and Investors can be so f'ing clueless about this. It's different for a small investor or first time homeowner, but c'mon guys.....
Yes, I got discounts on almost everything from almost every Supplier or Vendor. Did I always mark up the price to the customer? No I didn't. Sometimes it was the right thing to do, sometimes it wasn't. And it depended on the customer a lot too.... :-)
Often times there was enough profit in the mark-up on the Sub's pricing that I could show the customer that they were getting materials at my price, a big discount. Everybody is happy!
Let me bottom-line this for you newbies out there - you should be happy that your Contractor is marking up materials and you should even encourage it. You want a good company to make a good profit on your job and be around in the future for more work or if there is a defect on your job that needs correcting in the future. Right?
Labor is where contractors should make the money. Not material that they pick up and drop off.
Sounds like they want to hide their markup on the materials!
Quote from @Eliott Elias
Red Flag. They are up charging on the material.
Really guys? Seriously? OMG, a business is adding a markup to their product? Stop the presses because that's never happened before, right...? 🤣
Lol, after many years in business a good GC will build up so many valuable relationships with Vendors, Supply Houses and Subs that they can't even be counted. I ordered so much lumber (For framing) from one local lumber house that not only did I get large discounts but I got free pencils (OMG) and free tickets to local NFL/MLB games, which I rarely used, I would pass these on to my Subs to further cement our relationships. This is how the Construction business works, people....!
What shocks me the most is how Realtors and Investors can be so f'ing clueless about this. It's different for a small investor or first time homeowner, but c'mon guys.....
Yes, I got discounts on almost everything from almost every Supplier or Vendor. Did I always mark up the price to the customer? No I didn't. Sometimes it was the right thing to do, sometimes it wasn't. And it depended on the customer a lot too.... :-)
Often times there was enough profit in the mark-up on the Sub's pricing that I could show the customer that they were getting materials at my price, a big discount. Everybody is happy!
Let me bottom-line this for you newbies out there - you should be happy that your Contractor is marking up materials and you should even encourage it. You want a good company to make a good profit on your job and be around in the future for more work or if there is a defect on your job that needs correcting in the future. Right?
Labor is where contractors should make the money. Not material that they pick up and drop off.
WRONG , Contractors make their money delivering a finished product .
Contractors are business people , not hired labor ( they are called employees )
We mark up , materials , subcontractors , dumpsters , etc , even the porta potty we put on site . We mark up EVERYTHING
Thats called running a business
Profit is the name of the game , there is no reason to leave money on the table
Like @Matthew Paul said, a good businessman will take profit wherever they can. We have to. You won't understand being a Realtor, it's an entirely different business model. And I hope you are a successful realtor because you would never make it as a GC...
The issue I see with all of the comments on this thread is a clear lack of perspective. Contractors aren’t willing to understand the Investors side, Investors are willing to understand the Contractors side. If everyone would zoom out and really try to gain perspective of the other side it would help clear up so many issues.
Contractors,
You need to understand why the Investors are asking for bids without materials. It’s because they have been burned in the past by paying a contractor for materials up front who walks with their money and doesn’t do any work, or contractors trying to overcharge. Why they are looking for the best deal. It’s because they are looking to maximize their investment. Why they are choosing the contractors they do. They don’t need someone who isn’t accountable and will want to charge insanely high prices. Once you begin to understand what they are after you can help provide a service to them that will benefit all parties.
If you as the contractor are always on the defense and pushing back to potential clients needs with a “my way or the highway” attitude it’s not going to solve anything. It also doesn’t help when you say you’ll charge 2-3x what the going rates are either if they don't bend to your will. Would you want to work with anyone that has that attitude? What if you went to a nice steak house and requested your meal prepared a certain way. In return the staff was rude and said that you’ll get what you are served and if you don’t like it, you can leave or we’ll just charge you double! That’s not the greatest business model.
Trust me, I understand the difficulties of the construction industry. It’s not for the weak! It’s incredibly easy to get jaded over all of the crap that happens in our industry such as clients who don’t pay, labor shortages, supply chain issues, tight schedules, incompetent inspectors, terrible drawings, weather, safety, etc. If handling that is too much go do something else because it’s not going away!
Investors, homeowners, business owners, etc. need our expertise. As contractors we need to be great communicators and keep the client’s interest in mind at all times. Contractors need to be clear on the expectations the owner should have on their work and what’s in their bid. Unmet expectations lead to frustration, so make the expectations crystal clear! Take accountability for everything and do what you say you’re going to do, period!
Investors,
You need to understand that without contractors, your dream of financial independence doesn’t happen. Acting like you are some high and mighty investor that deserves to have contractor bow to your every demand is a load of crap. It’s amazing how many times I’ve heard “If you give me a good deal on this job, I will have future work” or “I don’t want to spend much on this project, it needs to be cheap” or “can you do it cheaper”. Newsflash, contractors don’t want to hear this at all.
Advice – don’t ever say the word “cheap” to a contractor. There isn’t a quality contractor that wants to do “cheap” work. Instead, you should ask for value, or ways the contractor can meet your expectations for the project for maximum return on investment. If you are open about the goals of your project, they will be able to help you reach your goals with their expertise. If they can’t do that, they aren’t a good contractor or you have unreal expectations.
It is your responsibility to be a good client to your contractors. Their jobs are far from easy and it’s only worse when you have unreasonable expectations and treat them poorly.
Let’s use the steak house example again. If you are provided with great service and a great meal but only make your servers/cooks job harder by being ridiculously nitpicky, rude, and never showing gratitude no one is going to want to serve you. You may get by for a short while but eventually they are going to find a way to keep you away. In the contractor world, word gets out quick (at least in my area) about bad clients so it’s best you don’t get a reputation you don’t want.
Pay your contractors timely, understand sometimes schedules and budgets aren’t met, things can and will go wrong. It’s not always your contractor’s fault and you need to understand this concept.
To sum this all up, I used to be a bitter contractor that always cussed working with clients, Architects, Engineers, GC’s, etc. Then I became an investor who needed different contractors to help me scale my business and I realized what the client goes through. There are some BAD contractors out there, I mean awful. It really opened my eyes to what they have to go through and why they request the things the do. Now I have a better understanding of both sides and it’s helped me provide a better service to my clients as a contractor.
Grow your perspective and it will change so much. Be good to people because you may not understand their perspective.
Sounds like they want to hide their markup on the materials!
Quote from @Eliott Elias
Red Flag. They are up charging on the material.
Really guys? Seriously? OMG, a business is adding a markup to their product? Stop the presses because that's never happened before, right...? 🤣
Lol, after many years in business a good GC will build up so many valuable relationships with Vendors, Supply Houses and Subs that they can't even be counted. I ordered so much lumber (For framing) from one local lumber house that not only did I get large discounts but I got free pencils (OMG) and free tickets to local NFL/MLB games, which I rarely used, I would pass these on to my Subs to further cement our relationships. This is how the Construction business works, people....!
What shocks me the most is how Realtors and Investors can be so f'ing clueless about this. It's different for a small investor or first time homeowner, but c'mon guys.....
Yes, I got discounts on almost everything from almost every Supplier or Vendor. Did I always mark up the price to the customer? No I didn't. Sometimes it was the right thing to do, sometimes it wasn't. And it depended on the customer a lot too.... :-)
Often times there was enough profit in the mark-up on the Sub's pricing that I could show the customer that they were getting materials at my price, a big discount. Everybody is happy!
Let me bottom-line this for you newbies out there - you should be happy that your Contractor is marking up materials and you should even encourage it. You want a good company to make a good profit on your job and be around in the future for more work or if there is a defect on your job that needs correcting in the future. Right?
Labor is where contractors should make the money. Not material that they pick up and drop off.
You seem to not know the difference between a SUB-contractor and a GENERAL/building Contractor.
SUB's, in general, are in the business of selling there labor.
Contractors; General/Building Contractors sell a PROJECT, which covers a whole hell of a lot more than just labor. For example, permits, if just selling labor how's the permit appear? How does the required drafting for obtaining the permit appear?
Or maybe your mixing up HandyMan with Contractor.
Point is, this is a wildly INCORRECT designation. Sub's sell installation labor, Contractors sell Projects.
Red flag. They are up charging on the material.
Of course contractors mark up materials ... When you rehab a house and sell it dont you mark it up as much as you can ? When you rent a house dont you make a profit ?
No different than being a contractor .
Profit is not a dirty word
There is no issue with up charging if you disclose it.
FYI: There is not 1 jurisdiction in the U.S. where Material up-charge vs cost is required, not 1.
Do you get a "disclosure" of your up-charge on the hamburger?
Contractors are no different than any restaurant; they acquire raw materials utilized in a construct of a finished product sold unto a final consumer of said finished product.
And all-the-more, if a GC has a great manufacturer direct account on materials they have a NDA agreement from the manufacturer that they CAN'T share there cost's or disclose to anyone.
You need to understand why the Investors are asking for bids without materials. It’s because they have been burned in the past by paying a contractor for materials up front who walks with their money and doesn’t do any work, or contractors trying to overcharge. Why they are looking for the best deal. It’s because they are looking to maximize their investment. Why they are choosing the contractors they do. They don’t need someone who isn’t accountable and will want to charge insanely high prices.
While I agree generally with your post, I think the above selection has some assumptions that are overlooked.
A customer/investor cannot be so stupid as to a) neglect to check a potential Contractor's credentials, b) pay a large sum of money to a crooked Contr, c) not insist that the Contr use proper Contracts, COs, Etc.
This happens continually on the Forum and it gives the Good Contactor community a bad name. Investors are business people and have zero excuse to give a Contr 50% up front. Then blame all Contractors for their own stupidity...?
Rant Off.