Purchasing Material For Contractors
Flipper/Rehabber · Knoxville, TN · Member since 2023 · 47 posts · 20 votes
I found a contractor I like to rehab a house I bought. Is it best for the investor to always purchase the material? I am assuming the answer is "yes" to get credit card points and prevent a contractor from charging a premium on materials. Please let me know what you do when it comes to buying materials for a flip.
I found a contractor I like to rehab a house I bought. Is it best for the investor to always purchase the material? I am assuming the answer is "yes" to get credit card points and prevent a contractor from charging a premium on materials. Please let me know what you do when it comes to buying materials for a flip.
It's not necessarily the way to go, depends on the property and your contractor. The most important thing is to work with a contractor you trust 100%. I know my contractor marks some of his materials up and I couldn't care less, because he's honest about it and I WANT him to profit off of my deals and return my calls when I need him.
I've found MOST quality contractors wont' use the materials you've bought because MOST newer isnvestors will buy the cheapest pieces and parts they can find, often providing used materials and then the expect the contractor to guaratee their work. I wouldn't do that- I'm sure most people in that situation wouldn't either. In most cases, a contractor wants to provide their own materials, not because they want to rip you off, but because they know that if they use quality materials that they are familiar with, they can provide you with a reasonable guarantee.
There are always exceptions, but don't make the assumption that a contractor who will only provide their own materials is trying to rip you off, it might be a sign that they have pride and want to stand by their work.
I'm not that experienced, but for the one renovation we've done, we purchased the materials. I think there was only one place where we needed a contractor's license to purchase, so we used our contractor's number, but we paid for the materials.
@Patrick Goswitz My sub contractors mark up the materials they purchase anywhere from 50-200% and charge me the extra.
I’ve worked with my main contractor for about 22 years and trust him immensely. He has 2 different credit cards of mine. One for 6 of my properties and the second card for the 7th property that is held in a partnership where the finances need to be kept separately. When he needs to purchase something he just does. 95% of the time he tries to tell me what he bought for which property the day of the purchase and if he buys something for more than about $150 he always asks my approval beforehand.
This saves me tens of thousands of dollars a year. Obviously I don’t recommend this to the majority of investors because from what I read it seems like no one has this type of relationship with their contractor.
If you can get the list of supplies needed and buy them yourself I would recommend it especially if you can use your contractors pro account at the stores or set up
Your own. Usually they don’t cost anything.
I found a contractor I like to rehab a house I bought. Is it best for the investor to always purchase the material? I am assuming the answer is "yes" to get credit card points and prevent a contractor from charging a premium on materials. Please let me know what you do when it comes to buying materials for a flip.
It's not necessarily the way to go, depends on the property and your contractor. The most important thing is to work with a contractor you trust 100%. I know my contractor marks some of his materials up and I couldn't care less, because he's honest about it and I WANT him to profit off of my deals and return my calls when I need him.
I've found MOST quality contractors wont' use the materials you've bought because MOST newer isnvestors will buy the cheapest pieces and parts they can find, often providing used materials and then the expect the contractor to guaratee their work. I wouldn't do that- I'm sure most people in that situation wouldn't either. In most cases, a contractor wants to provide their own materials, not because they want to rip you off, but because they know that if they use quality materials that they are familiar with, they can provide you with a reasonable guarantee.
There are always exceptions, but don't make the assumption that a contractor who will only provide their own materials is trying to rip you off, it might be a sign that they have pride and want to stand by their work.
A licenced professional contractor will provide materials and labor , they will give you a price for a finished product .
@Patrick Goswitz
Really depends on the contractor, with a background in this, I used to run a painting and flooring company. We hated when the customer bought materials for us to use. It’s never the stuff we want, never enough of what we need, etc etc. You want to make their job easier, you want to keep them happy, they can make things very difficult for you if they’re not satisfied with what you have.
Talk to them, ask them if they’re ok with and then ask them EXACTLY what they need/prefer. Brands included. It was never a worse feeling than showing up to start work and the customer picked out to the cheapest materials that they can find!
@Patrick Goswitz what's the end goal? Saving money I assume, if that's the case what does it matter if you're getting bids and going with the lowest bid or are you going with a contractor you know and trust? Either way for me they should be able to make their money however it is that they make their money, especially if you find a contractor you like, trust, and want to come back?
If you get 3 bids and for easy numbers sake lets' say you get $3k, $4k, and $5k as the bids, but choose to go with the lowest bid and then tell him you want to buy the materials to save the money yet that's where he's cutting his costs to obtain your business you're still kind of cutting off your own hand despite your face right? I don't know, I usually get 3 bids and go with whom I'm comfortable with, it's less heavy lifting in the end that you have to do anyway. Plus if something is forgotten are you going to run to the store everytime they need a box of screws or something?
I do most of my own work, but when I contract stuff out I let the contractor purchase their materials, besides they know what they want and need. Would you purchase your HVAC stuff and then have an HVAC company come in to install? Just some thoughts
If they're able to give you wholesale-ish prices cause you're doing a lot of reno in an area(say 3-5 houses) using the same materials then sure.
But otherwise, you know the material you want. Research the paint, floors, etc. Tell them they will need to get their own primer, subfloor, etc., and built into the cost. But you get the core materials. You'll pay a premium for their other stuff to supplement your core materials, but that's fine. You're not going to pay 200% of material costs like you would if you just let them buy everything for you. A $15,000 home depot bill turns into a $30,000 bill for you. Turn the bill into a $3,000 one and let them charge your $4,000 & let them hold some liability with the applications of use.
@Patrick Goswitz what's the end goal? Saving money I assume, if that's the case what does it matter if you're getting bids and going with the lowest bid or are you going with a contractor you know and trust? Either way for me they should be able to make their money however it is that they make their money, especially if you find a contractor you like, trust, and want to come back?
If you get 3 bids and for easy numbers sake lets' say you get $3k, $4k, and $5k as the bids, but choose to go with the lowest bid and then tell him you want to buy the materials to save the money yet that's where he's cutting his costs to obtain your business you're still kind of cutting off your own hand despite your face right? I don't know, I usually get 3 bids and go with whom I'm comfortable with, it's less heavy lifting in the end that you have to do anyway. Plus if something is forgotten are you going to run to the store everytime they need a box of screws or something?
I do most of my own work, but when I contract stuff out I let the contractor purchase their materials, besides they know what they want and need. Would you purchase your HVAC stuff and then have an HVAC company come in to install? Just some thoughts
I do believe everyone wants to save money if they can. I don't mind at all a contractor charging a markup on material. I should've been more clear in my original post. I like the credit card points as they can add up quickly. Would it be foolish to give a contractor my credit card to purchase material and have him keep receipts of materials purchased then when the job is finished I can pay him his markup on material?
@Patrick Goswitz - we've hashed this to death here, most 'good' Contractors will not let you provide materials. Do a search to find out all of the reasons.
Basically, in order to run a project on time and on budget, and to give you a quality finished product, a General Contractor needs to have full control over every aspect of the project.
And as I've said here a hundred times, say you pay for the materials, i.e. $3000 worth of tile, $5000 worth of cabinets, $4000 worth of appliances. So now you've saved money (you think, lol) and you've got your precious CC points or miles. Ok. great. Now who is going to pick up the materials, load and unload them? Make them safe at the project (which could be an unsecured house)? Who takes charge of contacting the vendor when some pieces show up damaged? Or in the case of appliances, who meets the truck, checks the products and signs for them?
Of course it will not be you. You will expect the GC to do all of this for you, and for free at that. Why do you investors think there is a mark-up anyway? It's to cover these things above and a lot more.
And you need to decide your goal....a great project run by a competent and honest GC, or points for your precious credit card? The two do not usually go together....
@Patrick Goswitz I think @Bruce Woodruff illustrates my point much better
A $15,000 home depot bill turns into a $30,000 bill for you.
That's happened, like....never....
You think GCs go to Home Depot anyway? And then double the price....? LOTFLMAO....
A $15,000 home depot bill turns into a $30,000 bill for you.
That's happened, like....never....
You think GCs go to Home Depot anyway? And then double the price....? LOTFLMAO....
I've gotten quotes from GCs for $27,000 for materials, when I shopped the product from Lowe's and came in at $12,000. When I asked they said time, storage, etc. I just said no too much. My entire primary residence every GC that quoted me had a 2-2.5x upcharge in materials. Granted this was in 2021.
So yeah happened like 4 x in one month.
And in my WPB properties herein 2023, the GCs charge at least 1.5x of what materials cost if I look at local home depot. So yeah again happened probably another 3-4 times.
Of course, I didn't go with any of these GCs but I also have the benefit of waiting and not being on anyone's timeline or deadline. The one's I did go with do buy spot stuff at Home Depot, Lowe's, local stores and charge 125% of it. But that's been common for all areas I have invested in.
A $15,000 home depot bill turns into a $30,000 bill for you.
That's happened, like....never....
You think GCs go to Home Depot anyway? And then double the price....? LOTFLMAO....
I've gotten quotes from GCs for $27,000 for materials, when I shopped the product from Lowe's and came in at $12,000. When I asked they said time, storage, etc. I just said no too much. My entire primary residence every GC that quoted me had a 2-2.5x upcharge in materials. Granted this was in 2021.
So yeah happened like 4 x in one month.
And in my WPB properties herein 2023, the GCs charge at least 1.5x of what materials cost if I look at local home depot. So yeah again happened probably another 3-4 times.
Of course, I didn't go with any of these GCs but I also have the benefit of waiting and not being on anyone's timeline or deadline. The one's I did go with do buy spot stuff at Home Depot, Lowe's, local stores and charge 125% of it. But that's been common for all areas I have invested in.
Wow. Ok, well at least you didn't go with these idiots....I've personally never heard of such a thing. I think a 25% markup is fair in some cases...or better yet, just make enough profit on the entire job to not bother the client with marking up little HD trips....
@Patrick Goswitz make sure the statement of work specifies what they buy and what you buy. Also assumptions on cost if you pick and they buy A $10 a square foot flooring when they budgeted $5, big difference. Sometimes it makes sense even for for things you pick to get it thru them for a better deal.
I wouldn't want to be buying materials for most things if you have a GC. Isn't it their job orchestrating materials and workers to get the job done?
A contractor is a business owner, do investors share their financials?
Do investors employ w2 personnel? Do they pay for vacation pay, medical insurance, workers comp, payroll taxes, PTO & holidays, ongoing training, trucks & commercial vehicle insurance, liability insurance, admins, marketing, SEO, liability insurance, bonding fees, licensing fees? Bookkeeping, CPA, 1099 issuance & follow up. IDK but I do know for a fact that's what contractors do.
https://www.cslb.ca.gov/Consumers/Hire_A_Contractor/Home_Imp...
There are certainly pros and cons to purchasing materials. It seems thus far the motivations behind most posts are cost savings. Regardless of direction you go, the allowances in your contract should be clear and quantities and material specs should be clearly defined. If the decision to purchase materials is trust related than that is a red flag and should likely eliminate the GC from consideration. Similarly if you feel the material pricing is marked up by too much, that's similarly a red flag. However, don't discount the value an organized and knowledgeable GC brings to your job site and mistaken the value they place on their time for a mark up on materials. If you are going to purchase materials as a cost saving mechanism, remember the project will perform best if both the owner and GC turn a profit. If there is no profit the GC will take short cuts and deliver a subpar product. From my experience the best reason to retain purchasing authority is to protect against mechanics liens. Mechanics liens differ depending on where you are but in many areas the laws are favorable towards contractors and suppliers. By purchasing materials you can mitigate some of these risks. However its really a balancing act and different for each owner depending on time and comfort level with your construction team and suppliers.
There are certainly pros and cons to purchasing materials. It seems thus far the motivations behind most posts are cost savings. Regardless of direction you go, the allowances in your contract should be clear and quantities and material specs should be clearly defined. If the decision to purchase materials is trust related than that is a red flag and should likely eliminate the GC from consideration. Similarly if you feel the material pricing is marked up by too much, that's similarly a red flag. However, don't discount the value an organized and knowledgeable GC brings to your job site and mistaken the value they place on their time for a mark up on materials. If you are going to purchase materials as a cost saving mechanism, remember the project will perform best if both the owner and GC turn a profit. If there is no profit the GC will take short cuts and deliver a subpar product. From my experience the best reason to retain purchasing authority is to protect against mechanics liens. Mechanics liens differ depending on where you are but in many areas the laws are favorable towards contractors and suppliers. By purchasing materials you can mitigate some of these risks. However its really a balancing act and different for each owner depending on time and comfort level with your construction team and suppliers.
It appears that Pennsylvania requires a contractor to provide a 12 year warranty for labor and materials, what would be the outcome if the customer supplies materials?
I found a contractor I like to rehab a house I bought. Is it best for the investor to always purchase the material? I am assuming the answer is "yes" to get credit card points and prevent a contractor from charging a premium on materials. Please let me know what you do when it comes to buying materials for a flip.
You've got to really be careful doing that, but we do it often. We have an experienced, degreed designer on the team and we have "trade accounts" with vendors, so we'll often purchase the materials and appliances directly from the vendors and have the contractor pick them up to use on the job. Be sure to monitor it all closely to ensure that they aren't skimming product to use on other jobs. Expect what you inspect and make sure the contractor sees that they can't pull a fast one on you. We do it, but you have to stay on top of it. Good luck to you!
You must have missed this recent thread in which we beat this topic to death over 6 colorful pages: https://www.biggerpockets.com/forums/24/topics/1143427-gener...
It really depends on the type of project, scope of work, and whether you're dealing with a real professional GC or more of a handyman/laborer type situation. If you're having a handyman install some doorknobs, then sure you can pick them up and bring them to the property. For anything beyond a very small project like that, it's generally going to best to have your contractor deal with materials. They will have them delivered to the job-site by their supplier, not go to the store to pick them up. The supplier will also pick up anything leftover at the end. The contractor will probably get better pricing than you can get, and it's none of your business how much it is marked up, as you're paying for a finished product. Forget about the CC points, that's like stepping over dollars to pick up pennies IMO. When I was a contractor I never dealt with people that nickle and dimed me over materials, or asked to order them so they could get points, I just didn't operate that way. You'll end up dealing with bush league contractors if you approach things this way IMO. You'll be better off in the long run if you find a great contractor, pay them on time and let them handle their business professionally. Take care of them, it will be reciprocated. Cheap is expensive in the trades.
You must have missed this recent thread in which we beat this topic to death over 6 colorful pages: https://www.biggerpockets.com/forums/24/topics/1143427-gener...
It really depends on the type of project, scope of work, and whether you're dealing with a real professional GC or more of a handyman/laborer type situation. If you're having a handyman install some doorknobs, then sure you can pick them up and bring them to the property. For anything beyond a very small project like that, it's generally going to best to have your contractor deal with materials. They will have them delivered to the job-site by their supplier, not go to the store to pick them up. The supplier will also pick up anything leftover at the end. The contractor will probably get better pricing than you can get, and it's none of your business how much it is marked up, as you're paying for a finished product. Forget about the CC points, that's like stepping over dollars to pick up pennies IMO. When I was a contractor I never dealt with people that nickle and dimed me over materials, or asked to order them so they could get points, I just didn't operate that way. You'll end up dealing with bush league contractors if you approach things this way IMO. You'll be better off in the long run if you find a great contractor, pay them on time and let them handle their business professionally. Take care of them, it will be reciprocated. Cheap is expensive in the trades.
Its really important for people entering into any home improvement contract to understand the state laws for so many reasons, business and professions codes/laws, warranties whether expressed or implied etc
The point being is well executed legal contracts are best for all parties involved.
We're contractors and have never marked up materials. In fact have let our clients upgrade, etc. at the same cost we buy for. We figure a reasonable profit when we bid a job, and don't have any surprises. New construction is different, as there's a set budget. They can choose other materials or colors, if they work within that budget. On change orders, etc. that would be specific to a client, they'd be required to pay for those upfront. Contractors also want to control the quality of materials going in, and a client wanting to save money might get a lower quality that could affect the end product, and cause problems down the line, reflecting on the contractor. We had some clients that bought lighting at a flea market. It wasn't to code, and couldn't be easily adapted, so we told them we couldn't use it, a total waste of their money.
Tons of responses here for you! It all depends on how you want to set up your business. For me personally, I want to control the finishes.. light fixtures, plumbing fixtures, cabinet pulls etc I will purchase and have shipped to the house. Everything else, I have the contractor buy. Its simpler and less on my plate and therefore I can focus on another house, finding another deal, etc.
A professional contractor is not going to work with you buying parts that don't fit online or at Home Depot.
Who pays for delays? Who returns the stuff? What happens when the part you ordered doesn't retro-fit and you hold up progress for a month?
Customer buys the materials , what could possibly go wrong .....................?
The minute a potential customer asks that question , its time to say , good bye .
Everything contractors do and should have a mark up , labor , materials , subcontractors , dumpsters , etc . This is how we make a living and cover our bills . Contracting is a business , profit is the goal , not a paycheck .
If you want points on your credit card , ask your contractor if they take credit cards , I do . You pay 4% credit card fee .
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Tons of responses here for you! It all depends on how you want to set up your business. For me personally, I want to control the finishes.. light fixtures, plumbing fixtures, cabinet pulls etc I will purchase and have shipped to the house. Everything else, I have the contractor buy. Its simpler and less on my plate and therefore I can focus on another house, finding another deal, etc.
I agree. It seems like it all kind of depends. Some contractors on here seem to get really upset if you even ask that question.