Purchasing Material For Contractors
Flipper/Rehabber · Knoxville, TN · Member since 2023 · 47 posts · 20 votes
Purchasing Material For Contractors
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Corby GoadeBusiness Member
Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votesQuote from @Patrick Goswitz:
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.
139 Replies
Quote from @Bruce Woodruff:
Quote from @Alan F.:
Quote from @Bruce Woodruff:
Quote from @Matthew Paul:
I just picked up some replacement windows at the supply house , custom ordered .
The manager asks me if I need some mis ordered windows cheap ?
I go back and look , these were top of the line anderson replacements , and they were big . I had no use for them .
He then tells me the story , A Homeowner ordered the windows , measured himself , he wanted the contractor discount , ( they still charged him retail ) . They delivered them . And were paid in full . Delivery time was to be at noon .
The crew he got to install them showed up at 7 and was told to remove ALL the old windows , get a head start . So they did , and threw all the old windows in the dump trailer , breaking the glass as they went .
The homeowner measured WRONG . So the house he was living in had 18 open holes .
Supply house took windows back pending any credit from manufacturer , it was denied all the paperwork was correct . Made to order . They will credit the customer if someone buys them at what ever they can get .
It was about $14,000 in windows down the drain . Plus another 14 K to re order . Pay the contractor for the removal and what ever else he did . AND WAIT 6 WEEKS FOR NEW ONES .
But the good thing is all the extra points he got on his card .
( I did pick up a nice exterior door for $75 )
Hilarious......🤣
I just don't get this obsession with a few credit card points. People would rather get a few lousy bucks or miles than have their project go as it should...
Consumer mindset, they've never been business owners with a producers mindset. Most folks have a w2 job
I think you're absolutely right! I forget about this....
You can lead a horse to water, but you can't make it drink. Sorry couldn't resist.
- 2yJose JacobPro MemberInvestor · 11040 · Member since 2019 · 188 posts · 111 votes
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
That's great. But you will never get a GOOD Contractor to work for you when you operate like that.
And you missed all the examples of what can go wrong when the customer puts themselves in charge of materials acquisition.....wrong items, wrong sizes, too many, too little, on and on.....
This contractor do all my reno for last 7 years. We go together to the HD or wherever and he pick up the material, I pay for it and he transport that to the site. We have an excellent relationship. Apart from that I pay him an excellent bonus if the house sells more than my original ARV because of his beautiful finishing. We both have lot of respect for each other. I treat him very nice and pay him very good.
I know several stories of contractors using someone's credit cards for purchase for other job of their own. Not all of them, but there are some out there.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Jose Jacob:
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
That's great. But you will never get a GOOD Contractor to work for you when you operate like that.
And you missed all the examples of what can go wrong when the customer puts themselves in charge of materials acquisition.....wrong items, wrong sizes, too many, too little, on and on.....
This contractor do all my reno for last 7 years. We go together to the HD or wherever and he pick up the material, I pay for it and he transport that to the site. We have an excellent relationship. Apart from that I pay him an excellent bonus if the house sells more than my original ARV because of his beautiful finishing. We both have lot of respect for each other. I treat him very nice and pay him very good.
I know several stories of contractors using someone's credit cards for purchase for other job of their own. Not all of them, but there are some out there.
Glad it's working for you. But it's a stupid business model, not sure why you'd use it. You're losing money and time. And I'd bet your 'Contractor' is not licensed or is not very good compared to typical standards...
But good luck....
- 2yJose JacobPro MemberInvestor · 11040 · Member since 2019 · 188 posts · 111 votes
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
That's great. But you will never get a GOOD Contractor to work for you when you operate like that.
And you missed all the examples of what can go wrong when the customer puts themselves in charge of materials acquisition.....wrong items, wrong sizes, too many, too little, on and on.....
This contractor do all my reno for last 7 years. We go together to the HD or wherever and he pick up the material, I pay for it and he transport that to the site. We have an excellent relationship. Apart from that I pay him an excellent bonus if the house sells more than my original ARV because of his beautiful finishing. We both have lot of respect for each other. I treat him very nice and pay him very good.
I know several stories of contractors using someone's credit cards for purchase for other job of their own. Not all of them, but there are some out there.
Glad it's working for you. But it's a stupid business model, not sure why you'd use it. You're losing money and time. And I'd bet your 'Contractor' is not licensed or is not very good compared to typical standards...
But good luck....
Neither the model is STUPID nor I am loosing money. You are a contractor and you may not LIKE the model which doesn't mean that the model is STUPID. First of all, try to respect others. You are mad cuz you didn't like it. It is STUPID for someone to think that I wud use an unlicensed contractor to put my half a million dollar projects in jeopardy. This is New York not Arizona, we pay top dollars for houses.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Maybe not completely 'stupid', but I bet I could save you time and money doing it my way.....
Quote from @Jose Jacob:
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
That's great. But you will never get a GOOD Contractor to work for you when you operate like that.
And you missed all the examples of what can go wrong when the customer puts themselves in charge of materials acquisition.....wrong items, wrong sizes, too many, too little, on and on.....
This contractor do all my reno for last 7 years. We go together to the HD or wherever and he pick up the material, I pay for it and he transport that to the site. We have an excellent relationship. Apart from that I pay him an excellent bonus if the house sells more than my original ARV because of his beautiful finishing. We both have lot of respect for each other. I treat him very nice and pay him very good.
I know several stories of contractors using someone's credit cards for purchase for other job of their own. Not all of them, but there are some out there.
Glad it's working for you. But it's a stupid business model, not sure why you'd use it. You're losing money and time. And I'd bet your 'Contractor' is not licensed or is not very good compared to typical standards...
But good luck....
Neither the model is STUPID nor I am loosing money. You are a contractor and you may not LIKE the model which doesn't mean that the model is STUPID. First of all, try to respect others. You are mad cuz you didn't like it. It is STUPID for someone to think that I wud use an unlicensed contractor to put my half a million dollar projects in jeopardy. This is New York not Arizona, we pay top dollars for houses.
The State of New York does not have any licensing for Contractors with the exception of Asbestos Contractors, Crane operators, Elevator Contractors. Anybody can call themselves a General Contractor with no testing.
Some municipalities have specific licenses which require little to no testing. It's like buying a business license.
- Real Estate Agent · New York City · Member since 2020 · 820 posts · 641 votes2y
Best to open an HD and/or Lowe's professional account and have them buy things for your project via phone sale. That way you avoid premiums, retain control / visibility on what is being purchased and get some form of "points".
- Lender · PA · Member since 2019 · 535 posts · 461 votes2y
In my opinion avoiding a bad experience with a contractor requires good due diligence, preparation and a carefully written contract. When you find your property and begin your contractor search, you should make sure you get recent references and actually speak with them. If you are doing a full gut rehab. you should have plans drawn with specifications. If I am spending 75k or greater on renovations I want to make sure that I have plans and specifications detailing the quality of the materials and the fixtures. An architect adds an expense to the job but as I have learned is essential to getting the finished product you are expecting. If you are using a good contractor than he should take the architects plans and specifications and give you a quote that is binding unless you change the scope of work or materials.
If you are buying light rehab properties you must be familiar with the cost of replacing a bathroom and kitchen, painting, drywall and flooring. Your contract should specify the grade of the materials and on the important stuff actually designate what you want. All of this takes time but it prevents the inevitable dispute at the end of the job when the contractors view of what was required differs greatly from yours. Make sure your original inspection and scope of work covers all of the renovations. You will always come across unanticipated problems. Make sure you understand what needs to be done and enter into a written change order with the contractor before he does the work.
If you agree to a fixed price quote based based on a detailed scope of work, you should not care how the contractor makes his profit.
On smaller light rehab. my partner who has a full time job and extensive general contracting experience runs the job and he splits the profits. He provide receipts for all of the materials' and we use tradesman at night and on weekends who want to pick up spot work. That is how we control the costs on those jobs. The more you know the less likely you will be scammed by a unscrupulous contractor. Good luck!
- Contractor · Chicago, IL · Member since 2016 · 4k+ posts · 2k+ votes2y
Hey there @Patrick Goswitz - It goes both ways....we personally purchase all the materials typically for our clients here in Chicago, but we also get better prices.
If you find a contractor that allows you to purchase all the materials instead of marking up the material they'll just mark up their labor more -> I will agree it's easier to track and understand costs as an investor if you know these numbers better, so I'd push for that or find a transparent general contractor, like us!
Credit card points are great but they are a drop in the bucket in the grand scheme of being a real estate investor!
Quality Builders4.968 Reviews Quote from @Jonathan Klemm:
Hey there @Patrick Goswitz - It goes both ways....we personally purchase all the materials typically for our clients here in Chicago, but was also get better prices.
If you find a contractor that allows you to purchase all the materials instead of marking up the material they'll just mark up their labor more -> I will agree it's easier to track and understand costs as an investor if you know these numbers better, so I'd push for that or find a transparent general contractor, like us!
Credit card points are great but they are a drop in the bucket in the grand scheme of being a real estate investor!
These threads are representative of our regional, neighborhood & scope specific differences. It goes to show there's so many different ways to execute value add in investing. I can only imagine the differences in a c+ rental flip in Cicero as opposed to popping the top in Downers Grove. The state's have massively different requirements for contractors licensing. Here in CA a $1.2m PP for a $2.4mil ARV is a different animal. Pardon me tagging you, mobile doesn't allow a general reply to thread. To all of you flipping, all the best !
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Jonathan Klemm:
Credit card points are great but they are a drop in the bucket in the grand scheme of being a real estate investor!
This ^^^
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Steven Goldman:
In my opinion avoiding a bad experience with a contractor requires good due diligence, preparation and a carefully written contract. When you find your property and begin your contractor search, you should make sure you get recent references and actually speak with them. If you are doing a full gut rehab. you should have plans drawn with specifications. If I am spending 75k or greater on renovations I want to make sure that I have plans and specifications detailing the quality of the materials and the fixtures. An architect adds an expense to the job but as I have learned is essential to getting the finished product you are expecting. If you are using a good contractor than he should take the architects plans and specifications and give you a quote that is binding unless you change the scope of work or materials.
If you are buying light rehab properties you must be familiar with the cost of replacing a bathroom and kitchen, painting, drywall and flooring. Your contract should specify the grade of the materials and on the important stuff actually designate what you want. All of this takes time but it prevents the inevitable dispute at the end of the job when the contractors view of what was required differs greatly from yours. Make sure your original inspection and scope of work covers all of the renovations. You will always come across unanticipated problems. Make sure you understand what needs to be done and enter into a written change order with the contractor before he does the work.
If you agree to a fixed price quote based based on a detailed scope of work, you should not care how the contractor makes his profit.
On smaller light rehab. my partner who has a full time job and extensive general contracting experience runs the job and he splits the profits. He provide receipts for all of the materials' and we use tradesman at night and on weekends who want to pick up spot work. That is how we control the costs on those jobs. The more you know the less likely you will be scammed by a unscrupulous contractor. Good luck!
Steven has a great take on this topic.....with the exceptions (IMHO) that I bolded. Definitely agree that clarity is the key. Write done in the SOW everything that is expected to happen in the process. Everything. Down to the tile SKU and pattern. Attach specs to the Contract as 'Exhibit A', 'Exhibit B', Etc. And absolutely use an architect on any project that is large in nature.
1) Asking for references is the typical way of vetting a Contractor, but think about it...is a Contr. ever going to give you a bad reference? No, these are all carefully chosen and will never be negative.
2) Using someone else's employees at nights and on weekends will definitely save you money...but it is not legal. Unless you then hire them as your legal employees and pay their Worker's Comp, Etc....
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Karen Chow:
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.
Just saw this....although that may not be illegal in some states it is certainly un-ethical IMHO
Quote from @Bruce Woodruff:
Quote from @Karen Chow:
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.
Just saw this....although that may not be illegal in some states it is certainly un-ethical IMHO
Yeah...but on a positive note cslb sting just nailed 13 trunk slammers in El Dorado county:)
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
I love it when they sting the scammers...!
- Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes2y
Quote from @Bruce Woodruff:
Quote from @Karen Chow:
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.
Just saw this....although that may not be illegal in some states it is certainly un-ethical IMHO
Since the person does not have the legal right to resell materials and avoided paying state sales tax, it's fraud. They probably used someone else's license number which also would be fraud.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Caroline Gerardo:
Quote from @Bruce Woodruff:
Quote from @Karen Chow:
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.
Just saw this....although that may not be illegal in some states it is certainly un-ethical IMHO
Since the person does not have the legal right to resell materials and avoided paying state sales tax, it's fraud. They probably used someone else's license number which also would be fraud.
Yep, I knew it was fraud in Cali where I used to build...wasn't sure where the OP was from. But it's still wrong...
- Lender · Washington DC · Member since 2015 · 2k+ posts · 2k+ votes2y
Quote from @Bruce Woodruff:
Quote from @Caroline Gerardo:
Quote from @Bruce Woodruff:
Quote from @Karen Chow:
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.
Just saw this....although that may not be illegal in some states it is certainly un-ethical IMHO
Since the person does not have the legal right to resell materials and avoided paying state sales tax, it's fraud. They probably used someone else's license number which also would be fraud.
Yep, I knew it was fraud in Cali where I used to build...wasn't sure where the OP was from. But it's still wrong...
She's in Oregon- it's a crime there and in Ohio. Could lose Canadian VISA, sure hope that's not her real name.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Caroline Gerardo:
Quote from @Bruce Woodruff:
Quote from @Caroline Gerardo:
Quote from @Bruce Woodruff:
Quote from @Karen Chow:
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.
Just saw this....although that may not be illegal in some states it is certainly un-ethical IMHO
Since the person does not have the legal right to resell materials and avoided paying state sales tax, it's fraud. They probably used someone else's license number which also would be fraud.
Yep, I knew it was fraud in Cali where I used to build...wasn't sure where the OP was from. But it's still wrong...
She's in Oregon- it's a crime there and in Ohio. Could lose Canadian VISA, sure hope that's not her real name.
Why are people always trying to save a couple bucks? It just ain't worth it. Do things right....sigh.
- Flipper/Rehabber · San Francisco, CA · Member since 2017 · 176 posts · 70 votes2y
Generally, we buy the Finish Materials and the contractor let's us know how much to buy. I don't think it would be good to have the contractor buy the Finish Materials plus they don't want to do it anyways. They just want to pick it up (or have it delivered to their house/office/job site) and install it.
For rough materials, they generally buy them.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Patrick Goswitz:
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.
Every contractor and every agreement is different. For us they would buy additional material and we'll reimburse the material with the receipt at the end. There's no right or wrong. I would say in more practical manner, they are more knowledgeable than us the investor what needs to be purchased.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Jose Jacob:
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
That's great. But you will never get a GOOD Contractor to work for you when you operate like that.
And you missed all the examples of what can go wrong when the customer puts themselves in charge of materials acquisition.....wrong items, wrong sizes, too many, too little, on and on.....
This contractor do all my reno for last 7 years. We go together to the HD or wherever and he pick up the material, I pay for it and he transport that to the site. We have an excellent relationship. Apart from that I pay him an excellent bonus if the house sells more than my original ARV because of his beautiful finishing. We both have lot of respect for each other. I treat him very nice and pay him very good.
I know several stories of contractors using someone's credit cards for purchase for other job of their own. Not all of them, but there are some out there.
I do the same except I give my credit card to him so I don't have to constantly going to HD/Lowes.
- Member since 2019 · 7k+ posts · 4k+ votes2y
Quote from @Jose Jacob:
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
Quote from @Bruce Woodruff:
Quote from @Jose Jacob:
That's great. But you will never get a GOOD Contractor to work for you when you operate like that.
And you missed all the examples of what can go wrong when the customer puts themselves in charge of materials acquisition.....wrong items, wrong sizes, too many, too little, on and on.....
This contractor do all my reno for last 7 years. We go together to the HD or wherever and he pick up the material, I pay for it and he transport that to the site. We have an excellent relationship. Apart from that I pay him an excellent bonus if the house sells more than my original ARV because of his beautiful finishing. We both have lot of respect for each other. I treat him very nice and pay him very good.
I know several stories of contractors using someone's credit cards for purchase for other job of their own. Not all of them, but there are some out there.
Glad it's working for you. But it's a stupid business model, not sure why you'd use it. You're losing money and time. And I'd bet your 'Contractor' is not licensed or is not very good compared to typical standards...
But good luck....
Neither the model is STUPID nor I am loosing money. You are a contractor and you may not LIKE the model which doesn't mean that the model is STUPID. First of all, try to respect others. You are mad cuz you didn't like it. It is STUPID for someone to think that I wud use an unlicensed contractor to put my half a million dollar projects in jeopardy. This is New York not Arizona, we pay top dollars for houses.
In biggerpockets, there are this mindset that "people has to build or do business in certain way". However every people and every city has its own intricacies, what's normal in area X doesn't mean it's the normal in area Y. Also everyone wants to have its own edge on dong business. Investor want to keep the price down. Contractor by natural want the price to be always elevated and controlled by them. Realtor doesn't want to lose their commision. We are all work against each other interest actually.
Now if my rehabbing cost is 1/3 of contractor in Ohio, doesn't mean I'm wrong of doing business lolthese days i don't even ask my contractor about the cost to rehab something, sometimes i know the cost after they did the rehab, becoz we have absolute trust to each other. lol , am i do it wrong? maybe.... lol but i dont care of people opinion since i created my own edge.
- Investor · Stamford, CT · Member since 2023 · 4 posts · 2 votes2y
Hi Patrick,
Typically you can go to your local building supply and bid the materials out. This not only lets your get a discount when these suppliers compete against each other, but if you have detailed plans from an architect or a spec for the build out - they can also estimate all the materials needed for you. This takes the work out of guessing on your end, and ensures no markup from the contractor.
if you don’t wish to do that - ensure you get receipts for materials and ensure you inventory what they buy once it’s on site. - 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Matt Zielinski:
and ensures no markup from the contractor.
So you expect no markup from the Contractor on materials? Zero? Even though they will spend a good deal of time picking up, handling, managing, securing and otherwise being responsible for your materials?
Well, just know that there will always be a markup on materials. You can either be up-front with your Contractor about it and know the exact amount of markup..., or just know that they will bury the materials markup in their other costs somewhere and wonder how much you actually paid to have them manage your materials....
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