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
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes2y
Quote from @Matthew Paul:
@Alan F. People confuse the term Contractor with employee .
They think if they buy materials they know how much the contractor will make off them .
When an beginner wants to rehab a house to flip they want to make as much money as possible . They are under the impression a contractor will be happy for the job . And they can negotiate the best price . And when they get that cheap price , about half way thru when things are going south and they realize they hired a cheap hack , its too late .
They read all the books where they are told to keep the contractor on a short leash , buy the materials , manage the job , dont pay deposits , have the contractor sign your contract . They get bad advice . No professional contractor works like that . ( Its kinda like having a tenant provide the lease agreement to the landlord )
When posts like this come up , all the contractors pipe in and give Great advice on how to get a job done . On time and on the contract price .
It's worse then that, we see countless people being oblivious on difference between GC, Contractor, Sub-Contractor, Handyman, Builder....
But hey, they probably also think a Real Estate Broker and Real Estate Agent are the same thing also.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes2y
Quote from @James Hamling:
Quote from @Matthew Paul:
@Alan F. People confuse the term Contractor with employee .
They think if they buy materials they know how much the contractor will make off them .
When an beginner wants to rehab a house to flip they want to make as much money as possible . They are under the impression a contractor will be happy for the job . And they can negotiate the best price . And when they get that cheap price , about half way thru when things are going south and they realize they hired a cheap hack , its too late .
They read all the books where they are told to keep the contractor on a short leash , buy the materials , manage the job , dont pay deposits , have the contractor sign your contract . They get bad advice . No professional contractor works like that . ( Its kinda like having a tenant provide the lease agreement to the landlord )
When posts like this come up , all the contractors pipe in and give Great advice on how to get a job done . On time and on the contract price .
It's worse then that, we see countless people being oblivious on difference between GC, Contractor, Sub-Contractor, Handyman, Builder....
But hey, they probably also think a Real Estate Broker and Real Estate Agent are the same thing also.
True
- Investor · Los Angeles, CA · Member since 2023 · 165 posts · 65 votes2yAt the end it is critical to have a contractor you trust and at the end you are paying for a finished product. If you are happy with the price he gives you then what you care about what percentage is going to the materials and what to his work.
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.
You want to make it easy for the contractor and not add work for him to coordinate the material purchase with you. - 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votesThe fact that the guys you use would rather just charge you labor indicates a lot about them. They're probably not licensed, bonded are insured, and I would doubt that the quality of their finish work stacks up against what most of us would consider adequate.
Quote from @Account Closed:
@Patrick Goswitz
I like to have the contractor pick up small things like screws and tubes of caulk etc but I pick up the majority of the materials because I know exactly what I want and I feel it’s easier for me to pick them up directly. Plus I buy from Menards and they give me 11% back on purchases (I just used almost 4k in rebates yesterday) and I get skymiles on the hundreds of thousands I spend each year on materials. The guys I use rather just charge me labor anyways. It works out well for all involved.
- Rental Property Investor · Duluth, MN · Member since 2021 · 16 posts · 6 votes2yHi Bruce, I know where you stand. I have seen your many posts and can tell this is something you are passionate about. I’m just sharing my personal experience here. Every situation is different. My contractor and I have a trusting relationship and I have a lot of construction experience so it works very well for me to get the materials and for him to only have to worry about labor.
Quote from @Bruce Woodruff:
The fact that the guys you use would rather just charge you labor indicates a lot about them. They're probably not licensed, bonded are insured, and I would doubt that the quality of their finish work stacks up against what most of us would consider adequate.Quote from @Account Closed:
@Patrick Goswitz
I like to have the contractor pick up small things like screws and tubes of caulk etc but I pick up the majority of the materials because I know exactly what I want and I feel it’s easier for me to pick them up directly. Plus I buy from Menards and they give me 11% back on purchases (I just used almost 4k in rebates yesterday) and I get skymiles on the hundreds of thousands I spend each year on materials. The guys I use rather just charge me labor anyways. It works out well for all involved.
I understand the potential problems that could arise that you are presenting and I think it is great that you have shared them so that people are aware. I believe this knowledge helps a person either avoid buying materials or create a system that avoids the potential pitfalls. Your points may be better presented as a “caution” sign vs a definitive “do not enter”
If you were to make the argument that it may not be for a newbie and therefore I should not have shared on this thread how I do things… I may have to concede. But to say that this type of situation automatically means no license or poor quality may be going a little far. - 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Account Closed:
Fair enough...... I have just personally been burnt so many times that it's an immediate red flag for me. And I would not advise a newbie to venture down that road. But an experienced guy like yourself, working with a very trusted GC, sure...if it works for you, it works!
Just help me warn all the newbies that are mistakenly trying to save a few $$ or get some silly Credit Card points...... :-)
Quote from @Account Closed:
Hi Bruce, I know where you stand. I have seen your many posts and can tell this is something you are passionate about. I’m just sharing my personal experience here. Every situation is different. My contractor and I have a trusting relationship and I have a lot of construction experience so it works very well for me to get the materials and for him to only have to worry about labor.Quote from @Bruce Woodruff:
The fact that the guys you use would rather just charge you labor indicates a lot about them. They're probably not licensed, bonded are insured, and I would doubt that the quality of their finish work stacks up against what most of us would consider adequate.Quote from @Account Closed:
@Patrick Goswitz
I like to have the contractor pick up small things like screws and tubes of caulk etc but I pick up the majority of the materials because I know exactly what I want and I feel it’s easier for me to pick them up directly. Plus I buy from Menards and they give me 11% back on purchases (I just used almost 4k in rebates yesterday) and I get skymiles on the hundreds of thousands I spend each year on materials. The guys I use rather just charge me labor anyways. It works out well for all involved.
I understand the potential problems that could arise that you are presenting and I think it is great that you have shared them so that people are aware. I believe this knowledge helps a person either avoid buying materials or create a system that avoids the potential pitfalls. Your points may be better presented as a “caution” sign vs a definitive “do not enter”
If you were to make the argument that it may not be for a newbie and therefore I should not have shared on this thread how I do things… I may have to concede. But to say that this type of situation automatically means no license or poor quality may be going a little far.What a well presented and mature comment, much respect to you. 1 thing to note is CA business and professions code strictly prohibits an agreement as such. Bruce operated in CA, as I do now. CA license law is very strict and designed to protect the customer.
- Rental Property Investor · Duluth, MN · Member since 2021 · 16 posts · 6 votes2yThanks, Alan, and great point… everyone should pay attention to what the law dictates when asking themselves the question who should purchase materials.
Quote from @Alan F.:
Quote from @Account Closed:
Hi Bruce, I know where you stand. I have seen your many posts and can tell this is something you are passionate about. I’m just sharing my personal experience here. Every situation is different. My contractor and I have a trusting relationship and I have a lot of construction experience so it works very well for me to get the materials and for him to only have to worry about labor.Quote from @Bruce Woodruff:
The fact that the guys you use would rather just charge you labor indicates a lot about them. They're probably not licensed, bonded are insured, and I would doubt that the quality of their finish work stacks up against what most of us would consider adequate.Quote from @Account Closed:
@Patrick Goswitz
I like to have the contractor pick up small things like screws and tubes of caulk etc but I pick up the majority of the materials because I know exactly what I want and I feel it’s easier for me to pick them up directly. Plus I buy from Menards and they give me 11% back on purchases (I just used almost 4k in rebates yesterday) and I get skymiles on the hundreds of thousands I spend each year on materials. The guys I use rather just charge me labor anyways. It works out well for all involved.
I understand the potential problems that could arise that you are presenting and I think it is great that you have shared them so that people are aware. I believe this knowledge helps a person either avoid buying materials or create a system that avoids the potential pitfalls. Your points may be better presented as a “caution” sign vs a definitive “do not enter”
If you were to make the argument that it may not be for a newbie and therefore I should not have shared on this thread how I do things… I may have to concede. But to say that this type of situation automatically means no license or poor quality may be going a little far.What a well presented and mature comment, much respect to you. 1 thing to note is CA business and professions code strictly prohibits an agreement as such. Bruce operated in CA, as I do now. CA license law is very strict and designed to protect the customer.
- Investor · Phoenix, AZ · Member since 2017 · 108 posts · 30 votes2y
I've never understood why the investor can't pay for the "finish materials", the contractor pay for the "trade materials" (grout, nails, backerboard etc.) and then just charge a flat rate for managing the project? I understand there are change orders that happen and that can be handled on a per instance basis.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes2y
Quote from @Ron Hollingsworth:
I've never understood why the investor can't pay for the "finish materials", the contractor pay for the "trade materials" (grout, nails, backerboard etc.) and then just charge a flat rate for managing the project? I understand there are change orders that happen and that can be handled on a per instance basis.
You as a customer are paying for the finished product . As a contractor I want you to pick out your cabinets , tile , fixtures etc . BUT I can not and will not warranty anything you provide . Whether its damaged before , during or after its installed .
So you buy a nice looking faucet set for the upstairs bathroom , I have my plumber install it and overnight the cartridge blows out and floods the house . Thats now entirely on YOU .I wont submit that to my insurance .
If a customer wants to save money at the contractors expense , the customer will not be happy with the end result . At that point the customer should just become the general contractor and run and manage all the subs .
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Ron Hollingsworth:
I've never understood why the investor can't pay for the "finish materials", the contractor pay for the "trade materials" (grout, nails, backerboard etc.) and then just charge a flat rate for managing the project? I understand there are change orders that happen and that can be handled on a per instance basis.
Good question. And @Matthew Paul answered it well. There is no benefit to a customer/investor paying for anything....now of course we expect you to pick out the fixtures and trim products, and we will have the supply house put them on our account and deliver them. Of course we mark up those materials 20-25%, but you are still paying less than you would and you don't have to do anything.
Still, some people want to pick up an occasional product like a fancy faucet they saw on their trip to Italy. We'll install it, but like Mathew said, no warranty or anything of the sort on that part.
I Always ask the contractors I work with to price by the item and separate cost of labor and materials!
I find it super important, I Have a text to confirm on my phone and what ever they need they can go to home depot i will get a text with the invoice, and if I find it right I than pay from my CC.
- Investor · Phoenix, AZ · Member since 2017 · 108 posts · 30 votes2y
Quote from @Bruce Woodruff:
Quote from @Ron Hollingsworth:
I've never understood why the investor can't pay for the "finish materials", the contractor pay for the "trade materials" (grout, nails, backerboard etc.) and then just charge a flat rate for managing the project? I understand there are change orders that happen and that can be handled on a per instance basis.
Good question. And @Matthew Paul answered it well. There is no benefit to a customer/investor paying for anything....now of course we expect you to pick out the fixtures and trim products, and we will have the supply house put them on our account and deliver them. Of course we mark up those materials 20-25%, but you are still paying less than you would and you don't have to do anything.
Still, some people want to pick up an occasional product like a fancy faucet they saw on their trip to Italy. We'll install it, but like Mathew said, no warranty or anything of the sort on that part.
that's the issue, why not just charge a flat rate for the job and not mark up anything. I have all materials, even the sub's you hire, you get a flat fee to handle the project. This seems to me to be the most transparent way.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Ron Hollingsworth:
Quote from @Bruce Woodruff:
Quote from @Ron Hollingsworth:
I've never understood why the investor can't pay for the "finish materials", the contractor pay for the "trade materials" (grout, nails, backerboard etc.) and then just charge a flat rate for managing the project? I understand there are change orders that happen and that can be handled on a per instance basis.
Good question. And @Matthew Paul answered it well. There is no benefit to a customer/investor paying for anything....now of course we expect you to pick out the fixtures and trim products, and we will have the supply house put them on our account and deliver them. Of course we mark up those materials 20-25%, but you are still paying less than you would and you don't have to do anything.
Still, some people want to pick up an occasional product like a fancy faucet they saw on their trip to Italy. We'll install it, but like Mathew said, no warranty or anything of the sort on that part.
that's the issue, why not just charge a flat rate for the job and not mark up anything. I have all materials, even the sub's you hire, you get a flat fee to handle the project. This seems to me to be the most transparent way.
But you're missing the main point. A GC needs complete and utter control of the project to put his name on it and give it a warranty of any type. You take away any of the aspects of that and you will not get a quality GC willing to take the risks. You should just manage it yourself....
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Ben Aaron:
I Always ask the contractors I work with to price by the item and separate cost of labor and materials!
I find it super important, I Have a text to confirm on my phone and what ever they need they can go to home depot i will get a text with the invoice, and if I find it right I than pay from my CC.
So you expect a GC to go get your stuff, load it, unload it, store it safely, install it, and warranty it.....for no markup? Lol.....you're a funny guy. You will get exactly what you pay for and Mr Murphy is waiting for guys like you....Good luck.
Quote from @Ben Aaron:
I Always ask the contractors I work with to price by the item and separate cost of labor and materials!
I find it super important, I Have a text to confirm on my phone and what ever they need they can go to home depot i will get a text with the invoice, and if I find it right I than pay from my CC.
https://www.cslb.ca.gov/newsletter/2010-summer/page9.htm
That's a violation of the California Contractors License Board law, business and professions codes. A contractor in California is required to provide a complete flat price for home improvement contracts including labor and material. A contractor violating this law is subject to disciplinary action including possible license suspension.
Hey Alan thank you for sending the information!
I am working here in the Bay Area, and in a few cities in Ohio, Detroit, Missouri, and Kansas. No doted California laws are the strictest one(For the good and bad ) But other places are not following the same California lawsQuote from @Ben Aaron:
Hey Alan thank you for sending the information!
I am working here in the Bay Area, and in a few cities in Ohio, Detroit, Missouri, and Kansas. No doted California laws are the strictest one(For the good and bad ) But other places are not following the same California lawsYes, I know. I've been a contractor in California for 31 years. The CSLB is extremely interested in protecting residential customers. Many states dont have a general contractors license at all.
- 2yJohn MorganPro MemberRental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
@Patrick Goswitz
I give my contractor my credit card to get whatever he needs at Home Depot or Lowe’s. He’s had it for the last 3 years.
- Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes2y
Quote from @Ron Hollingsworth:
Quote from @Bruce Woodruff:
Quote from @Ron Hollingsworth:
I've never understood why the investor can't pay for the "finish materials", the contractor pay for the "trade materials" (grout, nails, backerboard etc.) and then just charge a flat rate for managing the project? I understand there are change orders that happen and that can be handled on a per instance basis.
Good question. And @Matthew Paul answered it well. There is no benefit to a customer/investor paying for anything....now of course we expect you to pick out the fixtures and trim products, and we will have the supply house put them on our account and deliver them. Of course we mark up those materials 20-25%, but you are still paying less than you would and you don't have to do anything.
Still, some people want to pick up an occasional product like a fancy faucet they saw on their trip to Italy. We'll install it, but like Mathew said, no warranty or anything of the sort on that part.
that's the issue, why not just charge a flat rate for the job and not mark up anything. I have all materials, even the sub's you hire, you get a flat fee to handle the project. This seems to me to be the most transparent way.
And the best way for the contractor to go broke . This is not how you run a successful business . We mark up our subs , materials , our in house labor . We include in our pricing workmans comp , office expenses , time getting permits , waiting for inspectors , time setting up deliveries , dumpsters '
Contractors are in business to make money , not save the customer money .
A job starts when we sign the contract , not when we bang the first nail .
I have NEVER broken down a job into materials and labor on a project in 40 years . With the exception of a service call for a minor repair which is hourly plus materials . And we are on the clock even when running to get supplies
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
@Alan F. @Matthew Paul I don't think we will ever get this concept across to a lot of Investors. They are just too focused on saving money (which they actually don't do) and using their Credit Cards to get points/miles (putting a few meaningless points ahead of a $100k construction project, really smart) .
They cannot see the forest for the trees....
Quote from @Bruce Woodruff:
@Alan F. @Matthew Paul I don't think we will ever get this concept across to a lot of Investors. They are just too focused on saving money (which they actually don't do) and using their Credit Cards to get points/miles (putting a few meaningless points ahead of a $100k construction project, really smart) .
They cannot see the forest for the trees....
Its 1 (of many) reasons why good contractors move on to industrial/commercial contracting. Residential customers try to "convince" me into unpermitted code illegal work. Want me to use sub-standard product and "cover" for their existing unpermitted work. It leaves contractors who really aren't the best. Funny because all of the information is readily available but people choose to ignore it.
- 2yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Alan F.:
Quote from @Bruce Woodruff:
@Alan F. @Matthew Paul I don't think we will ever get this concept across to a lot of Investors. They are just too focused on saving money (which they actually don't do) and using their Credit Cards to get points/miles (putting a few meaningless points ahead of a $100k construction project, really smart) .
They cannot see the forest for the trees....
Its 1 (of many) reasons why good contractors move on to industrial/commercial contracting. Residential customers try to "convince" me into unpermitted code illegal work. Want me to use sub-standard product and "cover" for their existing unpermitted work. It leaves contractors who really aren't the best. Funny because all of the information is readily available but people choose to ignore it.
Yep. I managed to dodge this problem because I worked primarily for the ultra-wealthy who don't care about these issues and/or are savvy enough to realize the value of letting the GC just do his job. Everybody wins.
Well maybe we can educate a few folks and make the world (construction) a better place :-)
- Rental Property Investor · New Braunfels, TX · Member since 2022 · 409 posts · 408 votes2y
- Residential Real Estate Broker · Paia, HI · Member since 2016 · 479 posts · 311 votes2y
I usually buy all the materials, and the main reason is because women are better shoppers than men. LOL. And it's easy to order stuff on will call Home Depot, keep them on the job working instead of shopping. And of course they are paid to go pick up materials, or that is factored into their bid.
It all comes down to communication between you and your contractor/handyman.
As an investor buddy of mine says, I don't let anyone else spend my money.
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