Who should pay for materials?

Question

My business partner and I are new to the REI game. We currently have two houses that we have acquired and we are in the process of acquiring contractor bids to renovate them for resale. My question is, should we purchase all of the materials or have the contractor do this? Is there a potential cost savings (i.e. no markup on materiel costs by contractors) by purchasing these materials ourselves if we setup the proper accounts at the supply stores and can receive the same contractor discounts? Are contractors willing to work with this method or do they prefer to run all materials through their business? Just looking for some general input from the past experience of others in the business here.

Thanks,

Robert Leach · Answer

As a contractor, I would much prefer materials supplied simply for my own convenience. We don't have to deal with the logistics or providing warranty work on items not up to snuff. We typically handle the material purchasing for the majority of our clients and yes we do mark up the price modestly to cover the added expenses of facilitating the selection & delivery of the items. That said, there are several pitfalls, some of which are mentioned in the previous posts such as delays due to materials not being on site when scheduled or materials shorted for owners who prefer to supply.

There is no right way or wrong way to approach it. If you feel comfortable handling all the purchasing, have the time to coordinate and be onsite to receive deliveries then I would say do that.

Rogers Smith · Answer

@Lane Babin another interesting tidbit we've run across is product quality. For instance, the Delta single-handle pull-down kitchen sink faucet you buy from Home Depot is not the same one you will generally find at a specialty plumbing supply. We verified this by dissecting some faucets so my plumber could prove his point to me. There is a material difference in the two.

Ditto with light bulbs. The bulbs supplied by our lighting supplier last far longer than the ones we buy at Lowes. Simply something to keep ion mind.

Clayton Plank · Answer

@Lane Babin, I have found it best to let them purchase the materials. This is what they do on a day to day basis. I ran in to some problems when I purchased the materials a few times and i found it easier to let them handle. If you purchase too little material then they are calling you about getting more and it becomes a game of who is going to do what. There is a mark-up in everything you do in real estate, its just a part of the process. I just make sure the numbers work for me and then proceed. If they take care of the materials and bid for too little or order the wrong things that is on them and they will have to deal with it vs me having to run around and try to fix the problems.  Just my two cents.

Chris C. · Answer

I buy all my own finish materials.  Faucets, light fixtures, receptacles, light switches, paint, carpet, vinyl, etc.  I do this because we can save a significant amount of money if you have a good system in place.  We buy everything from Lowes so they give us price breaks plus they deliver the materials to the job site.  Our contract with contractors stipulates exactly what we provide and that they are to provide nails, caulk, tape, mud, smaller items like that.  Some contractors are hesitant at first but when they realize we always have the materials on site when they need them then they relax and actually like working with us.

I don't provide shingles to roofers, gutters obviously, and other similar items.

Rogers Smith · Answer

Hi @Lane Babin. In my experience, you would be better having your subs purchase the materials. You would be hard pressed finding suppliers who would give you a builder's discount. In addition, often your subs will not warranty the fixtures (such as plumbing fixtures) that your purchase.