Who buys the materials on a $22k rental rehab, me or the contractor?

Question

First rental closes next month, small two bed, and the rehab is about $22k. Two of the three bids handle materials completely differently and I don't know which way to go.

Bid A includes everything and the contractor told me plainly there's a markup on materials in there, he said around 15 percent. His argument is that he has accounts, he knows what's in stock this week, and if the vanity arrives cracked he handles the return instead of me driving it back on a Saturday.

Bid B is labor only. I buy everything, it gets delivered, he installs it. That's maybe $1,300 of markup I keep on this scope. His argument is that I pick exactly what I want and I see every price.

What I can't judge is the stuff that isn't in either number. If prices move between now and when things get ordered, whose problem is that? If I buy a faucet and it fails in eight months, does anyone warranty the labor to swap it? And I've never bought a bathroom before, so my picks would be guesses off a shelf.

The money says buy it myself. My inexperience says don't. Curious how the room splits.

chriswalton8 · Accepted Answer

Split it, and split it on the line where the failure hurts.

Buy the things where your taste matters and a delay doesn't stop work. Light fixtures, cabinet hardware, mirrors, the vanity if it's not on the critical path. You get exactly what you want, you see the price, and if it shows up late the crew keeps working on something else.

Let him buy anything the crew needs to keep moving. Lumber, drywall, fasteners, paint, subfloor, the plumbing rough parts. Those are commodity items where your picking skill adds nothing, and the whole value of his accounts is that he can get more of them on a Tuesday afternoon without a conversation.

On your warranty question, that's the strongest argument for letting him supply anything mechanical. If he buys the water heater and it fails, the labor to swap it is arguably his problem and most GCs will just handle it. If you bought it off a shelf, he'll swap it and bill you, and honestly he's right to. Whatever you both agree, get the warranty split written into the contract in a sentence, because verbal understandings on this evaporate at month nine.

On price moves, wren, whichever way you go, ask for the material lines as written allowances with a named product and a dollar figure. Then a price move is visible instead of a surprise, and you can decide whether to swap or pay the difference.

On a $22k job the split usually leaves you keeping most of the markup on the stuff you actually care about anyway.

stephen_ok9 · Answer

$1,300 on $22k is under 6 percent of the whole job. I'd want to know what the 15 percent buys before I chased it, because on a first rehab the thing most likely to cost you real money is a two week delay, not a markup.

mikeoconnell7 · Answer

The markup isn't free money to the contractor either. I run 12 percent and it covers pickups, returns, the guy standing at a counter for 40 minutes, and eating a wrong order about twice a year. On a $22k job the honest cost of me handling materials is close to what I charge for it. Where owner supply falls apart is the missing piece at 8am. Crew of three standing around for two hours because the transition strips didn't get ordered costs more than the markup on the strips.

ryanmck27 · Answer

Ask both of them what happens to the price if lumber or a fixture line moves before order date. Bid A almost certainly has that risk priced in somewhere and Bid B has handed it straight to you without saying so.

nataliehsu · Answer

sable's split is basically what I've watched work, and the thing I'd add is that the finishes you buy should all be sitting in the garage before the crew starts. Ordering during the job is where owner supply goes wrong, not the buying itself.

ehernandez74 · Answer

I'd add one question to the list before you decide: how does each bid handle the receipts? If Bid B is labor only and you buy, you have a clean paper trail on every dollar. If Bid A is all in with a markup, ask whether you see the invoices or just the line total. Neither answer is wrong, though contractors differ a lot on it and it's easier to ask now than after the first change order.

Who buys the materials on a $22k rental rehab, me or the contractor?

6 replies