Determining who is responsible for buying the materials for your rehab project will depend on what's best for you, your Contractors, and your specific rehab project.
In this article, we will discuss the pros and cons of the different options you have for buying materials so you can make the best decision for your project.
Types Of Materials
The materials on your rehab projects can be broken down into two classifications:
- Rough Materials
- Finish Materials
Rough materials are any materials that you generally can't see because they are hidden behind the walls and finishes or are components of the MEP system (mechanical, electrical, plumbing).
Rough materials include:
- Lumber framing (wood lumber, plywood sheathing, blocking, metal brackets, screws, etc.)
- Drywall (drywall, tape, mud, screws, etc.) *Note: Drywall isn't seen, it is typically covered by paint
- Insulation (wall, floor insulation)
- Plumbing rough-in materials (piping, fittings, elbows, p-traps flanges, brackets,etc)
- Electrical rough-in materials (electrical panel, breakers, wiring, staples, outlets, etc.)
Materials that are used to install finish materials are also considered rough materials, for example:
- Shims/screws used to install cabinetry and doors
- Caulking/putty for woodwork and trim
- Tile mortar used to attach the tile finishes to the floor or wall
- Miscellaneous screws, nails, fasteners, brackets or other materials used to install the finish materials
Finish materials are the pretty materials and finishes that you can see in the property.
Finish materials include:
- Kitchen Cabinetry
- Bathroom Vanities
- Doors and Door Hardware
- Woodwork and Trim
- Flooring materials (tile, hardwood, or carpet)
Who Should Buy The Rough Materials & The Finish Materials?
You have 2 different options for deciding who should buy the rough materials and the finished materials:
- The contractor is responsible for buying all materials (rough & finish)
- The contractor provides rough materials only, and you (the house flipper) buy the finish materials
Option 1: Contractor Is Responsible For Buying All Materials
The first option is to pass on all material responsibility to the Contractor so they are responsible for purchasing and delivering all rough materials and finish materials to the project.
Making the Contractor responsible for all materials saves the house flipper time from making countless trips to Home Depot or Lowes, but it does have its drawbacks:
- Saves You Time - Saves you countless trips to the Home Depot or Lowes and hours spent shopping and purchasing materials.
- Potentially Save Money - Contractors may be able to get better pricing on materials through their suppliers and special contractor discounts.
- Simpler Contract Terms - With the Contract structured so the Contractor provides all project materials, there should be no confusion as to who is responsible for providing which materials on the project.
- Delivery Coordination - The rContractor can schedule and coordinate the material deliveries when the materials are needed on-site.
- Less Responsibility for You - Ultimately, all material responsibility is passed on to the Contractor so you can focus on other aspects of the business.
- Potentially Pay Markup - The contractor may mark up the material costs, so you could pay more than you would at the retail store.
- More Upfront Preparation - Need to know all of the material SKUs upfront so your contractor can include the values in their bid proposal.
- Less Control/Flexibility - Don't have the flexibility to make changes to the material selections or SKUs without getting the Contractor involved.
- Change Orders - Changes to the material selections could result in a Change Order from the Contractor.
- Less Credit - You won't get any credit benefits, credit card points, or perks if the Contractor buys the materials.
Option 2: Contractor Provides Rough Materials, & Flipper Buys Finish Materials
The second option is to have the Contractor provide the rough materials and you (the house flipper) purchase the Finish Materials.
By taking responsibility for the finish materials, you have more control and flexibility with the materials and finishes that are installed on your project. However, this requires much more time commitment and coordination to ensure the materials are delivered on time when the Contractor needs them.
- Potentially Save Money - You could potentially save money on the Contractor's markup. You can also shop around at multiple stores and online to find coupons and the best pricing on materials.
- More Flexibility - Gives you the flexibility to make material selections and shop around for the best prices.
- More Control - Gives you the ability to make changes to the material selections without impacting the Contractor.
- Build Credit & Get Perks - Buying finish materials on your credit card can help you build business credit and get perks such as cashback or frequent flyer points.
- Takes More Time - You will need to go to Home Depot or Lowes, shop for the materials, and coordinate the deliveries which can take hours away from working on other aspects of your business.
- Harder to Coordinate - You will need to clarify in your Contract who is responsible for purchasing what materials, so everyone is on the same page upfront to avoid disputes later on.
- More Responsibility - You are responsible for measuring the quantities, buying the materials, and coordinating the deliveries to arrive when your Contractor needs the materials.
- Contractor Displeasure - Some Contractors are reluctant to allow their clients to purchase any materials because they want to charge a markup on the materials. They are also concerned the client won't deliver the materials on time or deliver the wrong quantity, which can slow down the productivity of their crew & ultimately cost them money!
<span class="lesson-quote--tag orange">REALITY CHECK</span>
<p style="margin:6px 0px;">If You Don't Want To Waste Your Time Shopping For Materials, You Can Always Give Your Contractor A List Of The Materials And SKUs That Need To Be Purchased. The Contractor Can Then Take That Material List To The 'Pro Desk' At Home Depot Or Lowes, And If You Have A Business Account, The Contractor Can Charge The Materials To Your Account.</p>
<p style="margin-bottom:6px;">This Process Allows The Contractor To Go Buy The Materials Whenever He Needs Them, Saves You Time Shopping For Materials, and allows You To Get The Benefits On Your Credit Account.</p>
<p>I Love Me Some Southwest Frequent Flyer Points!</p>
What's The Best Way To Coordinate The Materials With My Contractor?
The best way to coordinate who is responsible for the materials on your project is to write a solid Scope of Work document and Materials List that clearly designates who is responsible for the materials on the project.
The Materials Responsibility List on the right designates who's responsible for the materials for each scope of work on your project, which helps eliminate confusion and potential disputes that may arise on the project.